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Informist, Friday, Jan. 10, 2025

 

By Ashna Mariam George

 

MUMBAI – Strong growth in assets under management is expected to drive revenue growth for HDFC Asset Management Co. Ltd. for the quarter ended December, in turn lifting the company's bottom line. The fund house's net profit for Oct-Dec is expected to rise 20.4% on year to INR 5.90 billion, the average of estimates from five brokerages showed.

 

The brokerages' estimates for the company's net profit are in the range of INR 5.71 billion-INR 6.07 billion. The revenue of HDFC Asset Management Co. for Oct-Dec is expected to grow about 36% on year to INR 9.13 billion, according to the average of estimates from the brokerages. Sequentially, the revenue is expected to rise only 2.9%. Estimates for revenue ranged from INR 9.04 billion-INR 9.23 billion.

 

The company is scheduled to announce Oct-Dec earnings Tuesday. On Friday, the company's shares ended 2.7% lower at INR 3,844.80 on the National Stock Exchange. For the quarter ended September, the company reported a net profit of INR 5.77 billion, which was 32% higher on year but down 4.5% from a quarter ago, due to an increase in its tax outgo.

 

Nuvama Wealth Management expects a 48.8% on-year growth in equity assets under management to drive improvement in the company's share of equity mix to 65.2%. "This, in turn, is expected to drive revenue growth," the brokerage said in its earnings preview, adding that higher operating leverage would drive core earnings growth higher.

 

For Oct-Dec, brokerages expect the fund house's total assets under management to grow about 40% on year, of which equity assets under management are projected to grow about 45%. However, sequentially, both figures are estimated to grow 2-4% only, because of the underperformance of stocks in the Indian equity market in the reporting quarter.

 

The company's profit growth is expected to be limited by a fall in other income due to mark-to-market losses in the reporting quarter. Other income is expected to decline 37.0% on year and 47.4% on quarter due to adverse mark-to-market movement, Nuvama Institutional Equities said in a pre-earnings report.

 

However, analysts estimate the slow growth in assets under management to be offset by a decrease in commission expense. "We expect stable yields as impact of AUM growth is offset by full impact of commission cuts. HDFC AMC will likely benefit from the full impact of commission cuts executed in the second quarter," Kotak Institutional Equities said in a pre-earnings outlook. In Jul-Sept, the fund house spent INR 9 million for fees and commission expenses, unchanged from a quarter ago. 

 

Nuvama Wealth Management said a commentary from HDFC Asset Management Co.'s management on new asset class, new fund launches and distributor commission payouts will be the key monitorables.

 

Following are the Oct-Dec earnings estimates, in INR million, for HDFC Asset Management Co. based on reports from five brokerages:

Brokerage	Net sales	Net Profit
Kotak Institutional Equities	9,233.0	5,913.0
Motilal Oswal Financial Services Ltd	9,113.0	6,067.0
Nuvama Wealth Management Ltd	9,039.0	6,019.0
Prabhudas Lilladher Pvt Ltd	9,154.0	5,709.0
YES Securities (India) Ltd	9,097.0	5,770.0
Average	9,127.20	5,895.60

 

End

 

Edited by Tanima Banerjee

 

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