IGI Logo

Strong growth in revenue and increase in profitability: NAM India’s revenue from operations increased by 1.1% QoQ/11.7% YoY to Rs 329cr on account of solid growth in AuM while yields remain moderated. Other income increased by 128% QoQ on account of dividend income and gains on investment. The growth in top-line was translated in PAT which saw a healthy growth of 11.8%/84% YoY to Rs 205cr.

Growth in AuM size: During the quarter, the industry AuM increased by 14% YoY while the company’s AuM clocked a growth of 12% YoY. The growth in AuM size was mainly due to returns in the capital market. The growth in AuM was led by equity & ETF growth which increased by 21% YoY and 22% YoY. The company also continued to maintain its market share in total AuM to 7.3%

Yields compression: The yield on investment for the quarter was 45bps vs 48bps in Q4FY23. The management said that the marginal decline in yields is due to replacement of old assets with new assets and growing share of ETFs. The company expects yields to compress in the medium term and stabilize in the long term. In the near term, the management expects yields to decline further by 2-2.5bps.

Continuing leadership position in ETFs: NAM-India continues to maintain its leadership position in ETFs with ~60% share in total folios. In terms of value, it has a market share of ~42% in ETFs. With regards to the unique investor, the market share remains steady at 36.9% showing a slight decline of 50bps YoY but increased by 70bps QoQ. The growth in market share will be on the back of better returns of portfolios and its strong hold amongst retail investors.

Hold in B-30 cities continues: The company continues to have a sturdy hold in the B-30 cities with a market share of 19.3% in terms of AuM vs an average of 16.9% in the industry. In terms of folios and monthly average AuM (MMAuM) its market share stands at 11.8% and 8.3%. Its presence in B-30 cities can be attributed to its wide distributor network of 92,800 distributors as on Q1FY24. Also, in the overall distribution mix the direct channel share stood at 54%

Expanding quarterly book: The quarterly book has doubled in the two years from 17.5bn in Q1FY22 to 34.3bn in Q1FY24. During the quarter, the book increased by 6.5% QoQ/50% YoY. The increase in quarterly book is mainly due to the retail participating and higher market returns. In terms of SIP folios, the growth was healthy at 8.3% QoQ/26.8% YoY.

Valuation: We remain positive on the company on the back double digit AuM growth, its leadership position in the ETFs segment along with strong presence in the active funds segment. NAM has a strong hold amongst retail investors as well as B-30 cities. The company has managed to generate superior returns for its shareholders. We expect the AuM to grow at 15% CAGR over FY23-25E and expect margin to stabilize later in FY24. We expect revenue/EBITDA/PAT to grow at a CAGR of 18%/18%/17% over FY23-25E. We maintain Buy rating on the company while revising our target price upwards to Rs 374. We value the company at 24x based on its FY25E EPS.  

Please refer disclaimer at https://www.religareonline.com/disclaimer

SEBI Registration number is INZ000174330