HDFC AMC’s steady market share erosion worries investors
Premium- On a quarterly average asset under management basis, the fund house’s share stood at 16.7% in March, down from 17.2% in December and 16.9% a year ago
Shares of HDFC Asset Management Co. Ltd have been under pressure for the past one month and the company’s March quarter results doesn’t seem to have given enough reasons to rejoice.
The company has been losing market share for the past two years. On a quarterly average asset under management basis, the fund house’s share stood at 16.7% in March, down from 17.2% in December and 16.9% a year ago. On an outstanding AUM basis, the market share erosion is steep, from 20.9% in FY20 to 15.7% in FY21. What’s more is the share in terms of unique investors has also come down for the company. In short, investors are preferring rivals over the company for products.
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That said, there were bright spots in the March quarter performance. Operating revenue showed a 6% growth from the year ago period and other income growth too was healthy. Much of the boost to net profit came through growth in income rather than reduction in expenses as was the case in the December quarter. Further, systemic investment plans (SIP) inflows showed traction by growing 24% year on year. Another positive outcome was the increase in equity AUM during the quarter. Equity products have a higher yield and a reduction here has a larger impact on profitability compared with other products. The company reported an increase in the share of equity in overall AUM to 41.2%, better than industry level.
In a call with analysts on Tuesday, the management said that it would continue to diversify through new product launches in order to keep AUM growth healthy. To be sure, analysts believe that the trend for AUM growth must be watched in the wake of the second wave. “Improvement in equity flows is encouraging but imminent lockdowns could temper next few months," wrote analysts at Jefferies India Pvt Ltd.
The company’s valuation has been under pressure due to its market share loss. However, with a new chief at the top now and with new product launches, analysts believe the company could engineer a turnaround and gain lost market share.
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