The results were broadly in line with what the Street had expected. Higher equity markets were expected to lift assets under management (AUM), while a recovery in treasury income was likely to reverse the mark-to-market losses seen in the March quarter.
The biggest question going into the quarter, however, was whether recent changes to the Total Expense Ratio (TER) and the new Base Expense Ratio (BER) framework would begin eating into the fees earned by asset management companies.
Put simply, TER is the fee an AMC charges to manage a mutual fund. It is usually expressed as a percentage of assets under management. A lower TER means lower revenue for the fund house, even if the amount of money it manages continues to rise.
That concern largely did not materialise.
Revenue yields remained broadly stable across most listed AMCs during the quarter, suggesting the expected pressure on management fees has, at least for now, been limited. In many cases, the impact appears to have been absorbed elsewhere in the ecosystem, including through changes in commission arrangements.
However, while stronger markets lifted AUM and revenue yields held up, core operating performance remained modest as expenses continued to grow faster than revenue for most players. The sharp rebound in reported profits was instead driven largely by treasury gains.
Better market performance lifted AUM across the industry
The sharp recovery in equity markets helped average assets rise for almost every listed AMC.
Nippon India AMC stood out with the strongest sequential AUM growth, while Aditya Birla Sun Life AMC was the only major listed player to report a decline.
|
AMC |
AUM Growth QoQ |
| Nippon India AMC |
+3.7% |
| ICICI Prudential AMC |
+1.1% |
| UTI AMC |
+1.1% |
| Canara Robeco AMC |
+1.0% |
| HDFC AMC |
+0.8% |
| Aditya Birla Sun Life AMC |
-1.9% |
Higher AUM translated into revenue growth across the industry, but the improvement remained within a relatively narrow band. Stable revenue yields prevented the feared downside, but did not become an additional growth driver either.
Operating performance remained modest
Despite higher AUM, most listed AMCs reported expenses growing faster than revenue during the quarter.
As a result, operating margins compressed across much of the industry.
UTI AMC was the notable exception, with expenses declining 11% sequentially, helping it report a sharp improvement in operating margins.
|
AMC |
Revenue QoQ |
Operating Profit QoQ |
PAT QoQ |
| HDFC AMC |
+4.6% |
+0.6% |
+34.4% |
| ICICI Prudential AMC |
+1.0% |
-3.0% |
+25.5% |
| Nippon India AMC |
+3.8% |
+0.2% |
+30.8% |
| UTI AMC |
+1.0% |
+20.7% |
Loss to profit |
| Aditya Birla Sun Life AMC |
+1.0% |
-3.3% |
+65.4% |
| Canara Robeco AMC |
+2.0% |
+3.0% |
+83.0% |
The takeaway was that higher markets supported revenues, but did not translate into a proportionate improvement in operating earnings.
That matters because operating leverage is one of the biggest drivers of AMC valuations. Since fund management is an asset light business, investors expect higher AUM to translate into faster profit growth through margin expansion. This quarter, however, expenses grew faster than revenue for most AMCs, limiting operating leverage despite a favourable market environment.
In other words, while earnings were boosted by treasury gains, the market will continue to watch whether AMCs can convert future AUM growth into stronger operating margins.
Treasury gains drove the bottom line Reported profit growth was significantly stronger than operating performance. The reason was a sharp recovery in treasury income.
During the March quarter, several AMCs had reported mark-to-market losses on their investment portfolios as markets corrected. Those losses reversed in Q1 as equity markets recovered, resulting in significantly higher other income.
|
AMC |
Other Income |
| HDFC AMC |
+263 cr vs 12 cr |
| ICICI Prudential AMC |
+181 cr vs 90 cr loss |
| Nippon India AMC |
+170 cr vs 34 cr loss |
| Aditya Birla Sun Life AMC |
+162 cr vs 33 cr loss |
| Canara Robeco AMC |
+30 cr vs 10 cr loss |
| UTI AMC |
+187 cr vs 175 cr loss |
As a result, reported profit growth across the sector was largely driven by treasury gains rather than a sharp improvement in core operations.
SIP momentum softened
Another common theme across the quarter was softer systematic flows.
Systematic Investment Plans, or SIPs, are monthly investments made by retail investors and remain one of the best indicators of steady retail participation and inflows into mutual funds.
Most listed AMCs reported weaker systematic flows sequentially. Nippon India AMC was the only major listed player to report growth.
|
AMC |
Systematic Flows QoQ |
| Nippon India AMC |
+1.5% |
| HDFC AMC |
-1.4% |
| ICICI Prudential AMC |
-4.5% |
| UTI AMC |
-5.0% |
| Canara Robeco AMC |
-5.0% |
| Aditya Birla Sun Life AMC |
-9.9% |
Not every AMC had the same quarter
Operationally, Nippon India AMC emerged as the standout performer, reporting the strongest AUM growth, continued market share gains and the only positive growth in systematic flows.
ICICI Prudential AMC and Canara Robeco AMC also delivered steady quarters while broadly maintaining market share.
HDFC AMC reported a stable quarter but saw a slight moderation in market share.
UTI AMC’s margin performance improved as expenses declined, although revenue momentum remained relatively muted.
Aditya Birla Sun Life AMC had the weakest operational quarter, with lower AUM, weaker systematic flows and continued market share erosion.
Alternatives are becoming the next growth engine
One theme consistently highlighted by management teams this earnings season was the growing focus on alternative investment products.
Alternative Investment Funds (AIFs), Portfolio Management Services (PMS) and Specialised Investment Funds (SIFs) were repeatedly identified as the next phase of growth.
These businesses remain relatively small today but typically generate higher fee income than traditional mutual funds. As a result, they are increasingly becoming an important strategic focus for listed AMCs.
To conclude,Q1FY27 AMC report card
|
Theme |
What happened |
| AUM growth | In line with expectations, supported by stronger markets |
| Revenue yields | Broadly stable, fear was they would compress |
| Revenue growth | Remained modest |
| Operating margins | Compressed across most AMCs as costs outpaced revenue |
| PAT | Strong, led by treasury gains |
| Systematic flows | Softer across most AMCs, except Nippon |
| Alternatives | Emerged as the next growth engine |
|
Valuations |
FY26 P/E |
| ICICI Prudential AMC |
46x |
| HDFC AMC |
40x |
| SBI Mutual Fund |
39x |
| Aditya Birla Sun Life AMC |
29x |
| UTI AMC |
29x |
| Canara Robeco AMC |
25x |
The June quarter largely confirmed what the Street had expected. Higher markets supported AUM growth, revenue yields remained resilient despite concerns around TER and BER, and treasury gains drove a sharp recovery in reported profits.
The bigger takeaway, however, was operating leverage. While fee pressure proved less severe than feared, most AMCs were unable to translate higher revenues into stronger operating margins as expenses grew faster than revenue. Since operating leverage remains one of the key drivers of AMC valuations, this is likely to remain a closely watched metric over the coming quarters.
At the same time, management commentary increasingly pointed to alternatives as the next growth engine, suggesting the industry’s next phase of growth may come from businesses beyond traditional mutual funds.
PS – SBI Mutual Fund is yet to announce its Q1FY27 earnings.