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Q1FY26 Result Highlights HDFC AMC posted a strong performance in Q1FY26, with Quarterly Average Assets Under Management (QAAUM) growing 23% YoY to Rs 8.3tn and actively managed equity QAAUM rising 22% YoY to Rs5.0tn. Market share remained steady at 11.5% for total QAAUM and 12.8% for equity. PAT came in at Rs 750 cr, while core PAT rose 23% YoY to Rs 570 cr, supported by a 25% YoY increase in core revenue to Rs 970 cr and better-than-expected other income. Employee costs and other expenses rose 8% and 7% YoY, respectively. The company reported 24.3mn live accounts and 13.7mn unique customers, with the individual investor market share rising to 25%. SIP AUM grew 25% YoY to Rs 2.0tn, contributing 40% to the equity AUM. Within the equity segment, MFDs accounted for the highest share at 32.9%, followed by direct channels at 28.2% and national distributors at 26.1%. Yields held steady in Q1FY26, with the blended yield at 47bps, equity yields at 58–59bps, debt at 27–28bps, and liquid at 12–13bps. The share of AUM from direct channels increased to 42%, rising 330bps YoY, while the contribution from MFDs dropped to 25.6% and from HDFC Bank to 5.6%.

Key Conference call takeaways

Industry Overview

• Industry QAAUM grew 22% YoY to Rs 72.1tn in Q1FY26, with equity-oriented funds reaching Rs 40.5tn, up 23% YoY.
• Debt and liquid fund QAAUM stood at Rs 13tn and Rs 6.9tn, respectively.
• Net inflows into equity-oriented MFs totalled Rs 911bn; debt and liquid funds received Rs 1.3tn and Rs 609bn, respectively.
• ETF/other categories saw net inflows of Rs 691bn during the quarter.
• Closing AUM rose 22% YoY to Rs 74.4tn, with an absolute increase of Rs 13.2tn, of which Rs 8.6tn came from net new flows.
• Industry SIP contributions rose to Rs 273bn in Jun’25 from Rs 213bn in Jun’24, while SIP AUM reached Rs 15.3tn versus Rs 12.4tn a year ago.
• The number of contributing SIP accounts increased from 67.0mn to 86.5mn YoY.
• STPs are considered more volatile than SIPs, and the tenure of SIPs has increased gradually over time.

Company Financial and Operational Performance

• Revenue from asset management operations grew 25% YoY to Rs 9.7bn.
• Other income rose 34% YoY to Rs 2.3bn, primarily from debt and liquid mutual fund investments, with 10.5% in equity and 7.6% in arbitrage.
• PAT grew 24% YoY to Rs 7.5bn, while core PAT increased 23% YoY to Rs 5.7bn.
• Employee expenses rose 8% YoY to Rs 1.1bn; other expenses were Rs 844mn, growing 7% YoY and 15% QoQ.
• Operating metrics showed 24.3mn live accounts and 13.7mn unique customers as of Jun’25, with a 25% market share in unique customers.
• 69.6% of the company’s MAAUM came from individual investors versus 60.7% for the industry.
• The company launched its Innovation Fund NFO recently.
• Alternatives AUM stood at Rs 60bn, including a closed venture capital FOF of Rs 12bn.
• PMS business AUM also saw significant growth, with yields in alternatives and PMS businesses remaining comparable to the overall business.
• The company is also in the process of raising a credit fund.

Distribution, Yields, and Strategic Developments

• In Q1FY26, blended yield stood at 46bps, remaining flat QoQ.
• Equity yield stood at 58–59bps, debt at 27–28bps, and liquid at 12–13bps.
• The share of direct channel in equity-oriented AUM rose to 28.2% from 25.6% YoY.
• Direct channel share in total AUM increased to 42%, while MFD share declined to 25.6%, and HDFC Bank’s contribution marginally fell to 5.6%.
• HDFC AMC works with over 99,000 distribution partners including MFDs, national distributors, and banks.
• Other distribution channels are expanding faster, although HDFC Bank remains an important partner.
• The company secured approval for a new fund under SIF regulations and is building a team around it.
• Management remains constructive on debt funds due to favourable RBI measures and liquidity support.
• The product suite remains broad and well-diversified and covers all SEBI-allowed debt categories.
• The company maintains a higher net flow market share compared to its AUM market share.

Guidance and Outlook

• Under the new ESOP scheme, non-cash ESOP and PSU-related expenses are projected at Rs 2.0–2.1bn over four years: Rs 560mn in FY26, Rs 630mn in FY27, Rs 510mn in FY28, Rs 320mn in FY29, and Rs 60mn in FY30.
• The company reiterated its commitment to building a strong team and product strategy around its SIF initiative.
• Management expressed confidence in continuing to outperform in terms of net flows relative to overall book market share.

Outlook & valuation

HDFC AMC continued its strong momentum in Q1FY26 with Quarterly Average Assets Under Management (QAAUM) growing 23% YoY to Rs 8.3tn and actively managed equity QAAUM rising 22% YoY to Rs 5.0 tn on account of favourable equity market & robust SIP flows. We believe that HDFC AMC remains a strong player in the mutual fund industry, backed by robust financial performance, steady AUM growth, cost efficiency and a strong retail presence. While short-term market fluctuations pose challenges, the company’s long-term fundamentals remain solid. With an improved market position, a well-diversified product portfolio, and digital expansion efforts, HDFC AMC is well-positioned to sustain growth and deliver value to its stakeholders. The company remains focused on expanding its diversified product suite, including alternatives, PMS, and newly approved SIF products, with a measured approach to market entry and long-term team building.

With a strong and experienced investment team, HDFC AMC applies a disciplined and research-driven approach to managing client assets. The Indian mutual fund industry is poised for long-term structural growth, supported by increasing financial awareness, under-penetration of financial products, the shift toward financial savings, and the growing adoption of digital platforms. HDFC AMC is well-positioned to capitalize on these tailwinds due to its extensive distribution network, consistent SIP inflows, strong performance in large-sized schemes, strong execution and superior profitability metrics. At the current market price of Rs 5,551, the stock is trading at 39x FY27E. We maintain HOLD rating on the stock.