ICICI Prudential Asset Management is well placed to deliver strong, industry-leading profit growth over the medium term, driven by its leadership in active equity funds, growing presence in alternatives, and robust distribution strength, according to a new initiation note from Morgan Stanley.
The brokerage has initiated coverage on the stock with an Overweight rating, calling the asset manager "in pole position" within India's rapidly expanding mutual fund industry. Morgan Stanley has set a price target of Rs 3,500, implying meaningful upside from current levels, with a skewed risk-reward profile favouring the bull case.
Morgan Stanley highlights the strong structural tailwinds underpinning India's mutual fund industry, which has delivered a 20% CAGR in assets under management (AUM) over the past decade, with equity and ETF AUM growing at an even faster 27% CAGR.
The brokerage sees three long-term drivers sustaining growth: India's still-low mutual fund penetration relative to GDP, a secular shift in household savings toward financial assets, and predictable monthly inflows via SIPs. These factors, Morgan Stanley argues, offer longevity to growth while reducing market cyclicality.
Why ICICI Prudential AMC Stands Out
Within this backdrop, ICICI Prudential AMC is viewed as one of the strongest franchises in the sector. Morgan Stanley points to its trusted brand and parentage, leadership in profitable active equity strategies, and industry-leading operating profitability.
The brokerage estimates the company commands the highest profit market share at around 17% in FY25, supported by operating profit before tax to average AUM of 36 basis points. It also notes the firm's expanding footprint in alternatives, particularly portfolio management services (PMS) and alternative investment funds (AIFs), where ICICI Prudential AMC has built meaningful scale in non-corporate PMS.
Strong Growth Forecasts Through FY28
Morgan Stanley forecasts 26% CAGR in total average AUM over FY26-FY28, driven by a 25% CAGR in mutual fund AUM and a sharp rise in equity-oriented assets. Net revenue is expected to grow at 22% CAGR, with PMS and AIF revenues projected to expand at a faster 36% CAGR over the same period.
Operating profit before tax is seen growing at 24% CAGR, while net profit is forecast to rise at 22% CAGR, with a healthy dividend payout of about 81% maintained through FY28.
Premium Valuation Backed by Execution
Morgan Stanley's base-case valuation implies a 34x FY28 price-to-earnings multiple, a premium to HDFC Asset Management's 31x, justified by ICICI Prudential AMC's higher growth, superior operating mix, and leadership in alternatives.
In its bull case, the brokerage sees the stock rising to Rs 4,745, supported by faster equity penetration, stronger market share gains, and margin expansion. The bear case of Rs 1,825 factors in market weakness and intensified competition.
Key risks flagged include adverse regulatory changes, market volatility impacting equity flows, and heightened competition from both active and passive fund players.
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