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NAM: Building a diversified tech-driven franchise

NAM held an analyst meet to outline its strategy for expanding investor penetration beyond B30, deepening its wallet share, scaling up its ETF franchise and further institutionalizing its investment process. The strategy focuses on building a broader, more diversified franchise, with near-term investments supporting long-term growth. Following are the key takeaways:

* Investor acquisition remains the core strategic metric, with a focus on acquiring new customers, retaining them through market cycles and increasing wallet share across active funds, ETFs/passives and other products.

* Distribution expansion is moving well beyond B30, with NAM targeting B100/B200+ markets through an asset-light physical expansion model supplemented by digital distribution. Early traction in smaller markets supports the potential for deeper penetration and higher investor stickiness.

* A diversified distribution franchise remains a key competitive advantage: NAM works with ~125k MFDs, has no single distributor contributing >5% of assets, and views its non-bank-sponsored model as an advantage in accessing banks and third-party distributors.

* ETFs/passives are becoming an important business diversifier, with ETF share of AUM rising to ~21% from ~12% in FY20. Scale, liquidity and retail participation support NAM’s competitive position, while ETFs have also contributed meaningfully to HNI/UHNI market-share gains.

* Near-term costs are likely to remain elevated as NAM invests across distribution, technology, talent, alternatives and international opportunities. It remains focused on profitable growth over market-share rankings and will not pursue economically unattractive flows.

* We expect NAM to deliver a CAGR of 18%/19%/19% in revenue/ EBITDA/PAT during FY26-28E. We maintain our BUY rating with a 1-year target price of INR1,380 (premised on 47x FY28E Core EPS).

Investor acquisition and wallet share: Focusing on lifetime economics

* NAM’s growth framework rests on three levers – new investor acquisition, geographic penetration and higher wallet share from existing investors.

* NAM is targeting the broader savings pool rather than the existing MF investor base, with bank depositors, demat holders, IPO investors and income-tax filers representing key pools for incremental acquisition.

* Investor additions have remained resilient despite weak equity performance, supporting management’s view that acquisition is increasingly driven by distribution and investor awareness rather than market returns alone.

* SIP retention is vital, with NAM seeking to reduce premature stoppages through greater investor/distributor engagement and by reinforcing long-term wealth creation behavior. SIP mobilization is also being expanded across all five flagship funds.

* Wallet share is expected to increase as customer relationships mature, with acquisition evaluated on lifetime economics rather than near-term revenue. This creates cross-selling opportunities in active, passive/ETF and other products.

Alternatives and Japan: Incremental optionality

* Alternatives/PMS and international businesses provide additional wallet-share opportunities beyond the core MF franchise, with the DWS partnership providing a platform for domestic alternatives and international flows into India.

* Japan offers a differentiated medium-term opportunity, with NAM already managing ~8-9 Japan-linked funds. Nippon Life’s parentage could provide an advantage through institutional relationships and credibility with Japanese investors.

* NAM is building Japan-facing capabilities ahead of potential flows, as Japanese households gradually diversify savings beyond cash/deposits. Faster growth in India allocations could, therefore, provide meaningful upside to the international business

Valuation and view

* NAM’s medium-term growth opportunity is increasingly driven by new investor acquisition, deeper geographic penetration and higher wallet share, providing multiple avenues for sustainable AUM growth beyond market-share gains. The expanding ETF franchise and diversified distribution network further strengthen the franchise, while an increasingly institutionalized investment process supports scalability and consistency of performance.

* Near-term earnings leverage could remain constrained by elevated investments, but the focus on profitable AUM rather than market-share maximization should support franchise quality and returns over the longer term.

* We expect NAM to deliver a CAGR of 18%/19%/19% in revenue/EBITDA/PAT during FY26-28E. We maintain our BUY rating with a 1-year TP of INR1,380 (premised on 47x FY28E Core EPS).

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