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Result Highlights

* Revenue: Revenue from operations at Rs 3,316mn was up 4.9% QoQ and 1.1% YoY, leading the 2% sequential growth in QAAUM but lagging on the YoY growth of 7%

* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 43% was up 142bps QoQ and 43 bps YoY (calculated on rounded off figures)

* Share of B-30 in AUM: Share of B-30 in AUM at 18.2% was up 40bps/30bps QoQ/YoY

* Channel mix: In overall AUM, the share of direct channel was 54%. Share of MFDs, Banks and NDs within distributed assets was 60%, 19% and 21%, respectively

* Operating profit margin: Operating profit margin for the quarter, at 58.4%, was up 171 bps QoQ but down -59 bps YoY

Our view – NAM awaits market share gain in equity segment

Pressure on yield eases with calculated blended revenue yield up by 1bps QoQ to 47bps: The broader equity market has witnessed a rise in 2QFY23 and hence NAM’s equity schemes also had a positive MTM impact. On the other hand, there has been outflow in debt funds. Hence the share of Equity AUM in overall AUM has improved by 142bps sequentially. Also, with rising yield in debt funds, NAM has increased its debt Fund TERs marginally. These factors have led to a positive evolution in yield which the management expects to be sustainable.

Management guides to recouping lost market share: The management has stated that majority of the equity funds are in quartile 1 and 2 on 1-year basis. Furthermore, it has started to see net positive equity inflows. Hence, the management expects that the funds’ better performance would help in re-gaining its lost market share going forward.

We maintain ‘ADD’ rating on NAM with a revised price target of Rs 315: We value NAM at 23x FY24 P/E.

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