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Better performance key to capture market share

Quick Pointers:

* Decent quarter with steady MF yields QoQ; core income growth healthy.

* Net equity flow market share a key monitorable as performance is decent.

CRAMC saw a decent quarter as core PAT (adjusted of MTM gains/losses) increased by 7.7% QoQ & 25% YoY. Blended yields were steady QoQ despite (1) decrease in equity share in AUM mix by 120bps QoQ to 90.8% (2) telescopic pricing impact due to strong QAAUM growth of 7.8% QoQ (3) increase in liquid share QoQ to 6.3% from 5.3% in Q1FY26, suggesting some pass through of telescopic pricing to distributors. Performance in 1-yr bucket has been decent that was maintained in Q2FY26. Net equity flow market share has remained steady at 1.3% in H1FY26 while SIP market share was 2.6% (similar to stock equity market share). Our estimates remain unchanged, and we see healthy core earning CAGR of 17% over FY25-28E. While stock has run-up from the issue price of Rs266 we continue to remain positive on CRAMC; stock is trading at 23.8x on Sep’27 core ABV. We increase multiple on FY27E core EPS to 26x from 24x and raise TP to Rs350 from Rs320. Retain ‘BUY’.

* Steady core income yields QoQ: QAAuM at Rs1,197bn grew by +7.8% QoQ; while equity (incl. bal) at Rs1,087bn grew by 6.4% QoQ. Revenue accretion was 7.1% QoQ and 19.8% YoY while revenue yield was stable QoQ at 34.7bps (Q1FY26-35bps). Opex grew by 1.2% QoQ and came in at Rs420mn (Q1FY26- Rs415mn); staff cost was slightly elevated QoQ to Rs257mn while other opex was steady at Rs163mn. Hence, core income (+11.5% QoQ & 27.8% YoY) was healthy at Rs620mn resulting in operating yields of 20.7bps (Q1FY26-20bps). Other income dipped QoQ to Rs41mn from Rs243mn in Q1FY26. Tax rate was higher at 26.3% (Q1FY26 23.7%). Hence, core PAT yields were steady QoQ at 15.3bps. PAT came in at Rs487mnn (Q1FY26 Rs610Mn).

* Strong 1-yr performance may translate to 3-yr: Equity share decreased QoQ to 90.8% (92.0% in Q1FY26) while debt inched up by 22bps to 2.9% and share of liquid rose by 101bps to 6.3%. Blended yields were maintained QoQ despite (1) decrease in equity share in AUM mix by 120bps (2) telescopic pricing impact due to strong QAAUM growth of 7.8% QoQ. Weighted average performance in 1yr bucket remained decent in Q2FY26; it has been improving since Mar’24. If this trend continues, the 3-yr bucket would also show improvement, which in turn may lead to higher net inflows. Net equity flow market share was broadly steady at 1.3% in H1FY26 (1.3% in FY25).

* Revenue yields stable QoQ; no changes in overall estimates: Management indicated that reported revenue from operations included investment book gains and losses. Excluding MTM, underlying revenue remained stable QoQ. ESOP cost for FY26 is expected to be minimal as initial grants will be made at mid-range of IPO band (253-266) and subsequent grants will be made at market price. Opex is expected to grow at 12-15%. Cost to income ratio is guided to be maintained between 30-40%.

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