Categories Concall Highlights, Earnings, Finance

HDFC Asset Management Company Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from HDFC Asset Management Company Ltd (HDFCAMC) Q2 FY24 Earnings Concall

  • Industry Growth Trends
    • Quarterly average AUM reached INR47 trillion, up 20% year-over-year.
    • Actively managed equity funds near 50% of total AUM at INR23.1 trillion, up 26%.
    • Debt funds QAAUM surged to INR10.3 trillion.
    • B30 category AUM steady at 17% of total and 27% of equity AUM.
    • SIP flows totaled INR471 billion, 27% of gross equity flows.
  • Financial Performance
    • Quarterly average AUM crossed INR5 trillion, up 22% year-over-year.
    • Market share at 11.2% overall and 12.5% excluding ETFs.
    • Actively managed equity AUM up 40% year-over-year, outpacing industry growth of 28%.
    • Individual investors account for 68% of AUM, higher than industry at 58%.
  • Key Business Updates
    • Unique investors reached 7.9 million, 1 in 5 industrywide.
    • Processed 5.86 million systematic transactions in September, up 50% year-over-year.
    • Launched new sectoral/thematic funds in consumer, healthcare, technology.
    • Wholly-owned Gift City subsidiary secured approvals, to launch funds soon.
    • Revenue grew 18% year-over-year, operating profit up 20%.
  • SIP Flow Growth
    • SIP flows for industry grew 36% YoY to INR 16,000 crore, while for HDFC AMC SIP flows grew 56% YoY.
    • Growth driven by performance improvement, distribution expansion, marketing, digital initiatives.
    • SIP flows make up large share of flows for HDFC AMC and industry.
  • Expense Ratios and Yields
    • HDFC AMC equity yield is 67 bps including index funds.
    • Flow yields lower than book yields due to industry dynamics.
    • Pace of yield dilution has slowed due to rationalization of distribution costs.
    • Recent NFOs launched at higher margins vs historical.
  • Operating Expenses
    • Employee expenses grew 11% YoY, 8% CAGR over pre-COVID levels.
    • Other expenses grew 22% YoY but only increased ~INR 12 crores in absolute terms.
    • Increase in expenses driven by higher travel, NFO-related costs, marketing
  • Market Share Gains
    • HDFC AMC has gained market share across channels and products over the past few months.
    • Seeing material improvement in engagement with HDFC Bank post-merger.
  • Managing Costs Amid Business Expansion
    • Operating expenses as percent of AUM down due to higher AUM growth vs expense growth.
    • People cost inflation at 10-12% despite investments in distribution capabilities.
    • Overall costs well managed given scale of operations and offices, employees, AUM serviced.
  • Utilization of Cash Balances
    • Increased dividend payout ratio to 72% in FY23; expect further increases.
    • Evaluating inorganic growth opportunities.
  • Approach to Passive Funds
    • Do not see active to passive asset shifts like in some global market.
    • Optimistic about growing select ETFs, though some market share constrained by regulation.
  • Adding Unique Investors
    • HDFC captured 40% of new unique investors added to the mutual fund industry.
    • Strong performance across categories combined with distribution reach, marketing and digital efforts have helped gain investors.
  • Outlook
    • Focus remains on gaining higher market share across channels through performance, products, distribution and marketing.
    • Long-term opportunity remains attractive with low penetration of mutual funds in India.

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