IGI Logo

Steady core PAT; risk-reward favourable

* NAM India posted in-line core 2Q profit; PAT was at Rs3.4bn (-4% yoy/-13% qoq), weighed down by lower treasury gains, as yields were stable.

* QAAUM growth (+7% qoq) was led by equity, debt & commodity ETFs. NAM India indicated that the impact of a SEBI paper may be lower than perceived.

* We appreciate the focus on performance led by market share gains. We maintain our ADD rating on NAM India with a higher target price of Rs1,000.

SEBI paper - management says damage may be lower than perceived

Nippon Life India Asset Management (NAM India) reported in-line 2QFY26 core operating profit, registering PAT of Rs3.4bn (-4% yoy/-13% qoq), weighed down by lower-thanexpected treasury gains (-70% yoy/-75% qoq) due to volatile capital market returns. Management did not specify the quantum of the financial impact from the Securities and Exchange Board of India’s recent consultation paper (28 Oct 2025), although it indicated that it will be less damaging than perceived.

Healthy QAAUM growth led by equity, debt & commodity ETFs

QAAUM grew by 20% yoy and 7% qoq led by a strong rise of 9% qoq in equity AUM to form 50% of the total AUM, followed by 13% qoq rise in debt AUM to form 16% of the total AUM, and 14% qoq rise in gold ETF to form 4% of the total AUM. On a period-end basis, gold ETF was up 36% qoq, with 53% volume market share and silver ETF up 89% qoq. Combined AUM in these two ETFs stood at Rs450bn. Under the AIF category, the AMC has a cumulative commitment of Rs87.2bn, of which Rs6.2bn was raised in 2QFY26, and the pipeline includes Nippon India Credit Opportunity AIF.

Stable yields; cut in commission to partially cushion yield pressure

Reported mutual fund (MF) revenue yield was flat qoq at 36bp, despite a 3bp qoq fall in equity yields, which was offset by a sharp jump in gold ETF (which carries a higher yield vs. regular ETF) and higher debt yields (+3bp qoq). The AMC cut the commission payout ratio for a fourth schemes, thus making 60% of equity schemes to witness a cut in commission over the last two years. Yet, management indicated a 2bp decline in the overall yield every year. We believe the further rationalization in commission payouts will partially cushion yields from telescopic pricing.

Outlook and valuation

We appreciate the clear focus of NAM India on building a strong network, with no single distributor contributing more than 3-4% to its sales, sustaining its good performance, and consistent market share gains. We maintain ADD rating on the stock with a higher target price of Rs1,000 (Rs920 earlier), valuing it at 31x FY27F EPS, led by performance-led market share gains. Downside risks: Weak inflow & underperformance of its schemes.

Above views are of the author and not of the website kindly read disclaimer