AMCs likely to report strong gains in Q4FY24 on back of AUM growth

The share prices of listed asset management companies have outperformed the benchmark Sensex and analysts remain positive on the sector

Although net inflows into Equity Mutual Funds deteriorated month-on-month (M-o-M) in March 2024 to Rs 22,576 crore (excluding Hybrid), down 15 per cent M-o-M (up 12 per cent Y-o-Y), asset management companies (AMCs) had a great year with robust growth in assets under management (AUMs). AMCs are likely to report strong PAT growth (30-40 per cent Y-o-Y) in Q4FY24 on the back of AUM growth.

In Q4FY24, domestic mutual fund (MF) industry QAAUM (quarterly average AUM) grew by 34 per cent Y-o-Y and 10 per cent quarter-on-quarter (Q-o-Q) to Rs 54 trillion ($652 billion). The Equity QAAUM grew faster at 45 per cent Y-o-Y and 13 per cent Q-o-Q to Rs 39 trillion ($469 billion). The Equity AUM accounts for over 70 per cent of domestic MF industry AUM.

Among listed AMCs, HDFC AMC and Nippon AMC had market-share gains and may report higher growth. The AMC industry is therefore starting FY25 on a good note as FY24-exit equity AUM is 20 per cent higher than FY24 average AUM. Listed registrar and transfer agents or RTAs such as KFin Technologies will also do well.

However, debt funds continued to see net outflows for the third consecutive quarter. Hence, share of Equity AUM increased by 600 bps Y-o-Y and 200 bps Q-o-Q to 72 per cent. The equity segment saw record net inflows of Rs 1.4trn ($17bn) in Q4FY24 supported by increasing SIP flows (Rs 57,300 crore / $7bn) and money raised through NFOs (Rs 22,700 crore or $2.7bn).

Growing AUM

As against industry AUM growth of 34 per cent Y-o-Y in Q4FY24, HDFC AMC’s AUM grew by 36 per cent Y-o-Y, while that of Nippon AMC was up 47 per cent Y-o-Y. Birla AMC and UTI AMC’s AUM grew slower at 21 per cent and 22 per cent Y-o-Y, respectively. In the Active Equity segment (Equity + Balanced funds), versus 50 per cent Y-o-Y average growth for the industry, HDFC AMC and Nippon AUM grew by 60 per cent Y-o-Y. Hence, in active equity which is the most profitable segment, HDFC AMC’s market-share increased by 80 bps Y-o-Y to 12.9 per cent and Nippon AMC’s market share was up by 40bps Y-o-Y to 6.8 per cent.

Overall, the industry AUM, which was Rs 40 trn at end-March 2023, stood at Rs 54.5 trn (Feb'24), which was growth of 36.2 per cent (12.8 per cent due to flows and 23.4 per cent due to mark-to-market or MTM) in 11 months. This was driven by equity AUM growth of 51.6 per cent (14.3 per cent due to inflows and 37.3 per cent due to MTM impact) in this period, while debt AUM grew 14.8 per cent (0.9 per cent because of flows and 13.9 per cent because of MTM impact). HDFC AMC’s total AUM market share increased 9bps in Feb'24 to 11.36 per cent while NAM witnessed a 12 bps increase in total AUM market share to 7.99 per cent.

Retail interest

Equity schemes saw strong retail investments and individual investors held Rs 32.87 trn (around 60.3 per cent of total AUM) in Feb'24 vs Rs 23.44 trn (around 57.6 per cent of total AUM) in Feb'23. SIPs saw growth with 38.5 million gross new accounts registered from Apr'23 till Feb'24 with total SIP accounts at 80.01 mn in Feb’24 vs 63.60 million at FY23 end. The average monthly SIP contribution in FY24 (11 months) was Rs 16,400 crore vs Rs 12,900 crore in FY23. The total SIP AUM was at Rs 10.5 trn in Feb'24.

Given the substantial SIP contributions (which increase inflow predictability), and the increasing role of MFs in tapping household savings, we see a long-term trend of growth. The share prices of listed AMCs have outperformed the benchmark Sensex and analysts remain positive on the sector.