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Last Updated : May 11, 2020 01:32 PM IST | Source: Moneycontrol.com

HDFC AMC falls 4% after weak Q4 earnings, Narnolia downgrades to hold

Revenue in Q4 fell 2.1 percent YoY (down 9.3 percent QoQ) to Rs 476 crore due to low AUM growth, fall in equity oriented assets as well as less fee income on PMS.

 
 
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Shares of HDFC Asset Management Company fell nearly 4 percent intraday on May 11 after weak earnings in Q4FY20 following decline in equity markets.

Company's profit in March quarter degrew by 9.6 percent year-on-year (down 29.4 percent QoQ) to Rs 250 crore mainly on the account of lower revenue and one off impact on other income.

Revenue in Q4 fell 2.1 percent YoY (down 9.3 percent QoQ) to Rs 476 crore due to low AUM growth, fall in equity oriented assets as well as less fee income on PMS.

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Quarterly Average Assets under Management (QAAUM) grew by 8 percent YoY (down 3 percent QoQ) mainly due to fall in equity oriented assets on the account of fall in markets. QAAUM in actively managed equity oriented funds i.e. equity oriented QAAUM excluding index funds stood at Rs 1,57,400 Cr as on March 2020 with a market share of 15.2 percent.

Equity AUM composition to the total AUM declined to 38 percent in Q4FY20 as against 46 percent last quarter (closing AUM basis). This fall had impact on the revenue of the company as it being the high margin segment but management is optimistic of the recovery in equity AUM going ahead.

"AUM growth has been lowest in Q4FY20 as against that of in last 8 quarters almost. SIP book declined. Along with that company had performance issue in its larger funds causing the decline in market share. Operating expenses are expected to remain under control," Narnolia Financial Services said.

On the account of macroeconomic factors (COVID-19 impact on the market) along with the performance of the company, the brokerage downgraded its rating on the stock to hold from buy, but maintained target price at Rs 2,703.

As per the management after the recent event in Mutual Fund industry the debt investors are more or less moving to liquid and overnight funds.

ICICI Direct feels given elevated economic uncertainty, amid COVID-19, its business model is preferred involving least credit risk. Hence, the brokerage maintained its buy rating on the stock with a target price of Rs 3,000 per share.

"Near term outlook remains uncertain but structural changes, including increase in financial savings, remain positive. It is expected to maintain its leadership through healthy AUM growth. Focus on strong operating efficiency & higher proportion of equity AUM is seen aiding profitability. MTM decline led to schemes falling in low value slab, enabling higher TER cushioning declining revenue," ICICI Direct said.

"HDFC AMC's business franchise is seen remaining strong with substantial market share of 14-15 percent and strong operational performance (39-40 bps). Hence, its strong positioning & superior earnings profile deserve premium valuations," it added.

HDFC Asset Management Company share price was quoting at Rs 2,571.80, down Rs 50.55, or 1.93 percent on the BSE at 1258 hours IST. Before today's fall, it was up 25 percent from its March-end.

Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

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First Published on May 11, 2020 01:32 pm
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