Nippon India AMC Q1 Review: CLSA Downgrades Despite Profit Beat — Here’s Why
CLSA notes that Nippon Life's that current valuation, implies limited upside, leading to the more cautious stance.
Nippon India Asset Management Company (AMC) posted a stronger-than-expected profit in the first quarter of FY26, but CLSA downgraded the stock from ‘outperform’ to ‘hold,’ citing expensive valuation. The brokerage raised its target price to Rs 780 from Rs 700.
Net profit for the quarter rose to Rs 3.9 billion, 14% higher than CLSA’s estimate. The beat was largely due to mark-to-market (MTM) gains. MTM refers to the accounting practice of valuing financial assets at their current market price, not the original purchase price. When asset prices rise, companies report these gains in their earnings.
Despite the strong profit, CLSA said the current valuation leaves limited room for further upside.
Profit Driven By MTM Gains
The earnings beat was mainly driven by MTM gains during the quarter. The company’s mutual fund assets under management (AUM) increased 26% year-on-year, with the quarter-on-quarter growth being the fastest among India’s top 10 AMCs.
Overall investment yields remained flat compared to the previous quarter. However, the company saw slight yield improvement in its exchange-traded fund (ETF) business due to changes in scheme composition.
Equity Share Stable
Total AUM rose 13% from the previous quarter and 23% from a year earlier. Equity and debt AUM both grew by 15–16%. The company’s share of the equity AUM market rose marginally to 7.1% but has remained within a narrow band for several quarters, reflecting competitive pressure in the equity segment.
Retail flows remained strong, with the company holding a double-digit market share in both equity and Systematic Investment Plan (SIP) inflows. SIPs are automated monthly investments in mutual funds, commonly used by individual investors.
New Fund Category Planned
Nippon India AMC plans to launch a new category of Specialised Investment Funds (SIFs), which will operate under a separate business vertical. These funds typically invest in specific sectors or themes. The SIF business will be led by Andrew Holland.
The company also closed inactive SIP accounts during the quarter, resulting in a one-time drop in the number of active systematic folios. Still, total folios rose 18% year-on-year and 9.9% quarter-on-quarter.
Valuation Limits Upside
While CLSA acknowledged the company’s growth focus, it noted that the current valuation already reflects much of the positive outlook. The brokerage said the stock now trades at a level that limits further upside potential in the near term.
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