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At an inflection point

We initiate coverage on ABSLAMC with a ‘BUY’, valuing the stock at 27.5x on Sep’28 core EPS to arrive at TP of INR1,200. We are optimistic about its business prospects given the

(1) improving equity performance, which is driving up net equity flow market share (1.2% FY27TD, 0.3% in FY26)

(2) superior equity/debt/liquid yield at 70/25/14bps due to lower distributor payouts

(3) focus on increasing non-MF revenue (3.1% in FY26), which has seen a healthy 24% CAGR over FY22-26. We expect equity AAuM growth of ~18% over FY27-29E that may translate to core earnings CAGR of ~20% (highest among listed peers). The stock is trading at 24/20x on Sep’28 core EPS (15% discount to HDFCAMC & 38%/35% discount to ICICIAMC/NAM). Initiate with ‘BUY’.

Improving performance driving net flows:

ABSLAMC's equity performance is improving, with 1-year weighted alpha rank enhancing from 12 in Oct'25 to 2 in Aug’26. 50% of its AuM was in Q1 and Q2 in Aug’26. This superior performance is also risk-efficient due to lower scheme concentration as top 5 schemes accounted for 50% of equity MAAuM (54-72% for some listed peers), while SMID exposure stood at ~40%, below its peers. AMC’s net equity flow market share improved from -2.9% in FY24 to 1.2% in 5MFY27 with decline in stock equity market share being arrested. As superior 1-year performance translates into the 3-year meaningfully, net equity flows may improve sharply.

Superior yields driven by lower payouts:

Despite having higher ND/MFD share in equity distribution mix of 19.7%/52.3%, ABSLAMC maintains one of the highest equity yields of 71bps due to lower distributor payout at 55.4% (FY26) in equity (NAM: 60%, Kotak: 76%, Mirae: 73%, Axis: 65%). We would prefer the company to have a slightly higher equity payout that would aid net flows. Debt yield at ~25bps (FY26) is superior to most players, except ICICIAMC, HDFCAMC and SBIFUNDS. Liquid yield at 13.7bps remains the bestin-class vs average ~12bps for large peers, while distribution payout at ~45% is lower.

Banca channel to aid flows; focus on diversifying revenue:

Major banks that had disapproved ABSLAMC’s schemes due to weak 3/5-year returns, have approved flagship schemes due to improving equity performance; this would support net equity flows. ABSLAMC’s alternates QAAuM in Q1FY27 was INR2,002bn, with PMS/AIF at INR47bn, real estate at INR7bn, offshore at INR50bn, and EPFO at INR1,898bn. Non-MF revenue share was 3.1% in FY26 and 24% CAGR over FY22-26. All non-MF segments are growing at a healthy rate of >20%, which the AMC is confident of sustaining.

AAuM CAGR to outpace industry over FY27-29E:

Blended MF yields at 40bps is superior to SBIFM and NAM. Opex/AAuM at 16.4bps (excl. commission) is higher than large peers, due to lack of scale-based operational efficiency benefits, which can accrue to ABSLAMC led by healthy AAuM growth. While core earnings growth in FY27E could be weak (-1.1%), we expect equity AAuM growth of ~18% over FY27-29E, which would translate into core earnings CAGR of ~20% that would be highest among listed peers.

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