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Early vintage assets to now remain largely sticky

Result Highlights

Revenue: Revenue from operations at Rs 3,380mn was down -0.2% QoQ but up by 11.9% YoY, lagging the growth of QAAUM at 1%/24% QoQ/YoY

Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 42% was down -100bps QoQ but up 100 bps YoY (calculated on rounded off figures)

Share of B-30 in AUM: Share of B-30 in AUM at 17.2% was down -30bps/-70bps QoQ/YoY

Channel mix: In overall AUM, the share of direct channel was 56%. Share of MFDs, Banks and NDs within distributed assets was 59%, 21% and 20%, respectively

Operating profit margin: Operating profit margin for the quarter, at 61.5%, was down -115 bps QoQ but was up 658 bps YoY

Our view – Early vintage assets to now remain largely sticky

The sharp decline in yield in the month of March was a transient phenomenon related to compliance aspects: These expenses have been resurrected back in the first week of April itself. There has been dip in management fees but not in TER realization. On an overall basis, revenue realization stands at 49 bps vs 52 bps a year ago. Structurally, management averred that most of the “old” assets that had to flow out have done so Management expects improvement in equity market share and outflows from longerterm fixed income funds: Market share in equity AUM is expected to move up with a lag effect. On the fixed income side, the company expects flows to come in at the shorter end of the yield curve. There would be outflows from the longer end of the yield curve. We maintain ‘BUY’ rating on NAM with an unchanged price target of Rs 450: We value NAM at 29.0x FY23 P/E for an FY21-24E EPS CAGR of 20.1%.

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