Nomura has released a comprehensive update on Asset Management Companies (AMCs), highlighting muted operating profit growth amidst soft Asset Under Management (AUM) trends and market correction.
Key Observations:
- AUM Growth Moderation:
- The mutual fund industry has seen moderation in AUM growth.
- As of November 2024, Monthly Average AUM (MAAUM) showed growth of 3% quarter-on-quarter (q-o-q) and 40% year-on-year (y-o-y).
- Equity AUM Performance:
- Equity AUM growth was subdued, primarily impacted by market correction, with Nifty 50 declining by 9% during the third quarter.
- Despite this, inflows into equity mutual fund schemes have remained robust, suggesting sustained investor confidence.
Company-Specific Projections:
- HDFC AMC (Buy) and NAM (Buy):
- Expected to report QAAUM growth of 3% q-o-q and 42% y-o-y for HDFC AMC.
- NAM likely to deliver 4% q-o-q and 51% y-o-y QAAUM growth.
- Operating Profit and Margins:
- AMCs under Nomura’s coverage are projected to report muted operating profit growth, ranging from -2% to 2% q-o-q, though annual growth is expected to be a robust 40-65%.
- Operating margins are anticipated to remain steady, as operating leverage offsets declining revenue yields.
Outlook:
- The soft AUM growth trajectory is expected to weigh on short-term profit growth for AMCs.
- However, operating margins are likely to sustain due to the operational efficiencies being implemented.
Nomura’s overall stance suggests optimism for certain AMC players like HDFC AMC and NAM but emphasizes a cautious approach in light of ongoing market dynamics.
