Diversified portfolio, market share to drive asset growth for HDFC AMC

Industry SIP flows of Rs 78,330 crore in Q4FY25 contributed to active equity and hybrid inflows of Rs 1.042 trillion

Volatile market conditions have impacted the mutual fund industry’s returns in Q4FY25. However, systematic investment plan (SIP) inflows have remained almost stable, dropping only 2 per cent quarter-on-quarter (Q-o-Q).

 

One of the market leaders, HDFC AMC, posted equity quarterly average assets under management (AUM) growth of 26.3 per cent year-on-year (Y-o-Y) (down 1.7 per cent Q-o-Q) in Q4. This came as SIP inflows remained steady despite the volatile markets.

 

The equity AUM market share stayed at 12.8 per cent, excluding exchange-traded funds (ETFs) (flat Y-o-Y/Q-o-Q), and SIP flows rose 24.6 per cent Y-o-Y. The market share of unique individual accounts was up 200 basis points (bps) Y-o-Y to 24 per cent.

 

Industry SIP flows of ₹78,330 crore in Q4FY25 contributed to the active equity and hybrid inflows of ₹1.04 trillion.

 

Flat Nifty50 returns (down -0.6  per cent in Q4FY25) and adverse Nifty Midcap 150, Small cap 250 return of minus 9.6  per cent and minus 14.9  per cent respectively in Q4FY25 resulting in sequential QAAUM fall.

 

Around 94 per cent of HDFC AMC’s transactions were processed digitally. FY25 marked the first year where both liquid and debt funds saw inflows concurrently. 

 

The management said it had broadly maintained Q-o-Q equity yields. HDFC AMC saw revenue growth of 29.6 per cent Y-o-Y (down 3.6 per cent Q-o-Q) to ₹901 crore. Operating profit was ₹714 crore, up 35.8 per cent Y-o-Y, (down 4.7 per cent Q-o-Q).

 

Operating profit margins expanded 367 bps Y-o-Y and contracted 102 bps Q-o-Q to 78.9 per cent.

 

The sequential fall was on account of 3.6 per cent a dip in revenue. A rise in other income at ₹120 crore sequentially (down 20.3 per cent Y-o-Y and up 33.3 per cent Q-o-Q), was attributed to investments in long-dated debt, which benefited from rate cuts.

 

Adjusted net profit grew 18 per cent Y-o-Y (down 0.5 per cent Q-o-Q) to ₹638 crore. Yields for the quarter came in at 46.6 bps versus 45.4 bps in Q4FY24 and 47.5 bps in Q3FY25.

 

FY25 yields stood at ₹3,500 crore, up 35 per cent Y-o-Y.

 

Tax rates were higher in FY25, driven by increased capital gains tax and the recognition of deferred tax liabilities on mark-to-market (MTM) gains.

 

The management remains optimistic about a pick-up in inflows during FY26.

 

The average ticket size of SIPs declined 12 per cent Y-o-Y, mainly due to a reduction in high-value transactions. HDFC AMC is set to launch a Category II Credit Fund, for which regulatory approval has been obtained.

 

The international subsidiary launched three funds in Q3FY25, which received strong investor response, enabling global investors to access the Indian markets.

 

The management pointed out that corporate investors prefer shorter-duration debt funds, while individual investors leaned towards longer-durations.

 

In response to the specialised investment funds regulations, HDFC AMC has established a dedicated team for the development of suitable products for this investor category.

 

Given a strong position in a competitive market, a diversified product portfolio, and digital expansion, HDFC AMC is well-positioned to sustain growth.

 

Double digit, mid-teens AUM growth is anticipated in FY26 and FY27.

 

The direct channel’s share in total equity AUM continues to rise and this trend is expected to continue.

 

A new employee stock ownership plan (ESOP) has been proposed, awaiting shareholder approval. Under this, 2.5 million shares (including performance-linked stock units) will be allocated to employees over four years. The previous FY20 ESOP scheme had approved 3.2 million shares, of which 2.3 million had been granted. The remaining shares have been cancelled and replaced with a new scheme.