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Improved equity fund performance augurs well

Result Highlights

* Revenue: Revenue from operations at Rs 3279mn was up 8.5%/26.8% QoQ/YoY, somewhat lagging the growth of QAAUM at 10%/33% QoQ/YoY

* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 43% was up 200 bps QoQ and 400 bps YoY (calculated on rounded off figures)

* Share of B-30 in AUM: Share of B-30 in AUM at 18% was down 110 bps QoQ and 30 bps YoY

* Channel mix: Share of MFDs, Banks and NDs was 57%, 22% and 21%, respectively in overall AUM

* Operating profit margin: Operating profit margin for the quarter, at 59.0%, was up 28 bps QoQ and 625 bps YoY.

Our view – Improved equity fund performance augurs well

Management expects share of equity in AUM to rise with a lag, given improved equity fund performance: Management stated that investor count has already started to rise in this regard and inflows are also happening and share of equity in AUM should rise in due course.

Management also explained that yield has been soft on QoQ basis mainly due to new flows coming in at higher cost:They further stated that NAM will not be launching NFOs at the cost of profitability. Out of the 8 products filed with SEBI, 7 are ETFs. For the ETF business, excluding CPSE and Gold, the yield is 15-17 bps.

We maintain ‘BUY’ rating on NAM with a revised price target of Rs 547: We value NAM at 34x FY23 P/E for an FY21-24E EPS CAGR of 21%.

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