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Result Highlights

* Revenue: Revenue from operations at Rs 3,483mn was down/up -1.5% QoQ and 3.1% YoY, lagging the 0.1% QoQ and 3.5% YoY growth in QAAUM
* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 44% was flat QoQ but up by 244 bps YoY (calculated on rounded off figures)
* Share of B-30 in AUM: Share of B-30 in AUM at 19.0% was down/up - 20bps/180bps QoQ/YoY
* Channel mix: In overall AUM, the share of direct channel was 54%. Share of MFDs, Banks and NDs within distributed assets was 58%, 22% and 20%, respectively
* Operating profit margin: Operating profit margin for the quarter, at 60.0%, was down -33 bps QoQ and -156 bps YoY

Our view – Discussion centers around tax rule changes

While equity schemes’ performance has improved, the equity segment market share remained flattish: Management explained that there is going to be a lag in equity fund performance and equity inflows. Secondly, the company’s focus has been on garnering retail inflows, which are happening in improved fashion via SIPs, where the monthly inflows have risen from about Rs 6.5bn to about Rs 11bn per month. Furthermore, for the last 2 quarters, the net sales numbers have been better for the company than its outstanding market share, implying market share is on the upward trend.

According to management, debt mutual funds remain a superior product despite tax rule changes: There is flexibility in redemption since there is no penalty for premature withdrawal like in the case of fixed deposits. Also, like for like investment return is
currently higher, especially if investments are held for longer. Furthermore, there is a deferment of taxation, which is not the case with fixed deposits, which attract TDS.

We maintain a less-than-bullish ‘ADD’ rating on NAM with a revised price target of Rs 280: We value NAM at 21x FY24 P/E, at which the stock would trade at a P/B of 5.0x.

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