Indian AMCs log highest-ever profit in FY21; HDFC unit leads industry

Surge in equity markets, flows and lower expenses boost bottom line of companies

Domestic asset management companies (AMC) logged their highest-ever net profits in financial year 2020-21 (FY21) thanks to a surge in the equity markets, investor flows, and lowering of expenses.

According to data from mutual fund tracking firm Value Research, AMCs reported combined profits of Rs 6,859 crore in FY21, a 31 per cent jump over the Rs 5,232 crore recorded the previous year.
 
Among the over 40-odd fund houses, HDFC AMC reported the highest profits of Rs 1,326 followed by ICICI Prudential AMC at Rs 1,245. Others like Motilal Oswal AMC, DSP AMC, and Axis AMC saw their profits more than double over last fiscal.
 
“Salaries and rent have remained flat and costs for travelling and events came down significantly last fiscal. However, the key reason for the increase in profits is the surge in stock market and equity assets,” said Sunil Subramaniam, managing director, Sundaram Mutual.
 
During the nationwide lockdown imposed last year to check the spread of the Covid-19 pandemic, most of the branches were shut and people preferred to work from home. This led to a reduction in costs for MFs.
 
Meanwhile, equity markets have continued to soar, improving the equity AUM, leading to higher profits. Data from the Association of Mutual Funds in India (Amfi) shows that net AUM of equity funds was Rs 5.8 trillion at the end of March 2020, which rose to Rs 9.8 trillion in March 2021. In FY21, the S&P BSE Sensex and Nifty50 rallied 68 per cent and 71 per cent, respectively. Overall AUM for the industry stood at Rs 31.42 trillion at the end of March 31, 2021, as against Rs 22.2 trillion as of March 31, 2020.
 
“The asset management fee is the key source of revenue for fund houses, across all their products. Structuring products according to the market cycle expected to prevail across the scheme life cycle, is what attracts more investors, resulting in higher AUMs and thereby higher asset management fees. Fund houses in India have always done this well traditionally and continue to do so,” said Vivek Iyer, partner and national head financial services, Risk at Grant Thornton Bharat.
 
Industry players expect profits to grow 15-20 per cent this year as equities have remained buoyant. Also, strong inflows into equity schemes have sustained during the first half of the current fiscal at Rs 59,436 crore. Also, results of some of the listed players indicate that the momentum has continued during the first half of FY22.
 
Aditya Birla Sun Life AMC saw its profit jump 6 per cent to Rs 526 crore in the first half of FY22, while Nippon Life India AMC saw its profits soar 58 per cent to Rs 649 crore, and HDFC AMC’s net profit rose 5 per cent to Rs 1,326 crore.