AMCs - Impact Of Tax Rise On Sale Of Debt MFs Immaterial: Prabhudas Lilladher

BQ Prime’s special research section collates quality and in-depth equity and economy research reports from across India’s top brokerages, asset managers and research agencies. These reports offer BQ Prime’s subscribers an opportunity to expand their understanding of companies, sectors and the economy. .Prabhudas Lilladher Report.Asset management company stocks corrected in the last session by 1-5% after government classified capital gains arising from sale of debt mutual funds as short-term capital gains. Earlier this transaction was taxable as long term capital gains at 20%, but post this rule a normal tax rate would be applicable. Likely motive behind this move is to reduce arbitrage between fixed deposits and debt mutual funds. However, stock reaction seems unwarranted as impact on net debt flows and overall earnings may not be significant given debt MFs-are open ended providing more flexibility andoffer a compounded cash flow advantage. We do not foresee significant shift in corporate debt flows, yet high networth individuals flows may see some impact. For industry, debt contributes 21%/13% to assets under management/revenues. For listed AMCs, debt share ranges from 15-36% while revenue contribution is between 8-22%. Basis our worst case scenario analysis of 20% debt flows, HNI portion would be ~7% and earnings impact for our coverage AMCs i.e. HDFC Asset Management Company Ltd. and UTI Asset Management Company Ltd. would only be ~2%/1%. Our core earnings estimates remain unchanged and valuation is attractive at 20.5 times /9.8 times for HDFC AMC and UTI AMC..Click on the attachment to read the full report:.Indian Banking Sector - Disincentives To A Large Participant Could Lead To Disintermediation: Systematix.DISCLAIMERThis report is authored by an external party. BQ Prime does not vouch for the accuracy of its contents nor is responsible for them in any way. The contents of this section do not constitute investment advice. For that you must always consult an expert based on your individual needs. The views expressed in the report are that of the author entity and do not represent the views of BQ Prime..Users have no license to copy, modify, or distribute the content without permission of the Original Owner.

AMCs - Impact Of Tax Rise On Sale Of Debt MFs Immaterial: Prabhudas Lilladher

AMC stocks corrected in the last session by 1-5% after govt classified capital gains arising from sale of debt MFs as STCG.

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