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HDFC AMC rallies 5% on strong Q2 results; market cap touches Rs 1 trillion

At 09:29 am; with Rs 1.02 trillion market cap, HDFC AMC was trading 4.9 per cent higher at Rs 4,772.50, as compared to 0.18 per cent decline in the BSE Sensex.

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SI Reporter Mumbai

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HDFC Asset Management Company’s (AMC) market capitalisation crossed Rs 1 trillion-mark for the first time as the stock hit a new high after reporting a robust set of numbers for September quarter of financial year 2025 (Q2FY25) amid rising equities and broadly steady market share. The stock rallied 5 per cent to Rs 4,783.75 on the BSE in Wednesday’s intra-day trade.

At 09:29 AM, with Rs 1.02 trillion market cap, HDFC AMC was trading 4.9 per cent higher at Rs 4,772.50, as compared to 0.18 per cent decline in the BSE Sensex.

The stock of the HDFC Group Company was quoting higher for a seventh straight day, surging 16 per cent during the period. On Tuesday, HDFC AMC share had surpassed its previous high of Rs 4,544.50 touched on September 5, 2024. Thus far in calendar year 2024, HDFC AMC share price has outperformed the market by surging 49 per cent, as against 13 per cent rise in the benchmark index.
 

In Q2FY25, HDFC AMC has reported 9 per cent quarter-on-quarter (Q-o-Q) and 47 per cent year-on-year (Y-o-Y) growth in asset under management (AUM) at Rs 7.69 trillion, driven by growth in equity AUM (10 per cent Q-o-Q and 62 per cent Y-o-Y). 

The company’s revenue from operation increased 38 per cent Y-o-Y and 14 per cent Q-o-Q to Rs 887 crore, led by growth in AUM and revival in yield (~2 bps Q-o-Q on closing AUM) at ~46 bps. Operating expense was kept under tight control with 12 per cent Y-o-Y growth, however, higher tax outgo (one-off owing to change in capital gain tax and withdrawal of indexation benefit) resulting in 32 per cent Y-o-Y growth in profit after tax at Rs 577 crore (-4 per cent Q-o-Q).

ICICI Securities said HDFC AMC’s operational performance continues to remain strong coupled with healthy AUM growth. While the stock remains a play on structural growth in the asset management industry in the long run, recent uptick in valuation seems to factor near term triggers, it added.

“HDFC AMC is well placed to benefit from strong systematic investment plan (SIP) inflow market share, increasing unique investors and its widespread distribution network in our view. We have revised our earnings estimates by +6 per cent/+5 per cent for FY25/FY26 in-line with the strong momentum in AUM,” said analysts at JM Financial Institutional Securities.

The stock currently trades at 39x/35x FY25e/FY26e EPS of Rs 116/130. Given robust performance in larger schemes - beating their benchmarks over 3- year and 5-year buckets, and best in class PAT yields, the brokerage firm now values HDFC AMC at 40x FY26e EPS with target price of Rs 5,200.

HDFC AMC is one of India’s most profitable mutual fund managers and is renowned for being one of the leading houses for actively managed equity-oriented AUM. HDFC AMC offers a comprehensive suite of mutual fund and alternative investments across asset classes, including equity, fixed income, hybrid and multi-asset solutions, both on active as well as passive platforms, catering to the needs of a large and diverse customer base.

The surge in domestic investments, particularly in mutual funds, is a testament to India’s economic prospects and investor confidence. This trend underscores the potential for exponential growth in our capital markets, similar to the remarkable trajectory witnessed in the US from 1980 onwards, HDFC AMC said in its FY24 annual report.

The current surge in SIPs in India is somewhat resembling the 401(k) movement in the US. As household savings are channelled into mutual funds, the asset management industry is poised for substantial expansion, promising widespread participation in India’s economic growth story.

This positive outlook highlights India’s capacity to become a significant global economic force, fuelled by innovation, investment, and inclusive development. Positioned strategically, HDFC AMC aims to leverage the opportunities within India’s asset management sector, the company said.

Outlook for equities remains positive over the medium to long term considering the structurally robust domestic growth outlook, healthy corporate profitability and supportive government policies. However, it is essential to acknowledge that any sharp slowdown in global growth, escalation of geopolitical tensions and re-acceleration in inflation globally or locally remain the key near-term risks, HDFC AMC said.

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First Published: Oct 16 2024 | 10:14 AM IST

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