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Core performance in line; 21% PAT beat due to higher other income

* Aditya Birla Sun Life AMC’s (ABSLAMC) operating revenue grew 3.5% YoY/flat QoQ to ~INR4.6b (in line). The yields on management fees for the quarter stood at 43.3bp vs 44.3bp in 1QFY26 and 42.1bp in 4QFY26.

* Total opex grew 13% YoY to INR2.1b (in line), reflecting a cost-to-income ratio of 44.4% in 1QFY27 compared to 40.5% in 1QFY26 (vs our est. of 43.2%). EBITDA declined 3% YoY to INR2.6b (in line), reflecting an EBITDA margin of 55.6% (vs 59.5% in 1QFY26 and MOFSLe of 56.8%).

* The beat on other income resulted in a 21% beat on PAT, which was at INR3.1b, growing 12% YoY and 65% QoQ. Core PAT came in at INR1.9b (-2% YoY).

* The transition to the BER framework and commission optimization were fully implemented from 1st Apr'26, with 1QFY27 yields reflecting the normalized run rate. Going forward, revenue yields are expected to remain broadly stable, with only a 1 2bp impact from changes in the AUM mix and telescopic TER pricing.

* We have raised our earnings estimates by 4%/5% for FY27/FY28, respectively, to factor in higher other income, while keeping our AUM estimates unchanged. We reiterate our BUY rating with a TP of INR 1,290, based on a valuation of 42x FY28E core P/E.

Key takeaways from the management commentary

* The company launched the first SIF Hybrid Long-Short Fund and plans to launch two additional SIF products, including the Equity X Top 100 Long-Short Fund, following the initial performance track record. Moreover, it has strengthened its SIF investment team with the addition of two specialists.

* Existing alternative strategies have established strong investment track records, supporting fundraising momentum. The AMC will continue to provide seed capital (up to 10% of fund size) and temporary bridge funding to accelerate scaling of AIF strategies.

* SIP market share moderated during the quarter, which was primarily driven by higher cancellation rates across the industry and weakness in a few non-core schemes. Focus remains on improving absolute flows in flagship products, with market share gains expected to follow as prouct performance and distribution improve.

Valuation and view

* Improving flagship fund performance, stronger distribution traction, and stable post-BER revenue yields provide confidence in sustained AUM growth, while disciplined cost management should support operating leverage. Continued improvement in flows and market share recovery remain key earnings drivers.

* The expanding alternatives, PMS, passive, and GIFT City businesses provide meaningful long-term optionality beyond the core mutual fund franchise. As these businesses scale, they are expected to diversify revenue streams and support profitability, although execution and fundraising momentum remain key monitorables.

* We have raised our earnings estimates by 4%/5% for FY27/FY28, respectively, to factor in higher other income, while keeping our AUM estimates unchanged. We reiterate our BUY rating with a TP of INR 1,290, based on a valuation of 42x FY28E core P/E.

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