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Strong CAGR in core earnings led by QAAuM growth

PRUDENT saw a strong quarter as EBITDA was 23% ahead due to better revenue (led by higher QAAuM) and lower distribution cost. QAAuM grew by 4.0% QoQ (industry equity 2.9%). Commission was 3bps lower at 57bps due to GST related change. Net MF yield was up 3bps QoQ to 31%; company expects this yield level to sustain. New partner addition was up to 600 per month from run-rate of 413 in FY26 as competitive advantage resulted in GST unregistered distributors seeking platform support. We raise core PAT for FY27/28E by 5% each. We increase multiple to 37.5x from 35x on Mar’28 core EPS and raise TP to INR 3,175 from INR 2,875. Retain ‘ACCUMULATE’.

Good quarter; earnings beat led by better AuM growth, revenue and lower commission:

QAAuM was 2.3% higher at INR 1331bn (PLe INR 1301bn). Revenue was 3.3% higher at INR 3.44bn (PLe INR 3.33bn) due to better QAAuM growth; MF yield at 88.2bps was inline. Other segment revenue (insurance, broking & others) was 8% higher to PLe at INR 509mn. Commission expense was 2.7% lower to PLe at INR 1.89bn (PLe INR 1.95bn). Opex growth was exactly in-line at INR 686mn; higher staff cost was offset by lower other opex. Other expenses dropped to 365.3mn (PLe INR 400.3mn) due to reduction in other expenses. EBITDA at INR 891mn was 23% ahead of PLe led by higher revenue and lower commissions. Other income was more at INR 208.3mn (PLe INR 75mn) due to higher MTM. Core PAT at INR 592mn was 26% higher to PLe while PAT was INR 748mn.

TER change had a positive impact:

QAAuM growth at 4% QoQ was superior to industry equity QAAuM growth of 2.9% suggesting slight market share gain. Gross MF yield fell to 88bps (91bps in Q4’26) due to TER/BER regulatory changes. Company expects gross yield to stabilize at ~88bps. Current MF yield is likely to continue in near future, though it may fall by 1-2bps over the medium to long term for new business. Current quarter's margin may be considered representative for next 3 quarters. Commission expense was 3bps lower at 57bps and declined by 5bps QoQ, primarily due to lower fees paid to GST unregistered distributors led by regulatory change and removal of exit load.

Monthly customer additions enhance:

Staff cost was up 19% QoQ due to annual salary revision (~14% wage hike), branch expansion and higher variable pay provision. Company guided for 22-24% staff cost growth (including ESOPs) in FY27. New partner additions increased to around 600 per month in Q1’27, up from monthly run rate of 413 in FY26 as existing distributors sought platform support due to GST changes.

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