Buy Nippon Life India Asset Management Ltd For Target Rs.1,250 by Prabhudas Liladhar Capital Ltd
Profitable growth trajectory to continue
We attended NAM analyst meet, wherein senior management reiterated its strategy of
(1) profitable growth
(2) focus on sticky/granular flows through unique investor addition
(3) deeper regional penetration by increasing presence in B100/B200 markets. Market leadership in gold+silver ETF (33% market share) is a unique advantage due to better profitability while being a hedge to active equity. Risk management is robust with preference for superior risk-adjusted returns & long-term performance over short-term ranking. Market share in net equity flows/SIP at 11/12% remains higher than stock equity AUM market share of 7.5%. We tweak multiple to 38x from 36x on Sep’28 core EPS and raise TP to INR1,250 from INR1,225. Retain ‘BUY’.
Strong market share gains over the last 6 years:
Over Jun’20 to Jun’26, NAM delivered 26% CAGR in MAAUM, while market share expanded from 7.3% to 9.0%. ETF share in AUM increased from 12% to 21%, while commodity ETF share rose from 2% to 11%. HNI market share increased meaningfully from 5.5% to 8.9%, supported by strong traction in ETFs. Total folios grew at a robust 28% CAGR, increasing from 9mn to 40mn. NAM highlighted the strength of its investor acquisition engine, with investor base increasing from ~6mn to ~24mn unique investors.
Focus on profitability and deeper penetration:
The management stated that profitability remains a primary focus, rather than market share gains. NAM remains patient on growth, avoiding NFO-led expansion and focusing on acquiring new-to-MF investors, particularly from smaller towns. NAM wants to penetrate deeper beyond B30 markets in B100/B200 locations that would drive the next phase of investor acquisition. Distribution is being built through sustained on-ground and digital presence. While these markets are harder to penetrate, attrition is lower and flows garnered are stickier.
Focus on stickiness/diversification:
SIP retention (SIP > 5 yrs) is superior, with stickiness at ~45% vs. industry level of ~31%. NAM follows a more diversified distribution model, with no single distributor contributing >5% of assets. ETF remains a meaningful profit pool, while commodity ETFs benefit from NAM’s scale and liquidity. HNIs account for a higher share, i.e., 40% of commodity ETF; HNIs contribute 25% to industry gold ETF. NAM has improved its avg customer wallet share from 1.1x to 1.4x, and its medium-term objective is to increase this further to ~2x through deeper product penetration.
Robust risk management:
In 2019, NAM engaged global consultant Mercer to undertake an external review of its investment framework. Risk management is a key differentiator, with focus on consistency, risk controls and long-term performance, rather than chasing rankings. Investment process is built around 3 pillars: improving investment input quality, implementing stricter risk guardrails and continuous portfolio monitoring. NAM follows the growth at reasonable price (GARP) investment philosophy, that allows to participate in growth opportunities while avoiding overpayment for growth.
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