Nippon Life India Asset Management (NAM IN) Q3FY25 Result Update

Gaurav Jani

NAM saw a stable quarter as core numbers came in as expected i.e. equity QAAuM growth, revenue yields, opex and core income were broadly in-line. As per the management, commission has been rationalized in multi-cap/large-cap schemes which contribute 29% to equity AuM. The positive impact on yields could be seen partly in Q4FY25 but fully in Q1FY26. Market share in net equity flows (ex-NFO) continues to remain positive and during 9MFY25 it was 10.4%. Hence, equity market share further expanded to 7.08% (+4bps QoQ). Closing equity AuM for industry corrected by 5.2% over Sep-Dec’25 and equity markets have a downward bias. A further correction could lead to earnings downgrade for AMCs. Over FY25-27E we expect core PAT CAGR of 15% and stock is valued at 27.7x on Sep’26 core EPS. Due to weak equity markets, we trim multiple to 30x from 35x and cut TP to Rs725 from Rs820. Retain ‘BUY’.

• Steady quarter with core numbers in-line: QAAuM was in-line at Rs5699bn (+3.8% QoQ); while equity (incl. bal) at Rs2677bn grew by 3.7% QoQ. Revenue was in-line at Rs5.88bn (+2.9% QoQ) as revenue yields were 41.3bps (41.6bps in Q2FY25). Opex was at 2.11bn (PLe Rs2.12bn) due to lower staff cost and fees/commission. Employee cost was lower at 957mn (PLe Rs978mn); ESOP charge was Rs108mn (PLe Rs120mn). Other expenses were higher at 864mn (PLe Rs826mn) and rose by 8.1% QoQ due to investments in tech and AIF business. Hence, core income was in-line at Rs3.76bn; operating yields were 26.4bps. Other income dipped QoQ to 0.2bn (PLe Rs0.15bn) due to equity market correction in Oct’24 resulting in MTM loss. Tax rate was 24.6% (PLe 25%). Hence, core PAT yields were in-line at 19.9bps. PAT was Rs2.8bn.
•  Equity performance and flows remain healthy: During Q3FY25, due to equity market correction, equity share was flat QoQ at 47%, while debt improved by 94bps QoQ to 13.9% and liquid contracted by 40bps QoQ to 7.3%. Blended revenue yield was largely stable QoQ due to fall in equity markets (increasing indirect TER) and decline in share of lower yielding liquid/ETF. Superior equity performance is driving market share gains in net equity flows and market share in equity+bal QAAuM has been rising post Q3FY23; it improved QoQ by 4bps to 7.08%. As of Dec’24 basis weighted avg. equity performance, NAM remains one of the top performing funds (rank 2 or 3) in the 3/5yr buckets. Share in SIP flows increased from 11.8% in Q3FY24 to 12.8% in Q3FY25.
• Distributor payout rationalized in two large schemes: Company suggested that commission has been rationalized in two schemes (post Dec’24) i.e. multi-cap and large-cap which on a combined basis contribute 29% to Dec’24 MAAuM. The positive impact on yields could be seen partly in Q4FY25 but fully in Q1FY26. NAM does not intend to launch any large NFOs in active equity since it tends to distort flows and pricing; it would focus on existing funds to shore up flows as this will lead to steady and sustainable net flows.