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.