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Good Quarter; Market Share Gains Continue!

Est. Vs. Actual for Q1FY26: Revenue – BEAT; Operating Profit – INLINE; PAT – BEAT

Changes in Estimates post Q1FY26

FY26E/FY27E (in %): Revenues +1.3/+3.0; Operating profit +3.3/+6.4; PAT +4.9/+5.6

Recommendation Rationale

• Focus on Offshore Business: NAM continues to witness strong flows in the offshore business from Asia and Europe. The company will continue to expand and strengthen its footprint in the Japanese institutional and retail space, alongside foraying into newer geographies in the Asian, European, and Latin American markets.

• SIP remains growth engine: The company has seen a continued traction in its SIP flows, growing at 29/4% YoY/QoQ. SIP market share stood at 10.07% in Jun’25. The management highlighted that the equity net sales market share and SIP market share continue to remain well above the equity market share. Over Apr-May’25, the industry witnessed a one-time clean-up for the inactive SIPs folios. However, NAM has seen growth stabilise and resume over Jun-Jul’25. The company has fared better vs. the industry in terms of SIP discontinuation. The management highlighted that the SIP book remains granular, with ~75% of SIPs being Rs 10,000, adding stability.

• Yields to decline by 2-3bps annually: NAM’s blended yield in Q1 stood at 36bps, with equity yield at 55bps, debt yield at 25bps, ETF yield at 17bps, and Liquid yield at 12bps. The ETF yields improved 2bps QoQ due to the composition of the various funds in the ETF segments. NAM has rationalised distributor commissions for ~45% of the equity portfolio, thereby partially supporting yield decline. The management anticipates an annual yield decline of 2-3bps, predominantly attributed to the telescopic pricing formula, with AUM growth and new flows coming at a higher cost.

Sector Outlook: Positive

Company Outlook: Long-term prospects of the Indian AMC industry remain intact, given the low penetration levels in India vis-à-vis developed countries. It is a play on the financialization of savings in India, and NAM is likely to benefit from these trends, thereby facilitating market share gains. We expect NAM to deliver a healthy MF AUM/Revenue/Earnings growth of 21/17/16% CAGR over FY25-28E, supported by (i) Diversified product offerings, (ii) Improving market share across segments, (iii) Focus on passive offerings, and (iv) Strong SIP franchise. Anticipating a healthy growth trajectory, we tweak our Revenue/Earnings estimates upwards by 1-3%/4-6% over FY26-27E.

Current Valuation: 34x FY27E EPS; Earlier Valuation: 29x FY27E EPS

Current TP: Rs 925/share; Earlier TP: Rs 750/share

Recommendation: We maintain our BUY recommendation on the stock

Financial Performance

• Operational Performance: NAM reported an MF QAAUM growth of 27/10% YoY/QoQ. MF QAAUM market share improved by 29/23bps YoY/QoQ. The share of Equity AUMs was broadly stable at 49.6% vs 49.8% QoQ. Equity AUM market share declined by 18bps QoQ and stood at 7.04% vs 6.86% QoQ. SIP flows were flattish sequentially and stood at Rs 97.7 Bn (+30/1 YoY/QoQ) during the quarter. SIP portfolio grew by 23/15% YoY/QoQ. The company has the largest unique customer base of 21.2 Mn vs 20.9 Mn QoQ with a market share of 38.3%, flat QoQ.

• Financial Performance: Revenue growth was ahead of our expectations and grew by 18/28% YoY/QoQ. Yields (as % of AUM, calc) stood at 35bps. Opex growth was in line with management guidance and stood at 16/8% YoY/QoQ. Operating profit growth was healthy at 23/6% YoY/QoQ. Operating profit margin (calc.) stood at 64% vs 62.7/64.5% YoY/QoQ. PAT growth was strong at 19/33% YoY/QoQ.

Valuation & Recommendation

We value the stock at 34x FY27E EPS vs its current valuations of ~29x FY27E to arrive at a revised target price of Rs 925/share, implying an upside of 16% from the CMP. We maintain our BUY recommendation on the stock.

Key Highlights

New product launches: As a part of NAM’s AIF business, the company currently offers 4 business lines, namely Public Equity, Real Estate, Private Credit & Venture Capital. The fund deployment across all strategies was robust in Q1FY26. At present, fundraising is underway for (a) Public Equity AIFs - Nippon India Equity Opportunities AIF Scheme 9 and Nippon India Equity Opportunities AIF Scheme 10, (b) Private Credit AIF – Nippon India Credit Opportunities AIF Scheme 1; and (c) Private Credit AIF Nippon India Credit Opportunities AIF Scheme 1. During Q1, the company launched 4 new products – (a) Nippon India Nifty 500, (b) Quality 50 Index Fund, (c) Nippon India Nifty 500 Low Volatility 50 Index Fund and (d) Nippon India BSE Sensex Next 30 Index Fund. Going ahead, NAM’s product pipeline includes the launch of the Empowered India Long-only Focused Flexicap Strategy and the Nippon India Credit Opportunity Scheme.

Valuation & Recommendation

We value the stock at 34x FY27E EPS vs its current valuations of ~29x FY27E EPS to arrive at a revised target price of Rs 925/share, implying an upside of 16% from the CMP. We maintain our BUY recommendation on the stock.

Key Risks to Our Estimates and TP

• Slow growth in AUM and pressure on yields would impact our top-line estimates.

• Ongoing global uncertainties, FII outflow, and a weak INR/USD outlook may impact some growth momentum and lead to some volatility.

• The asset management industry is strongly regulated, and regulatory uncertainty would impact our estimates.

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