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Yield compression continues; marginal market share gain

About the stock: Nippon Life India AMC is among the largest asset managers in India with an AUM size of | 3.46 lakh crore. The company has a strong distribution network with 84300+ distributors.

*Market share as on Q4FY22 was at 7.4%

*Strong presence in B-30 cities that contribute to 17.2% of total AUM

Q4FY22 Results: Steady quarter with marginal uptick in market share.

*QAAUM was at | 283300 crore, up 24% YoY, flat QoQ. Market share was up 26 bps

*Operational revenue up 12% YoY at | 338 crore; sequentially flat due to lower yields

*PAT up 5% YoY, flat QoQ at | 174.5 crore, due to subdued topline

Alternate Stock Idea: Apart from Nippon Life AMC, in our coverage we like HDFC AMC.

*HDFC AMC is among the largest and profitable mutual funds with an QAAUM of ~| 4.3 lakh crore as on March 2022

*BUY with a target price of | 2400

Key takeaways of recent quarter & conference call highlights

Q4FY22 Results: Mixed Performance

*Revenue from operations were flat at | 338 crore. Other income declined 43% YoY to | 34.5 crore, mainly due to MTM during the quarter

*Operating expense remained largely stable at | 138 crore. Consequently, the company reported a PAT of | 174.8 crore registering 5% growth YoY and flat growth on a QoQ basis

*Yields were under pressure mainly on account of lower TER due to increase in fund size

*AUM growth of 24% YoY was led by 28% YoY rise in equity AUM while ETFs also increased 50% YoY. On a QoQ basis, AUM growth was flat at | 283300 crore

*SIP book increased sequentially from | 2010 crore to | 2130 crore in Q4FY22, with number of folios increasing from 37 lakh in Q3FY22 to 40 lakh in Q2FY22

*The company has a strong presence beyond 30 cities (B-30) with 17.2% of AUM coming from this segment compared to industry average of 16.6%

*The company has gained AUM market share on an overall basis by 26 bps sequentially to 7.4%

*Number of unique investors has increased by 20% YoY to 1.2 crore

Q4FY22 Earnings Conference Call highlights

*Equity segment has been facing pressure in the past two years but now it is improving gradually. The positive trend is visible. In the next three to four quarters equity segment market share is expected to improve

*Fall in yields in the current quarter was mainly due to a reduction in TERs of a few funds due to an increase in size, higher trail commission and increase in competition

*Opex to largely remain at current levels. Healthy growth in digital purchase during the quarter. Digital SIP registrations contributed 47% of total new SIPs registered in FY22. The management will continue to create digital infrastructure

*The company has a robust pipeline in place to further strengthen both active and passive offerings. Passive funds share is expected to be at ~ 50%

*The management will continue to grow organically but at the same time is open to inorganic opportunity

*The management aims to keep dividend payout ratio of 100%, going ahead

*The management indicated that there will be no large branch expansion; Investment in digital infrastructure will continue

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