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HDFC Asset Management Company Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤16th Jan 26

Summary : HDFC AMC reported strong Q3 FY26 results with robust AUM growth and healthy SIP inflows, driven by strategic expansion into alternative assets and effective management of regulatory changes, maintaining a positive outlook.

Management Perspective positive : We feel very optimistic on the overall industry growth for next several years. We've been able to maintain operating margins very well. We remain very, very confident in our investment team and ability to handle transitions.

Concall Report Analysis & Insights

Business Overview

  1. Overall QAAUM crossed INR9 trillion, with equity-oriented AUM exceeding INR6 trillion.
  2. Total unique investors reached 15.4 million, a 26% penetration rate.
  3. Systematic transactions (SIP/STP) grew 24% Y-o-Y to INR47.3 billion in December 2025.
  4. PMS AUM surpassed INR50 billion; structured credit fund secured INR13 billion commitments.
  5. Total revenue was INR12,332 million, operating profit INR8,557 million, and PAT grew 20% Y-o-Y to INR7,701 million.

Future Growth Prospects

  1. Management is very optimistic about overall industry growth for the next several years.
  2. Plans to deepen and strengthen PMS, AIF, International, and GIFT City offerings.
  3. Working on creating a second fund for private equity and venture capital.
  4. Fintech is a vital distribution channel, expanding reach and accessibility.
  5. Long-term focus on increasing AUM market share through SIP buildup and customer engagement.

Management Insights

  1. Maintained operating margins in the 33-36 basis point range through disciplined cost management.
  2. Focus is on growing absolute profits sustainably, not just market share or scale.
  3. Handled fund manager transitions well, confident in the experienced investment team.
  4. Partnership with IFC for structured credit fund aims to develop India's private credit market.
  5. HDFC Bank remains a crucial distribution partner, contributing significantly to SIP flows.

Signs of Skepticism

  1. Management did not provide specific numbers on the net financial impact of regulatory changes, only stating they will 'optimize' and 'contain' it.
  2. Detailed impact of fund manager transitions on specific fund flows was not explicitly disclosed, only general confidence in the team.
  3. The exact yields for discretionary versus non-discretionary PMS were not provided.
  4. Management did not give a clear target for increasing liquid fund market share, attributing fluctuations to large corporate investors.

Risk Factors

  1. Market volatility has muted returns for the last 15-18 months.
  2. Regulatory changes (TER, exit load, brokerage limits) will impact larger schemes' margins.
  3. Competition in the liquid fund segment has led to some market share loss.
  4. Open architecture of HDFC Bank channel can lead to event-based or seasonal challenges.
  5. Telescopic pricing naturally leads to lower expense ratios as AUM scales.

Good To Know

  1. Industry AUM stood at INR80.2 trillion as of December 31, 2025.
  2. Monthly SIP inflows reached a record INR310 billion in December 2025.
  3. Gold and silver ETFs now contribute 18% of industry ETF AUM.
  4. HDFC Bank's open architecture means HDFC AMC's equity AUM market share within the bank is in the late 20s, higher than its industry average of 13%.
  5. Fintech platforms have registered 25 million SIPs in the first nine months of the current financial year.

Key Drivers

  1. SIP momentum drives AUM growth.
  2. Alternative assets expand client base.
  3. HDFC Bank channel strengthens distribution.
  4. Fintech partnerships boost new flows.

Key Analyst Discussions

Competitive Environment

  1. Passive segment growth is driven by institutional mandates, exempted funds, insurance companies, and gold/silver ETFs.
  2. HDFC AMC has a higher market share in equity index funds than in active equity funds.
  3. Fintechs are a vital distribution channel, expanding reach and accessibility for the mutual fund industry.
  4. Management aims to maintain market share in equity and debt, but liquid fund share fluctuates due to large institutional movements.

Market Trends & Consumer Behavior

  1. Healthy momentum in equity and equity-oriented net new flows continues.
  2. SIP book momentum is strong, with the industry adding more investors and folios monthly.
  3. There is significant growth potential across all segments of asset management due to formalization and financialization of savings.
  4. Preference exists among some customers and advisors for mirroring the market through passive products.

Financial Highlights

  1. Operating profit margin increased by 1 basis point due to lower other expenses, including less CSR and marketing.
  2. Equity yields were 56-57 basis points, debt yields 27-28 basis points, and liquid yields 12-13 basis points.
  3. Blended yield for the quarter was 45 basis points, 46 basis points for nine months.
  4. Non-cash ESOP expense is estimated at INR68 crores for the full year and INR47 crores for nine months.
  5. Regulatory changes will reduce TER for larger schemes, while smaller schemes may see increased TER.

Product Composition

  1. PMS business is growing in both discretionary and non-discretionary segments.
  2. First close of structured credit fund raised INR1,290 crores, with IFC as an anchor investor.
  3. Company is building a second fund for private equity and venture capital.
  4. Product portfolio is largely complete across active equity, fixed income, money markets, and passive segments.
  5. Select sectoral or thematic funds may be launched where strong conviction and clear opportunity exist.

Strategic Considerations

  1. Regulatory changes include removal of 5 basis points additional TER, revised expense ratio construct, and rationalized brokerage limits.
  2. Management will optimize to contain the financial impact of regulatory changes on profitability.
  3. Investment team transitions, including a senior fund manager returning, have been handled well, maintaining confidence.
  4. HDFC Bank channel relationship is being deepened through dedicated internal teams and digital collaboration.
  5. The company is exploring strategic acquisitions for business enhancement when timing and pricing are suitable.