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Yields improve sequentially due to favorable mix

* HDFC AMC’s operating revenue grew 14% YoY/6% QoQ to ~INR11.7b (inline). Yields came in at 48.5bp in 2QFY27 vs 46.6bp in 2QFY26 and 47bp in 1QFY27. For 1HFY27, revenue grew 14% YoY to INR22.7b

* Total opex at INR2.4b grew 6% YoY but declined 4% QoQ. Employee costs at INR1.4b were up 15% YoY but remained flat QoQ while other expenses at ~INR948m were down 6% YoY/8% QoQ. As a bp of AUM, opex was 9.9bp vs. 10.3bp in 2QFY26 and 10.7bp in 1QFY27. EBITDA came in at INR9.3b (5% beat due to lower opex), up 16% YoY/9% QoQ. EBITDA margin stood at 79.5% vs. 77.9% in 2QFY26 and 77.3% in 1QFY27. For 1HFY27, EBITDA grew 13% YoY to INR17.8b.

* PAT stood at INR7.5b (9% beat due to lower opex and higher other income), up 4% YoY but down 11% QoQ. PAT margins came in at 64% vs 69.9% in 2QFY26 and 76.1% in 1QFY27. For 1HFY27, PAT grew 8% YoY to INR15.9b.

* HDFC AMC’s margins improved sequentially to 48.3bp from 47bp in 1Q, primarily driven by a favorable asset mix, while underlying yields remained largely stable. The marginal sequential increase in equity yields was not attributable to a decline in AUM, with movements instead reflecting changes in product mix, the nature of flows and MTM.

* We broadly retain our earnings estimates for FY27/FY28 based on its 2Q performance. We expect its revenue/EBITDA/PAT to deliver a 14%/14%/ 13% CAGR, alongside ~13% AUM growth over FY26–28. We reiterate our BUY rating with a TP of INR2,900, based on 40x FY28E core EPS.

SIP AUM remains flat QoQ, hit by STP flows

* HDFC AMC’s QAAUM at INR9.7t grew 10% YoY and 4% sequentially, driven by 19%/4%/ 90%/16% YoY growth in equity/hybrid/ETFs/index funds while liquid funds remained flat YoY and debt funds declined 17% YoY.

* On a QAAUM basis, the equity mix stood at 67.1% in 2QFY27, well ahead of the industry mix at 57.5% as of Sep’26. The closing AUM for 2QFY27 stood at INR9.2t, registering a growth of 6% YoY and remaining flat QoQ.

* On a closing AUM basis, the company’s overall market share in total AUM declined YoY to 11.1% from 11.5% in Sep’25. Ex-ETFs, the market share declined to 12.3% from 12.8% in Sep’25. Closing actively managed equity/ debt/liquid AUM market share stood at 12.7%/13%/10.4% as of Sep’26.

* The individual monthly AAUM rose 9% YoY/ 3% QoQ to INR6.7t (contributing ~69.9% of total AUM vs. the industry share at 61.1%). The number of live individual accounts grew 24% YoY to 32.3m while unique investors grew 22% YoY to 17.7, representing 28% penetration of India’s MF investor base (higher than the industry growth of ~11% YoY).

* SIP AUM grew 14% YoY but was flat QoQ at INR2.3t as of Sep’26. Systematic flows were affected by STP weakness amid market volatility, as wealth managers paused transfers from liquid and money market funds to equities.

* Average SIP ticket size moderated QOQ to INR2.5k from INR2.8k in 1QFY27.

* However, excluding STPs, SIP market share and transaction volumes improved, supported by a long-standing focus on SIP investing, a strong product track record, a broad product range and established distribution partnerships.

* The company continues to expand its product bouquet as part of its long-term strategy to build a full-spectrum investment platform spanning mutual funds, ETFs, PMS, SIFs, private equity and private credit, catering to investors across asset classes, life stages and risk profiles.

* Based on overall AUM, the direct channel accounted for the largest share at 44.7%, followed by IFAs and national distributors at 23.5% and 22.4%, respectively. Within equity AUM, direct and IFAs accounted for 32% and 29.8% of the share, respectively, while the national distributor channel contributed 26.8%.

* As a bp of AUM, opex was 9.9bp vs. 10.3bp in 2QFY26 and 10.7bp in 1QFY27. Operating expenses are broadly driven by inflation and business growth, while incremental spending is directed towards building future capabilities and capacity.

* In 2QFY27, the non-cash charge stood at INR186m (vs INR211m in 2QFY26 and INR227m in 1QFY27). ESOP guidance for FY27 stood at ~INR800m.

* Other income came in at INR713m vs. our est. of INR450m (down 26% YoY/73% QoQ) affected by mark-to-market losses.

Valuation and view

* HDFC AMC’s strong equity franchise, improving operating efficiency, and sustained growth in individual investor participation position it well to deliver healthy earnings growth over the medium term. While near-term flows may remain volatile amid market fluctuations and STP-related weakness, a favorable asset mix, disciplined cost management and expansion into newer product categories should support growth and profitability

* We broadly retain our earnings estimates for FY27/FY28 based on its 2Q performance. We expect its revenue/EBITDA/PAT to deliver a 14%/14%/ 13% CAGR, alongside ~13% AUM growth over FY26–28, supported by continued expansion across mutual funds, SIFs, PMS, and alternatives. We reiterate our BUY rating with a TP of INR2,900, based on 40x FY28E core EPS

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