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* Decline in top-line due to moderation in yields: Nippon Life’s standalone revenue from operations increased by 3.6% YoY but declined sequentially by 1.6% QoQ as margins declined marginally by 0.2bps YoY and 0.8bps QoQ at 48bps in Q4FY23 at Rs 325cr. Other income declined by 21% QoQ due to mark to market losses in fixed income securities but increased by 34% YoY.

* Yield to stabilize in long run: While the top-line yield declined marginally from 0.483% in Q3FY23 to 0.475% in Q4FY23, the rate of decline was lower compared to previous quarters. The decline in yields was due to increase in share of ETF in AuM mix. While we expect yields to remain under pressure in the short term, we believe yields will stabilize in estimates as net return to investors remains high.

* AuM growth remained flat sequentially: Mutual funds AuM in the quarter stood at Rs 2,932bn as the growth remained flat sequentially at 0.1%, however, it increased by 3.5% YoY. The growth in AuM was slightly below the industry growth of 0.6% QoQ/5.5% YoY as debt AuM declined by ~28% YoY while equity AuM remained stable. We remain positive on the AuM growth in the estimates as the share of ETFs has seen growth higher than the industry. We expect AuM to grow at 8% CAGR over FY23-25E.

* Strong holding amongst retail investors: With regards to SIP, quarterly book stood at Rs 32.2bn with an increase of 10.7% QoQ/51.2% YoY while folios saw an increase of 4.3% QoQ/20% YoY at 4.8mn. The market share in B-30 cities was strong at 11.7% in Q4FY23 from 10.5% in Q4FY21. Also, unique investors grew by 13% YoY with a market share 36.2%. We expect to see growth in estimates amongst retail investors to its superior returns in funds and rise in distributors

* Valuation: We remain positive on the company on the back strong market share in ETFs mix in AuM, stabilizing margins in long run and increase in retail investors. We expect the company to benefit from the sector tailwinds and strong performance of its funds. The company has a dividend payout of ~100% in FY23 with a dividend yield of ~4.6%. We estimate revenue/EBITDA/PAT to grow at 9.5%/12%/12.1% CAGR over FY23 -25E. We maintain Buy with a revised target price of Rs 291 valuing the company at 20x of FY25E P/E.

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