Hold Canara Robeco Asset Management Company Ltd For Target Rs.280 by Prabhudas Liladhar Capital Ltd
SIP flows to be driven by equity performance
Quick Pointers
* Mixed quarter; core income beat but SIP falls QoQ/YoY
* Company has set up teams to ramp-up SIP flows
* New TER guidelines may not have a material impact
CRAMC saw a mixed quarter; while core PAT was a beat due to higher revenue and lower opex, SIP flows dipped by 3-4% on a QoQ/YoY basis. Company attributed this to industry-wide pressure on ELSS, post taxation changes. It is setting up dedicated SIP sales teams to ramp-up SIP flows. Focus remains on active management, therefore, launch of passive products may not happen in near term. Revenue yield was higher and rose by 2.9bps QoQ; as per company, yield increase was driven by replacement of high-cost assets with lower-cost ones. We maintain multiple at 22x on Mar’28 core EPS and keep TP at INR 280. Change rating to ‘HOLD from ‘ACCUMULATE’.
Core PAT beat driven by higher revenue/lower opex: Equity QAAuM was in-line INR 1,078bn that fell by 3.8/3.3% QoQ. Revenue was higher at INR 1.14bn (PLe INR 1.03bn) led by higher revenue yields at 38.8bps (PLe 35bps). Opex was lower at INR 456mn (PLe INR 501mn) due to lower staff cost partly offset by higher other opex. Staff cost came in at INR 238mn (PLe INR 322mn); other opex was higher at INR 219mn (PLe INR 178mn) due to NFO related expenses viz. advertising, marketing, regulatory and risk. Core income was a beat at INR 686mn (PLe INR 528bn) resulting in operating yields at 23.3bps (PLe 18bps). Other income was negative 104mn. Tax rate increased to 28.9% (PLe 25%). Core PAT was 30% beat at INR 514mn while yields came in at 16.9bps (PLe 13.5bps). PAT was INR 414mn.
Better yields; TER impact could be neutral to positive: Equity share (incl. bal) rose to 91.8% (91.2% in Q3’26). Revenue yield increased by 2.9bps QoQ likely due to (1) change in TER slab for large & mid-cap & (2) slight rationalization in commission. As per the company, yield increase was driven by replacement of high-cost assets with lower-cost ones. Management is still evaluating the TER impact and at worst the impact could be neutral; the company may also see a slight positive impact. CRAMC expects yields to remain within a sustainable band of 32-40bps.
SIP sees a dip QoQ: Compared to industry growth of 24% YoY in SIP flow, CRAMC witnessed a decline of 3.2%. As per the company, SIP flows (1/3rd of AUM) have softened YoY, partly due to industry-wide pressure on ELSS, post tax changes. Management is setting up dedicated SIP sales teams across five locations and it expects a directional improvement in the SIP book over the next 6 months. 28% of the AUM comes through the direct digital channel.
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SEBI Registration No. INH000000271
