- Core EBITDA jumped 18.8% YoY in 9MFY26, driven by 17.2% AUM expansion.
- ICICI Securities upgrades HDFC AMC to BUY, keeping a ₹3,060 target price.
- Projected end‑to‑end AUM growth of 3%/15%/16% through FY28E.
- Yield compression expected to be modest – only ~1.1bps decline by FY28E.
- Cost‑to‑AUM CAGR of 14% positions HDFC AMC for higher multiples.
Most investors missed the subtle upgrade signal – that’s where the real upside hides.
Why HDFC AMC’s Margin Expansion Beats Sector Trends
HDFC Asset Management’s 9‑month FY26 results delivered an 18.8% year‑over‑year lift in core EBITDA, a metric that strips out one‑time items and reflects pure operating profitability. The boost came on the back of a 17.2% rise in total assets under management (AUM), confirming that the company’s systematic investment push is translating into real cash flow. In a market where many peers are battling fee compression, HDFC AMC’s ability to keep blended yields stable while scaling AUM is a rarity. The firm’s equity‑heavy mix—still above 70%—offers higher fee potential compared with more balanced competitors, further protecting margins.
Impact of AUM Growth on HDFC AMC’s Valuation
ICICI Securities models a three‑phase AUM trajectory: modest 3% growth in Q4FY26, then an acceleration to 15% in FY27 and 16% in FY28E. Assuming a modest 1.1 basis‑point erosion in yields, the forward‑looking core EPS reaches ₹70.7 by FY28E. The brokerage applies a 40× FY28E EPS multiple, resulting in an unchanged target price of ₹3,060 per share. Even if yields dip slightly faster, the sheer scale of AUM – projected to breach ₹14 trillion by FY28E – keeps the valuation attractive relative to peers that are still under ₹10 trillion.
Historical Yield Trends in Indian Asset Management
Regulatory changes in 2023 capped the total expense ratio (TER) for equity funds, forcing a sector‑wide yield decline of roughly 1–2 basis points per annum. However, firms with high equity exposure and strong brand loyalty, like HDFC AMC, have historically mitigated this drag through superior fund performance, which fuels higher inflows and justifies premium pricing. A similar yield‑compression episode in 2018 saw HDFC AMC’s market‑share grow by 3.5% while peers lagged, illustrating the firm’s resilience.
Competitor Landscape: Tata AMC vs HDFC AMC
Tata Asset Management has been chasing HDFC AMC’s market‑share by expanding its SIP (systematic investment plan) distribution across digital channels. Yet, Tata’s AUM growth rate is hovering around 10% YoY, well below HDFC’s 17.2% pace. Moreover, Tata’s cost‑to‑AUM CAGR sits at 11%, compared with HDFC’s 14% – a subtle but important efficiency gap that translates into higher net returns for investors and, consequently, higher fee capture for HDFC. Adani AMC, another fast‑growing player, is still building its retail distribution network, making HDFC AMC the clear leader in unique investor share and SIP flow across traditional and digital channels.
Investor Playbook: Bull and Bear Cases for HDFC AMC
Bull Case: Continued inflows from systematic investment plans, a stable regulatory environment, and the firm’s low cost‑to‑AUM trajectory push earnings multiples higher. If AUM reaches the FY28E estimate, the valuation could comfortably breach the 45× EPS multiple, delivering upside of 20%+ to the target price.
Bear Case: A sharper than expected yield compression (exceeding 5 bps) or aggressive pricing wars could erode the modest 1.1 bps yield cushion assumed. Additionally, any slowdown in retail SIP adoption due to macro‑economic stress could curb AUM growth, pressuring the 40× multiple assumption.
Overall, the upgrade to BUY reflects a convergence of strong operational fundamentals, a favorable regulatory backdrop, and a competitive moat that keeps HDFC AMC ahead of the sector curve. Investors who act now can lock in exposure before the broader market catches up to these dynamics.