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Steady performance; market share to be watched…

HDFC AMC reported a steady operational performance though lower than expected AUM growth and continued loss in market share remain a concern. Industry AUM increased from | 31 lakh crore as of Q3FY21 to | 31.4 lakh crore as of Q4FY21, largely led by pick up in equity markets and offset by outflow in debt segment.

Equity related AUM increased 6.5% QoQ at | 13 lakh crore, proportion of equity AUM were at 41% vs. 39% QoQ. Debt schemes witnessed outflow thereby declining ~4% QoQ. SIP inflows increased sequentially from | 8400 crore to | 9200 crore. HDFC AMC's AUM saw a marginal decline of 2.7% QoQ to | 395500 crore (24% YoY), mainly led by ~19% QoQ decline in liquid AUM to | 63800 crore. Equity AUM increased 3% QoQ to | 165400 crore, now forming 43% of total AUM.

HDFC AMC continued to witness decline in market share from 14.3% in Q4FY20 to 13.1% in Q3FY21 and 12.6% in Q4FY21. Equity AUM (actively managed) market share also declined from 14.7% in Q4FY20 to 13.4% in Q3FY21 and 12.9% in Q4FY21

Income from operations increased 6% YoY, 4% QoQ to | 503 crore while other income became normalised at | 43 crore, after elevated level seen in Q2FY21 and Q3FY21. Opex increased 9% QoQ to | 123 crore, led by an increase in employee expenses, though opex to AUM remained in long term trajectory of 12 bps of AUM.

Net profit for the quarter was at | 316 crore, up 26% YoY, down 14% QoQ, led by lower other income. In line with industry, SIP inflows witnessed an increase from | 910 crore in December 2020 to | 1040 crore in Q4FY21 but still lower than | 1130 crore in March 2020. Thus, the SIP book market share has increased from ~10.8% in Q3FY21 (market shares calculated) to 11.3% in Q4FY21 though it was lower compared to 13.1% in Q4FY20.

Valuation & Outlook

Post moderation in SIP flows and outflow from equity schemes in major part of FY21, the industry witnessed a revival in March 2021. HDFC AMC has followed suit but continued decline in market share remains a concern. Aiming at accelerating AUM growth and gaining market share, slew of products launches (thematic funds) are underway, though outcome of steps undertaken to shore up AUM needs to be closely watched. Overall, we continue to remain positive on the strong brand franchise and efficient operational strength shown in FY21. Therefore, we maintain our HOLD rating on the stock with an unchanged target price of | 3000/share.

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