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In-line Quarter; Strong SIP Franchise to Support Steady Growth Est. Vs. Actual for Q2FY27: Revenue – INLINE; Operating Profit – INLINE; PAT – MISS Changes in Estimates post Q2FY27 FY27E/FY28E/FY29E (%): Revenues -1.3/-0.7/0.3; Op. Profit -2.1/-2.0/-1.3; PAT -8.2/-2.3/-1.1

Recommendation Rationale

* Yield Compression Reflects Telescopic Pricing: NAM reported a blended yield of 37bps in Q2FY27, with equity yields at 52bps (down 2bps QoQ), debt at 25bps, liquid funds at 12bps, and ETFs at 25bps. The sequential moderation in yields, particularly in equity, was primarily attributable to telescopic pricing as AUM expanded and incremental flows accrued across the franchise. The management clarified that the regulatory changes in distributor-related pricing had already been reflected in Q1, with no additional impact in Q2.

* Net Flows Remain Resilient Despite Market Volatility; Strong SIP Franchise Lends Support: Despite market volatility and a moderation in industry-wide flows, NAM indicated that its net inflows remained broadly stable in Q2, with equity (ex-index and arbitrage) net-sales market share continuing at high single-digit levels. The management highlighted that incremental flows have been well-distributed across categories, including large, mid, small, multi-cap and hybrid funds. While continued market weakness has weighed on investor sentiment, the industry has witnessed higher outflows from large cap funds among HNIs. However, NAM’s large cap funds have not recorded negative net sales. NAM attributed this resilience to its diversified product portfolio and sizeable SIP franchise, which have helped it navigate market volatility. The management further highlighted that NAM continues to garner ~Rs 3,200 Cr in systematic inflows each month, supported by a fragmented retail investor base and deeper geographic penetration.

* Customer Additions Moderate Amid Industry Slowdown and Deliberately Lower NFO Launches: The pace of incremental customer additions moderated in Q2, reflecting broader industry trends and NAM's deliberate restraint on NFO launches. The management acknowledged that investor growth across the mutual fund industry has flattened amid market volatility, with SIP growth and incremental investor acquisition also showing signs of moderation. The absence of new NFO launches by NAM was another factor contributing to slower customer additions. NAM has consciously avoided launching products without an established track record in a volatile market, prioritising investor suitability and long-term outcomes over near-term customer acquisition. Despite this moderation, NAM crossed 40 Mn folios and approximately 2.5 Cr unique customers, accounting for 37.0% of the industry's unique customer base, as of Sep'26.

Sector Outlook: Positive

Company Outlook: NAM’s strong market positioning, diversified product portfolio, and leadership in ETFs provide a solid foundation for sustaining growth, despite moderation in industry flows and temporary headwinds in customer additions. The company’s sizeable SIP franchise and broad retail reach provide resilience through market volatility, while continued market share gains reflect the strength of its diversified distribution capabilities. The upcoming SIF launch offers an incremental growth opportunity. Overall, NAM remains well-positioned to capitalise on the structural growth of India’s MF industry, with MF QAAUM, revenue and earnings expected to deliver CAGRs of 20.0%, 17.0% and 17.0%, respectively, over FY26-29E, supported by

(i) diversified product offerings

(ii) improving market share across segments

(iii) a strong SIP franchise.

Current Valuation: 33x Sep’28E EPS

Earlier Valuation: 39x FY28E EPS Current TP: Rs 1,175/share

Earlier TP: Rs 1,325/share Recommendation: We maintain our BUY recommendation on the stock

Financial Performance

* Operational Performance: NAM reported a MF QAAUM growth of +20/5% YoY/QoQ. MF QAAUM market share improved by 51/-1bps YoY/QoQ to stand at 9.02%. The share of Equity AUMs (+20/7% QoQ) improved to 49.9% vs 48.9% QoQ, supporting yields. Equity AUM market share improved by +27/+2bps YoY/QoQ to 7.4%. SIP Inflows grew by 4/1% YoY/QoQ to stand at Rs 111.4 Bn. SIP portfolio grew by 15/1% YoY/QoQ. Managed Accounts AUM grew by +11/3% YoY/QoQ. Offshore business AUM de-grew by 16/8% YoY/QoQ. Total AUM stood at Rs 9.01 Tn. (+18/4% YoY/QoQ).

* Financial Performance: Core operating revenue growth was in line with our expectations and grew by 21/4% YoY/QoQ, with yields (calc.) remaining steady QoQ at 36bps. However, weak other income dented overall revenue growth, which stood at 18/-13% YoY/QoQ. Opex growth was contained at 13% YoY/flat QoQ. Operating profit growth was healthy at 25/6% YoY/QoQ. Operating profit margin (calc.) stood at 67.5% vs 65.3/66.2% YoY/QoQ. PAT de-grew by 6/36% YoY/QoQ. Earnings were impacted due to an exceptional item of Rs 96.8 Cr towards settlement related to Yes Bank AT1 Bonds.

Valuation & Recommendation

We value the stock at 33x Sep’28E EPS vs its current valuation of ~28x Sep’28E to arrive at a revised target price of Rs 1,175/share, implying an upside of 20% from the CMP. We maintain our BUY recommendation on the stock

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SEBI Registration number is INZ000161633