India's asset management sector is poised for strong growth as it would capitalise on the growing savings of retail investors, Nomura said while initiating coverage on three companies.
The brokerage initiated coverage with a 'buy' rating on HDFC Asset Management Co. and Nippon Life India Asset Management Ltd. and a 'neutral' rating on UTI Asset Management Co.
Significant interpenetration, increasing retail participation and strong momentum in SIP flows would provide a long runway to grow for the AMC industry, the brokerage said in a note on Oct. 8.
Nomura expects the country's mutual fund industry's asset under management to register an 18% CAGR over financial years 2024-30, led by the equity and passive segments. "We expect core-operating profitability for the sector to remain healthy despite gradual moderation."
Nomura On HDFC AMC
Nomura initiated coverage with a 'buy' rating and has a target price of Rs 5,000 per share, implying an upside of 19.4% from the previous close.
HDFC AMC is well-positioned to benefit from India's underpenetrated asset management industry.
Post the HDFC merger, the AMC is poised to capture more market share, according to the brokerage.
It remains one of the most profitable AMCs, driven by strong equity AUM and operational efficiency.
The company leads with a 13.3% retail AUM market share.
It is witnessing consistent improvement in market share in the equity segment.
Nomura On Nippon Life India AMC
Nomura initiated coverage with a 'buy' rating and a target price of Rs 785 per share, implying an upside of 23.7% from the previous close.
The brokerage has a constructive view, driven by its consistent equity performance, strong market share gains, and diversified product suite.
It is well-positioned to benefit from rising industry flows, especially in small-/mid-cap segments, it said.
There will be strong performance ahead with a robust retail franchise, growing SIP market share, and an over 90% dividend payout policy.
Nomura On UTI AMC
Nomura initiated coverage with a 'neutral' rating and a target price of Rs 1,300 per share, implying an upside of 8.3% from the previous close.
The company's overall and equity AUM CAGR has been lower led by weak fund performance.
The brokerage finds the consistent decline of market share concerning.
It expects the core earnings CAGR to be steady at 18% over fiscal 2024-28.
However, profit after tax CAGR is expected to be soft at 3% on account of normalisation of other income.
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