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Core performance in line; one-off settlement impacts PAT

* Nippon Life India AMC’s (NAM) operating revenue came in at INR8b (in line), reflecting 21% YoY/4% QoQ growth. Yield on management fees stood at 40.4bp in 2QFY27 vs 40.1bp in 2QFY26 and 40.8bp in 1QFY27. For 1HFY27, revenue grew 24% YoY.

* Total opex came in at INR2.6b (in line), registering 13% YoY growth/remaining flat QoQ. EBITDA came in at INR5.4b (in line) in 2QFY27 (+25% YoY/6% QoQ) and EBITDA margin at 67.5% in 2QFY27 vs 65.3% in 2QFY26 and 66.2% in 1QFY27.

* Due to the one-off fee payment of INR968m related to investment in Yes Bank AT-1 bonds, PAT stood at ~INR3.2b in 2QFY27 (20% miss), declining 6% YoY/36% QoQ. Excluding the settlement paid, PAT stood at INR3.9b, in line with our estimate. For 1HFY27, PAT grew 12% YoY.

* Newly granted ESOPs worth INR600-800m will be expensed over four years. ESOP expenses stood at INR280m in 1HFY27 and are expected to reach INR580m in FY27. The AIF subsidiary is likely to incur higher expenses over the next 3–6 quarters due to headcount additions.

* We have cut down our earnings estimates for FY27/FY28 by 4%/1% to factor in the exceptional item corresponding to the settlement fee paid. We reiterate our BUY rating on the stock with a TP of INR1,200, based on 42x FY28E core P/E.

Market share remains stable QoQ across categories

* NAM’s overall MF QAAUM grew 20% YoY/5% QoQ to INR7.9t. Equity/Hybrid/ETFs/Index/Liquid funds posted YoY growth of 18%/35%/36%/19%/12%, while debt funds declined 13% YoY.

* The share of Equity/ETF/Debt/Liquid in the overall QAUM stood at ~47.6%/31.6%/7.0%/10.6% in 2QFY27 vs 47.7%/27.9%/9.7%/11.4% in 2QFY26.

* NAM’s market share for QAAUM rose 51bp YoY/declined 1bp QoQ to ~9.0%, with equity market share rising 27bp YoY/2bp QoQ to ~7.4%.

* ETF market share rose 135bp YoY to 21.1%, with NAM maintaining a dominant position in this space at 45% of overall industry folios and 46% of ETF trading volumes on NSE/BSE.

* Gold & Silver ETF average daily volumes remain significantly ahead of industry peers despite moderation in industry-wide gold ETF flows. Combined Gold & Silver ETF AUM account for 32% of ETF AUM and 12% of total MF AUM.

* SIP flows improved sequentially to INR111.4b in 2Q from INR110.3b in 1Q despite market volatility, driven by fintech platforms, B-30 expansion, digital investments, and brand-building initiatives, reflecting a monthly SIP inflow of INR37.1b (+4% YoY). The SIP book grew to INR1.86t (+19% YoY).

* Total opex came in at INR2.6b (in line), growing 13% YoY/remaining flat QoQ. As bp of QAAUM, the cost stood at 13.1bp in 2QFY27 vs 13.9bp in 2QFY26 and 13.8bp in 1QFY27.

* Overall operating expenses are guided to grow 18–20% YoY (excluding ESOP) over the next 1–2 years, reflecting continued strategic investments.

* Employee costs rose 13% YoY/remained flat QoQ to INR1.4b. AIF subsidiary is likely to incur higher expenses over the next 3–6 quarters due to headcount additions, while employee expenses are expected to remain flat for the mutual fund business.

* Other income stood at INR231b vs our est. of INR300m. The company paid SEBI settlement of INR968m related to investment in Yes Bank AT-1 bonds.

* Under the investor mix, the retail share stood at 50% in 2QFY27 (vs. 54% in 2QFY26), while HNI/corporate share stood at 37%/13%, respectively.

* Cumulative AIF commitments stood at INR99.8b (+14% YoY), with INR4b raised in 2QFY27. Fundraising is underway for a listed equity fund, a private credit fund, and a direct VC fund. During the quarter, the company launched the second SME-focused Category II/III AIF, the Undiscovered India Opportunity Fund 2.

* Under the advisory segment, AUM declined to INR15b from INR19b in 2QFY26.

* On the Gift City front, three feeder funds are operational, with combined AUM growing to USD45m. The AMC is exploring feeder funds through GIFT City into its Indian master funds, along with a potential outbound fund strategy through a strategic partner.

* Digital purchase transactions contributed 78% of total new purchase transactions. The company recorded 4.5m digital transactions in 2QFY27.

* The company had an investor base of 24.3m unique investors (among the largest), with a market share of 38.4%. It added 0.4m folios QoQ, taking the total to 40.6m

Valuation and view

* NAM remains well positioned to deliver healthy long-term growth, supported by its strong retail franchise, resilient SIP momentum, expanding digital ecosystem, and continued market share gains. The company continues to invest in technology, workforce, distribution, and branding, while broadening its product offerings across alternative assets and GIFT city.

* We have cut down our earnings estimates for FY27/FY28 by 4%/1% to factor in the exceptional item corresponding to the settlement fee paid. We reiterate our BUY rating on the stock with a TP of INR1,200, based on 42x FY28E core P/E.

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