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NAM reported an operating PBT of INR 2.3bn (+25% YoY, +20% QoQ; in-line vs JMFe) driven by a) strong AUM growth of 23% YoY, b) steady top-line yields of 45bps (flat QoQ) and controlled opex (+13% YoY). Overall MF QAAUM witnessed a growth of +12% QoQ (+23% YoY) with strong growth in equity and ETFs (+31.5% and +33% YoY resp) on back of buoyant markets and market share gains; further, even debt AUM witnessed a growth of +24% YoY. Monthly SIP flows improved to INR 17.3bn in Sep’23 vs INR 12.2bn in Jun’23 and SIP flow market share improved to 10.5% (+220bps QoQ). Top-line yields were held steady at 45bps despite favourable AUM mix as equity yields continue to see moderation as new lower yielding AUM continues to replace old higher yielding AUM and also as scheme AUM size is increasing. NAM has started to see equity market share gains (6.7% in Sep’23, +25bps QoQ) on the back of strong uptick in net equity flows and management indicated that this trend should subsist. NAM has seen a sharp bounce back since the lows seen post SEBI discussion paper on proposed TER changes given that SEBI has indicated that a revised discussion paper is in works. While there is a broad expectation that the new discussion paper will be much more positive for AMCs, we remain watchful of the key changes. Maintain BUY with a TP of INR 430.

* In-line core operating performance: Operating revenue yields were steady at 45bps despite favourable AUM mix as equity yields continue to see moderation as new lower yielding AUM continues to replace old higher yielding AUM and also as scheme AUM size is increasing. Opex was controlled (+13% YoY; +2.4% QoQ) and management indicated that there are one-off discretionary expenses over the last quarter which they can stop as needed. Operating PBT of INR 2.3bn (+25% YoY, +20% QoQ) was in-line with JMFe with core PBT margins improving +2bps QoQ to 27bps aided by operating leverage. Other income was strong at INR 0.8bn (vs INR 1.2bn QoQ).

* Strong AUM growth subsists: Overall MF QAAUM witnessed a growth of +12% QoQ (+23% YoY) with strong growth in equity and ETFs (+31.5% and +33% YoY resp) on back of buoyant markets and market share gains; further, even debt AUM witnessed a growth of +24% YoY. Monthly SIP flows improved to INR 17.3bn in Sep’23 vs INR 12.2bn in Jun’23 and SIP flow market share improved to 10.5% (+220bps QoQ). NAM’s equity market share, which was steady around 6.3-6.4% levels for last 5-6 quarters, has started to see gains (6.7% in Sep’23, +25bps QoQ) on the back of strong uptick in net equity flows and management indicated that this trend should subsist. Management indicated that equity flows, unlike 1Q24 wherein they were concentrated in small/mid cap schemes, were more diversified this time with top 5 schemes contributing 80% of the flows. We remain watchful on the sustainability of market share gains going ahead.

* Valuation: NAM has seen a sharp bounce back since the lows seen post SEBI discussion paper on proposed TER changes given that SEBI has indicated that a revised discussion paper is in works. While there is a broad expectation that the new discussion paper will be much more positive for AMCs, we remain watchful of the key changes. Maintain BUY with a TP of INR 430.

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CIN Number : L67120MH1986PLC038784