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NAM continues to revise commission structure

Our view – Revised commission structure to reduce pace of yield erosion

Revenue Yield – Yield was stable on sequential basis while equity business held on: Calculated consolidated revenue yield remained broadly stable QoQ at 41 bps. Commissions were rationalized at the fag end of the quarter. Due to the proportional sharing approach, the pace of dilution of yield will be lower going forward. The smallcap, largecap and multicap funds have been addressed, which comprise about 45- 50% of overall AUM. In the Equity business, the early trends in January have not seen a distortion and are more or less at par with flows seen in December. The company has maintained double digit market share in equity flows (presumably net equity flows).

Operating Expenses – Operating expenses growth was relatively elevated on YoY basis: The total operating expense stood at Rs. 2.02bn, up by 2.7% QoQ and 23.2% YoY. The employee expense for the quarter was Rs 1.06bn down -0.4% QoQ but up 21.8% YoY. The non-staff expenses have grown 25% YoY and 6.3% QoQ. The nonstaff expenses were driven by investment in technology and in the AIF business. The endeavour is to keep overall expenses growth, excluding ESOP expense at 15-17%. We maintain ADD rating on NAM with a revised price target of Rs 750: We value NAM at 36x FY26 P/E, at which the stock would trade at a P/B of 10.5x.

(See Comprehensive con call takeaways on page 2 for significant incremental colour.)

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

* Revenue: Revenue from operations at Rs 5,879mn was up 2.9% QoQ and 38.9% YoY, lagging 4% QoQ and 51% YoY growth in QAAUM

* Share of Equity in AUM: Share of Equity in AUM (including Hybrid funds) at 51% was flat QoQ but up 250bps YoY (calculated on rounded off figures)

* Share of B-30 in AUM: Share of B-30 in AUM at 20.4% was down/up - 10bps/30bps QoQ/YoY

* Channel mix: In overall AUM, the share of direct channel was 54%. Share of MFDs, Banks and NDs within distributed assets was 56%, 25% and 19%, respectively

* Operating profit margin: Operating profit margin for the quarter, at 65.6%, was up 8 bps QoQ and 438 bps YoY

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