Dominant equity mix, Superior profitability matrix …
About the stock: HDFC AMC is among the largest and profitable mutual funds with closing AUM of ₹9.25 lakh crore+ as on Q3FY26. Higher presence in equityoriented schemes & controlled expenses enable it to earn industry leading margins.
• Market share as on Q3FY26 was at 11.5%
• Strong distribution network with 280 branches and over 1,06,000 empanelled distribution partners
Q3FY26 performance: HDFC AMC continued to deliver a healthy set of results in Q3FY26, aided by industry tailwind, steady market share and a favourable asset mix. Quarterly average AUM grew 5% QoQ to ₹9.25 trillion, with market share broadly stable at 11.4%. The high-yielding equity-oriented mix remained strong at ~65% of QAAUM versus the industry average of ~56%. Revenue rose 5% QoQ to ₹1074 crore, supported by AUM growth while operating profit increased 10% QoQ on the back of lower other expenses. PAT grew 7% QoQ to ₹770 crore, aided by operating leverage and improved profitability.
Investment Rationale
• AUM market share maintained with equity book gaining traction: HDFC AMC is broadly maintaining its market share at ~11.5% (Ex-ETFs at 12.8%) despite its large base and intensifying competition. Within the AUM mix, Q3 witnessed actively managed equity-oriented AUM market share improve ~10 bps QoQ, ~30 bps YoY to 13% in Q3FY26. On the other hand, debt AUM market share declined from 13.3% to 12.9% QoQ while liquid AUM market share declined from 11.8% to 11.7%. Increasing traction in high yielding equity book is noteworthy that shall support overall yields and margin. Further, its SIP AUM market share stands healthy at 13.3%, which has been steadily improving. The count of unique investors in MF industry was ~5.9 cr of which HDFC AMC comprises 26.1% in Q2FY26 which is a QoQ improvement from 25.4% and has been steadily increasing from 22% in FY24.
• Industry leading profitability matrix: EBITDA margin was strong at 82% in Q3, improving from 77.9% in Q2 wherein other expense was impacted by CSR, NFOs and business promotion related expense. For Q3, other expense was flat YoY and declined 12.5% QoQ. Employee expense was flat QoQ, up 30.3% YoY to ₹ 124 cr which included ESOP related expense. Overall, profit as % of AUM stood at industry leading level of ~33 bps which the company has been broadly maintaining.
Rating and Target Price
• HDFC AMC is relatively a stable play on structural MF growth story with its multi-channel distribution, long-term performance track record, healthy SIP book and strong parentage. Considering recent Sebi circular related to TER, we have slightly lowered FY27E profitability. Management suggests it shall try to optimise and maintain profitability, taking instance of sharper TER change in 2019. We introduce FY28E and maintain BUY rating on the stock, valuing it at 36x FY28E EPS with target price of ₹3200.
