At a recent analyst meet, HDFC AMC’s senior management sounded confident about growth prospects. Its Q1FY27 results, however, were moderate. HDFC AMC reported Q1FY27 mutual fund QAAUM (quarterly average AUM) at Rs 9.35 trillion, which was up 1 per cent Q-o-Q, and market share was at 11.2 per cent. Yields went up by 2 basis points to 47.2 basis points, driving revenue up by 4.6 per cent Q-o-Q to Rs 1,100 crore. The operating profit margin at 77.3 per cent was down 250 basis points Q-o-Q. The net profit at Rs 837 crore grew 34 per cent Q-o-Q, with higher other income. The regulatory impact of changes in TER (total expense ratio) regulation was not very high, given the restructuring of commissions.
The uptick in yields was driven by the shift from TER to BER (base ER) plus statutory levies and accounting changes. Employee costs increased 14 per cent Q-o-Q, given higher ESOP expenses and annual increases. Other expenses rose 31 per cent Q-o-Q on higher CSR expenses. Other income of Rs 260 crore was driven by mark-to-market, or MTM, gains and was up 12.8 per cent Y-o-Y.
The company plans to invest in new platforms and teams, along with hiring across international business, portfolio management services, or PMS, alternative investment funds, or AIF, institutional sales, digital, AI and marketing. The AMC targets launching funds in the Alternatives segment (HDFC Alternatives), while the Board has approved the launch of a Long-Short SIF fund.
The AMC is gaining share in unique investor count, where it had an annual growth rate of 33 per cent between April ’23 and June ’26, which is twice the industry’s growth rate of 16 per cent.
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The one-year equity performance has weakened, but three-year returns remain strong, which has resulted in the highest net flow market share of 12 per cent.
The structural story is that India has a big stock market with over 12,000 listed companies with revenues above $25 million. The formalisation of the economy is pulling more savings into the financial markets. HDFC AMC has 17 million unique investors and good growth potential, given the MF investor base of 62 million and over 130 million registered capital-market investors. The industry average SIP ticket size of Rs 3,000 per month can also climb.
The AMC is trying to grow every channel, though distributor-led AUM has better stickiness. Despite 98 per cent of transactions being digital, the company has continued physical expansion across B30 (beyond 30 cities), which are in focus because 65 per cent of new SIPs sourced via fintech come from those locations. The top five schemes contribute 66 per cent to equity (and balanced) AUM, but there may be a runway in under-penetrated funds. Regulatory approval for SIF is in process, with a new hire, Parampreet Paul, to lead.
The Alternatives platform is scaling up, with the AMC investing in the headcount of the team managing PMS, private equity and private credit, and also increasing the size of risk, product, legal and sales support teams. Balance-sheet commitment to Alternatives will exceed Rs 1,000 crore by FY27-end. The first Cat-3 AIF and a non-discretionary portfolio management service, or NDPMS, targeting family offices and ultra-HNIs have been launched. HDFC AMC’s private credit fund has partnered with IFC as the anchor investor.
Key growth levers could include SIP ticket-size top-ups, cross-selling of multiple products per client and reducing early redemption via investor education. Even though equity returns have been negative recently, SIP flows are very strong. Small- and midcap flows are stronger than large-cap and flexicap.
India-domiciled AUM (ex-EPFO) is $100 billion, or $160 billion including the EPFO mandate. The total number of schemes is 110 (48 passive + 60 active), with 55 products launched in the last five years. There’s concentration. The top scheme accounts for 25 per cent of AUM and the top five schemes account for 75 per cent of equity AUM. Six schemes have a 30-year track record and 13 have a 15-year track record (or longer) and profitability. This long-term performance could be a moat against competition.
HDFC AMC has deliberately avoided over-raising via NFOs to protect long-term investor returns. For example, the Defence Fund NFO closed at Rs 1,100 crore, though it could have raised three times that. It has since grown organically to Rs 11,000 crore via SIPs. The relationship with GIFT City has grown, with 7,500-8,000 distributors empanelled, and two outbound funds sold in the US, Japan, etc., are live. HDFC AMC is actively engaging with IFSCA (International Financial Services Centres Authority) to make international investing through GIFT City easier. Given the proactive attitude, despite the moderate results, HDFC AMC could leverage brand equity, distribution and long-term performance to drive AUM growth.
