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Improving fund performance to drive market share

* Aditya Birla Sun Life AMC’s (ABSLAMC) fund performance has improved consistently since Jan’25, with ~67% of equity AUM ranking in the top two quartiles on a one-year return basis in Jul’25, compared to the ~20% average over the preceding 12 months. This strong performance across schemes is likely to support equity market share gains, which have remained stable at ~4.2% over the past six months.

* ABSLAMC is expanding its product pipeline across alternatives (private markets and real estate), passives (ETFs, index funds, FoFs), and offshore strategies, reinforcing its multi-asset platform beyond its core MF platform.

* 1Q witnessed robust net equity sales, surpassing full-year FY25 levels. This growth was driven by improved fund performance across categories and a sharper focus on flagship products. With enhanced distribution engagement, continued product innovation, and improved relative performance, the company is well-positioned to capture incremental flows in FY26.

* Yields are expected to remain broadly stable, with only a marginal movement of 1-2bp, driven by the telescopic structure.

* ABSLAMC is strengthening its multi-asset platform by scaling passives (through innovative product launches), building a differentiated alternatives franchise, and expanding offshore via GIFT City. These initiatives enhance diversification and provide long-term revenue visibility beyond the core active MF business.

* Management has secured board approval to launch a separate brand, Apex, within the SIF space, aimed at tapping product opportunities across fixed income, credit, long-short, and arbitrage strategies. The company is also in the process of onboarding key talent to strengthen execution capabilities.

* We project a 10%/10%/11% CAGR in revenue/EBITDA/Core PAT over FY25-27E. We reiterate a BUY rating on the stock with a TP of INR1,050, premised on 27x FY27E EPS.

Improving equity sales trajectory driving AUM growth

* ABSLAMC reported steady improvement in its mutual fund franchise, underpinned by healthy fund performance, enhanced distribution engagement, and strong retail flows.

* The company’s mutual fund quarterly average AUM surpassed the INR4t milestone as of Jun’25, marking a 14% YoY increase, with equity AUM at INR1.8t (+11% YoY). Momentum was supported by SIP contributions at INR11.4 as of Jun’25, with SIP AUM (INR840b, up 9% YoY) contributing ~45% of total AUM, underscoring the stickiness of retail flows.

* The company added ~0.6m new SIP registrations during 1Q, taking the total folios to 10.7m, aided by the deepening penetration in B30 markets and continued distributor engagement through initiatives like vintage point held in 4Q and regional growth summit to be hosted soon.

* The quarter was marked by robust net equity sales exceeding the full-year FY25 sales, supported by improving fund performance across categories and the firm’s sharpened focus on selected flagship products. With enhanced distribution engagement, continued product innovation, and improved relative performance, the AMC is well-positioned to capture incremental flows in FY26.

* The overall mutual fund QAUM market share stood at 6.2%, with equity QAUM market share at 4.2% as of Jun’25.

* Despite industry-wide yield pressures, ABSLAMC maintained equity yields at ~67-68 bp on a YoY basis, supported by scale benefits and a balanced stance on distributor commissions. Management does not anticipate any further rationalizations and will continue to prioritize driving profitable growth for the company.

Fund performance improves across equity and fixed income categories

* Fund performance improved significantly, with consistent returns across equity and fixed income schemes, supported by strengthened investment processes.

* Equity Investments: The company has demonstrated consistent improvement in investment performance, delivering strong returns across multiple schemes, which reflects the effectiveness of its enhanced processes.

* Fixed Income: Performance remains robust across categories, with the product suite being further expanded through innovative offerings. Currently, one or two new funds are in the pipeline to cater to the evolving needs of a growing investor base.

* Management reiterated its strategy of concentrating flows into 5-6 focus equity products (including Large Cap, Flexi Cap, Balanced Advantage, Multi-Asset Allocation, and GenNext Funds) to drive market share recovery, while selectively addressing mid- and small-cap categories once performance stabilizes.

* As a % of Monthly Average AUM (MAUM): The share of AUM ranked in the top two quartiles (one-year returns) rose to 67% in Jul’25, up from 40% in Jul’22.

* Based on the number of schemes: The number of schemes ranked in the top quartile (one-year return) improved to 4 in Jul’25 from 2 in Jul’22. For three-year returns, the number of top-quartile schemes rose to 3 from 1 over the same period, indicating an overall positive trend.

SIF: Unlocks the next growth frontier

* Management has secured board approval to launch a separate brand, Apex, with a formal announcement expected shortly. Within the SIF space, the firm has identified multiple product opportunities spanning fixed income, credit, arbitrage plus equity, and long-short strategies.

* Notably, most of these product innovations can be managed using the company’s existing in-house capabilities. However, to effectively manage longshort and arbitrage-oriented funds, the company is in the process of finalizing key hires with the requisite expertise. These additions are expected to strengthen the alternatives platform and enable the launch of such strategies in the near term.

Scaling passives with comprehensive product suite and diversified distribution mix

* ABSLAMC continues to remain focused on scaling the passive AUM size through innovative product launches in ETFs, Index Funds, and Fund of Funds while driving customer acquisitions through digital platform and distributors.

* As of Jun’25, passive assets reached INR364b, reflecting a robust 22% YoY growth, supported by increasing adoption across ETFs (INR86b), Index Funds (INR240b), and Fund of Funds (INR38b).

* The company’s passive customer base expanded to 1.2m folios, underlining its ability to drive retail penetration alongside institutional traction. With a suite of 52 distinct passive offerings across equity and fixed income indices, the company ensures relevance in asset allocation solutions for retail, HNI, and institutional clients alike.

* While passive yields remain structurally lower than active funds, scale and investor stickiness in ETFs and index funds provide a stable revenue stream. Management highlighted that passives are a long-term strategic priority, expected to see further traction as investor preference for systematic and lowcost investing deepens.

Building a robust alternatives and PMS franchise for the long term

* ABSLAMC’s alternatives platform has scaled up meaningfully, emerging as a strong growth lever within its diversified business mix. PMS and AIF AUM rose nearly 8.4x YoY to INR287b in 1QFY26, driven by the large Employees’ State Insurance Corporation (ESIC) debt mandate of ~INR243b.

* While the ESIC portfolio carries limited yield contribution, it enhances ABSLAMC’s institutional credibility and positions the firm as a serious player in the alternatives segment. Beyond ESIC, management continues to remain focused on building a differentiated, multi-asset alternatives franchise targeting HNIs and family offices, offering both equity and fixed income category products.

* The company has recently completed the first close of its Structured Opportunities Credit Fund – II and is preparing to launch the India Equity Innovation Fund. These developments are expected to strengthen its product portfolio and support sustained acceleration in business growth.

* On the alternatives side, management indicated plans to onboard dedicated leadership to drive the business for larger growth alongside its existing team.

* Yields on the Alternatives side typically stand at ~1%+ (excl. ESIC), as guided by management.

Expanding global footprint via GIFT City

* ABSLAMC’s Offshore AUM stood at INR106b as of Jun’25, marginally lower on a YoY basis due to some large overseas investors restructuring their portfolios amid political uncertainty. Nonetheless, the AMC continues to expand its GIFT City presence, where it has already closed the Global Emerging Market Equity Fund (~USD 65m) and is actively fundraising for the India ESG Engagement Fund, ABSL Flexi Cap Fund (via inward remittance), and the Global Blue-chip Fund (via outward remittance).

* Offshore yields (excluding GIFT CITY) typically range ~30–40 bps, while GIFT City funds carry higher yield potential (~1%+), offering margin accretion opportunities.

* With GIFT City being converted into a subsidiary in FY26 and a dedicated product pipeline under development, offshore and IFSC platforms are expected to play a more meaningful role in capturing global investor allocations to India.

Deepening B30 reach; strengthening distributor engagement

* ABSLAMC has maintained a strong focus on expanding its reach across B30 cities, with over 80% of its 300 locations situated in the B-30 cities. The B-30 AUM stood at INR722b, up 12% YoY, and accounts for ~18% of its MF AUM as of Jun’25.

* The company continues to deepen engagement with its distribution network through targeted initiatives such as Vantage Point, an exclusive event held in 4Q, bringing together the top MFDs across the country. Moreover, it is now planning to host a regional growth summit for deeper engagement with distribution partners to strengthen market reach. ABSL has already covered all key markets, which have contributed ~80% to its AUM over the last three months through engagements.

* By empowering mutual fund distributors (MFDs) with product knowledge, training, and engagement platforms, ABSLAMC is enhancing its ability to capture incremental flows from semi-urban and emerging markets.

* In parallel, the company is also aligning its sales force with clear KRAs to expand institutional coverage from 9k corporates to 12k corporates and broaden presence from the top 8 to the top 20 locations. This dual-pronged distribution strategy—leveraging both retail MFD networks in B30 and institutional relationships in T30—positions the AMC to sustain market share while improving penetration into the underrepresented investor segment.

Valuation and view

* ABSLAMC continues to demonstrate broad-based growth with a healthy retail franchise, resilient SIP momentum, and strong scale-up in the alternatives and passives segments. The company’s differentiated positioning across mutual funds, passive products, and the expanding alternatives platform (boosted by the ESIC mandate and Apex launch) provides visibility of diversified growth. While offshore flows remain muted, GIFT City initiatives offer a medium-term lever. We believe sustained traction in retail flows, continued SIP accretion, and the scaling of alternatives will drive earnings growth and support valuations.

* We project a 10%/10%/11% CAGR in revenue/EBITDA/Core PAT over FY25-27E. We reiterate a BUY rating on the stock with a TP of INR1,050, premised on 35x FY27E core EPS

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