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Our view – NAM has outperformed the industry on net largecap flows

Equity net flows continue to be healthy on the back of fund performance, among other factors: The market share in net equity flows including hybrid funds remains in excess of 10%. The healthy flows are driven by fund performance, among other reasons. Net flows are being witnessed across equity schemes including largecap, midcap and others. 25% of the net flows have come into the largecap category since the company has de-risked flows and flow are not merely driven by mid and smallcap category

Revenue yield erosion continue largely along expected lines: The blended revenue yield has declined about 0.4 bps QoQ to 40-41 bps. This is in line with prior guidance of blended yield compression of about 2-3 bps per annum. The decline in yield was driven by the equity segment. As the size of the equity AUM rose, the SEBI telescopic pricing formula kicked in. Furthermore, new equity assets are coming at a higher cost and net sales have been healthy and as much as 2.2x last year's level.

We maintain an ‘ADD’ rating on NAM with a revised price target of Rs 625: We value NAM at 34x FY25 P/E, at which the stock would trade at a P/B of 9.9x.

Result Highlights (See “Our View” above for elaboration and insight)

* Revenue: Revenue from operations at Rs 4,233mn was up 6.5% QoQ and 19.6% YoY, lagging 8% QoQ and 29% YoY growth in QAAUM

* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 49% was up 180bps QoQ and 416 bps YoY (calculated on rounded off figures)

* Share of B-30 in AUM: Share of B-30 in AUM at 20.1% was up 20bps/90bps QoQ/YoY

* Channel mix: In overall AUM, the share of direct channel was 52%. Share of MFDs, Banks and NDs within distributed assets was 57%, 23% and 20%, respectively

* Operating profit margin: Operating profit margin for the quarter, at 61.2%, was up 49 bps QoQ and 94 bps YoY

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