AMC Quarterly Earnings Expected to Decline Sequentially Amid Market Volatility

Asset Management Companies Expected to Report Soft Q1 FY24

The asset management sector is likely to report a soft March quarter, with profits expected to decline sequentially due to mark-to-market (MTM) losses on treasury books and softer yields, according to brokerages. Despite revenue and operating profit growing in double digits year-on-year, profit growth is expected to be largely flat at about 1%, dragged by weaker other income.

Sector Performance

The sector's performance is expected to be impacted by the sharp correction in March, which has weighed on asset values and fee yields. YES Securities noted that the share of equity AUM declined sequentially across major fund houses, which could translate into pressure on revenue yields. The brokerage also expects EBITDA margins to dip marginally and net profit to decline sequentially across asset managers, largely due to lower treasury income.

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Leadership and Growth

However, Nippon Life India Asset Management and ICICI Prudential Asset Management Company are expected to lead growth, with EBITDA likely to rise about 31% and 26% year-on-year, respectively, according to an Equirus Securities note. HDFC Asset Management Company is still expected to post healthy revenue growth of around 18%, but profits could fall on a sequential basis due to treasury losses.

Flows and Cash Levels

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Flows into mutual funds have held up through the volatility, providing some support to the sector. As of February, industry AUM crossed Rs 83 lakh crore, with equity AUM at Rs 35.6 lakh crore, supported by monthly inflows of about Rs 38,000–40,000 crore and SIP contributions of roughly Rs 30,000 crore. However, there is a shift in how that money is being deployed, with mutual funds buying nearly Rs 80,000 crore of equities in March.

Cash Levels

Cash holdings, which stood at about Rs 1.7 lakh crore (4.9% of AUM) in February, are estimated to have dropped to around Rs 1.3 lakh crore. If volatility persists or inflows slow, cash levels could fall further to about Rs 1 lakh crore, or roughly 3% of AUM.

Performance Gap

Performance continues to be the clearest differentiator across fund houses. ICICI Prudential Asset Management Company and Nippon Life India Asset Management remain well ahead, with about 90–91% of their equity AUM in the top quartiles on a three-year basis, according to Equirus. HDFC Asset Management Company remains strong on long-term metrics, but has seen some slippage in the near term.

Market Share Trends

This divergence is also visible in market share trends. ICICI Prudential AMC added about 16 basis points of equity market share on a quarter-to-date basis, while HDFC AMC and Nippon AMC also gained ground, according to Equirus. On the other hand, UTI AMC and Canara Robeco AMC lost about 6 basis points and 4 basis points, respectively.