How do you see HDFC AMC growing its market share over the next few quarters and what exactly are you planning to do to gain further market share in this industry?
We have a good long-term track record across all strategies. Given the product range, performance track record, the platform we have, over a period of time we want optimized market share across all products. Incrementally on physical presence, relationship with all channels - mutual fund distributors, national distributors, aggregators, banks, and fintech channel which has been growing quite a bit over the last couple of years. We continue to focus on each one of them.
When I look at the share of HDFC Bank in the mix of equity AUM, that has kind of come down. Any thoughts on that number?
The bank share in the distribution pie decreasing, I don't think that's the right way of looking at it. What we are seeing is broad-based growth across all our distribution channels - all banks, national distributors, mutual fund distributors, Fintechs, direct, registered advisors. It's really a case of the overall opportunity expanding rather than any other channel losing out. HDFC Bank remains a very important partner for us and the potential within that channel is very significant. We continue to work very closely with the bank and there is clear alignment at the top. There are changes that take time to play through, but we are confident that results will follow. HDFC Bank has always followed an open architecture approach. This occasionally results in event-driven or seasonal variation, particularly in quarters when peers launch a large NFO. Importantly for us, particular thing we monitor closely is the quality of flows and the SIP share through the bank - that continues to remain strong.
Just one small data point question - is it possible to give some sense on what could be the contribution of flows or SIP from Fintech players?
We can get back to you with this data point.
The flow versus book market share and also - it seems that we are going a little bit slower on the entire SIF launch. What are your thoughts and when should we expect any action and your build up on alternatives?
Overall flows are higher than the book share, that much I can tell you. We remain focused across all products, channels, geographies. On SIF, we have secured all necessary regulatory approvals. From our standpoint, getting the approval is just the starting point. Real question is, how do we participate in a way that is consistent with our philosophy? That means being very clear on two things - the product has to be investment-led and it has to solve for a genuine client need, rather than just occupy shelf space. So, we are not approaching this as a race. In a category like this, being early doesn't necessarily create an advantage. We would much rather be thoughtful and deliberate. We are not starting from scratch - we already have the underlying capabilities. The team is working on designing a couple of products in this space which are differentiated. I would view this as more strategic than immediate. It's not going to move the needle overnight. The category itself will take time to develop and investor understanding will have to built. Over a period of time, having a well thought out SIF offering becomes important if you want to be seen as a complete investment platform.
On the performance of schemes in one-year bucket - except mid cap and value category within the equity-oriented schemes, the scheme performance and the rank of HDFC AMC among the industry players has deteriorated. Can you help me understand what was the reason and how are we trying to improve the performance?
No, not at all. In fact, we continue to be in top 2 quartiles across most of the categories, across like time periods including longer term performance. Large number of our funds are rated 4 and 5 stars by Value Research. As I said, flow market share remains better than the book market share. The team is clearly amongst the most experienced in the top tier. The investment philosophy or style has stood test of time since delivered best-in-class performance over a long period of time. There is enough and more data now available on the flows and that does suggest continuing trend in our favor. Investors as well as distributors, they don't look at fund performance over one or two quarters. As you move right on the timeline graph, we stand out clearly. There is more and more appreciation of a long-term track record of alpha generation across our strategies. 12 or 13 of our funds have got a track record over 15 years, and several of them going back 20 or 25 or 30-year plus track record of alpha generation.
If you look at the top three schemes, they account for a significant portion of our AUM on equity side, probably closer to above 50% of equity plus hybrid put together. Given that the smaller schemes would have relatively more advantage in the new TER structures, do you think that can be a strategy for us where we push these more the smaller category product, smaller sized schemes to kind of protect our yields and also from a diversification of AUM perspective?
Advantage to whom, Prayesh? It is advantageous to investors. We exist for our investors. As the scheme, given the telescopic pricing, as the scheme becomes bigger, you have a lower TER and that much of additional returns baked in for the investor and I feel very happy for them. Over a period of time, I think people underappreciate this aspect. If you look at the long-term track record of larger schemes, that has been outstanding. And as the TER has the impact from the telescopic pricing, investors tend to gain and ultimately the fate of our industry is decided by the investors and if they make better returns, good for us.
On the guidance on expense growth for FY27 and '28 - anything that you can guide on what kind of expense growth we should look at on an absolute basis?
So, we don't give out guidance generally. If you look at our last 5 years CAGR of employee cost and other expenses, it's been around the 13% mark. We focus on cost. At the same time, we are mindful of the opportunity ahead of us in terms of growth and we'll keep investing around it. But there is no specific guidance we generally give out on cost.
You quantified the impact of this new base TER and other regulations at a gross level. Just wanted to understand the other non-distributed costs and other overheads. Is there a thought process around your RTA payouts and when do these renegotiations happen and do you think there is any scope or headroom available to curtail cost? Second on unique investor count - given fintech channels are the largest originators of new customers, how is the customer wallet divided between different players on these platforms? And customer behavior during this current downturn - any difference between the more assisted channels and DIY channels?
On the expenses on the fund side - I mentioned in context of operating expenses of the AMC that we run a very tight ship, I can say the same about the fund expenses also. We try to optimize it for our investors across all the costs that we have while ensuring that they get best-in-class service. Won't comment more on that. On unique investors - the penetration which was 17.6% in March '23 has gone up to 27% in March '26. Over the last three financial years, we would have added almost 10 million investors, 1 crore new unique investors in the fund house. Reflection of investment performance, all the investments we have been making on distribution side, and the brand and franchise.
Follow-up on fintech - the wallet share of a customer, how that would be divided between you and other players when they're deciding on allocation through the fintech channel. And how their behavior has been versus assisted channels during this downturn?
Our flow share through the fintech channel is also higher than the book share. That reflects a strong presence on their platforms. Our folios also - this year we have moved up from 2.3 crores folios to 3 crores folios, so 70 lakh folios have got added in last one year or so. And while we have added around 35 lakh new investors. So, investors are investing - every investor is on an average investing in more than one product of ours. On behavior versus assisted channels - it will be really difficult. We can only look at the data at our end and you should ask some of these guys when you get an opportunity. They have added very large number of new investors to the industry in last four or five years. In FY '20 the number of investors coming through the fintechs would have been less than a million. That number is now multiple of that - probably more than 30 million or so. Exponential growth in last four or five years. We have to give it a little bit of more time to really assess the behavior of all of these investors.
Looking at your market share - the last eight to nine quarters it's pretty much constant at around 12.8%-13-odd percent. Do you have any aspiration to increase your market share to say maybe a 14% or a 15% or do you have any vision or strategy?
In the early part of last decade it would have been 20%, but of course the overall size of the market was small, incremental flows were like a small fraction of what we get now. In last two years, the net flows in the industry are like over INR9 lakh crores. This was the total equity AUM couple of years back what we have got in terms of flows. The market share what you are seeing is on a much larger base of AUM and much larger base of flows. Aspiration is always very high. 10-15 years back we used to have a much larger share. Our mission is to be the wealth creator for every Indian. In a country of 1.4 billion people, industry has only got 60 million investors. We have got 17 million. We take pride that every fourth investor has invested with us, but there are three investors in the industry out of those four who are yet to invest. The other opportunity - if you compare people invested in capital market versus mutual fund - at least 13 crore people have invested in capital market and there are 60 million in the mutual fund. So there are another 60-70 million investors who have invested directly. Our focus as a large player is on growing the market as much as getting higher share in flows.
Regarding the alternative business - alternatives need specialized talent and what kind of cost to AUM ratio do you see on alternative division versus the mutual fund?
We don't give segment wise cost to income, but I mentioned earlier the work that we have been doing to grow our alternatives business and our PMS business. As of now, we have hired high-quality investment resources, putting in place client service capabilities, putting in place all the other capabilities in place to grow it over a period of time. We don't give like segmental cost.
What are the key priorities for HDFC AMC in the coming quarters? How do you plan to bring more retail investors into mutual funds, strengthen distribution in smaller cities, and leverage digital platforms to make investing simpler and more engaging?
Over the last couple of years, industry has grown from strength to strength. We are seeing tremendous focus on expanding the systematic book across all channels, geographies, and investor segments. While the industry has grown, we have got our fair share. We continue to serve investors across various channels through the physical branch network that we have significantly expanded, and continue to evaluate opportunities on that side. On the other side, we continue to invest in our digital capabilities - our portal, website, and app are best-in-class. Transactions which used to be almost 30% physical five-six years back are now almost 97% done digitally. We believe in 'phygital'. On the product side, as per SEBI classification, we are present in all categories. Our aspiration is to keep growing our market share in all of those categories. Beyond mutual funds, we also see opportunities to grow non-mutual fund side including PMS, private credit, Category 2 AIF, fund of fund. The other opportunity is the international business - 100% wholly-owned subsidiary in GIFT City with five funds live, building product range and distribution for both inbound and outbound.
How are you approaching risks such as market volatility or any regulatory compliances that keeps on changing over the time, and rising cost, while still ensuring profitability remains steady and growth keeps on going from the company?
On the cost question: breaking down cost into two components - employee cost and all other expenses. On employee cost, excluding ESOPs, our cost has grown by about 12.5% year-on-year. Over the last five years, the CAGR for employee cost ex-ESOPs non-cash charge is around 13%. During that period, employee count has grown from 1,250 to around 1,700 employees. On non-employee cost, they have increased at a CAGR of about 13.5% over the last five years. We don't give specific guidance, these will broadly grow in line with business and investments we are making across technology and people. Cost relative to AUM over the last few years shows a clear downward trend. The focus is not necessarily cutting cost, but on managing them well while we continue to invest for growth. On risk management and volatility, we have a team that ensures appropriate risk factors are in place and we sort of manage that very actively across our compliance and risk team.
On the EPFO and SPFO mandates that the AMC received - is there any data on that?
So SPFO, that we've already started managing. EPFO, we are signing the agreement. So, both of them were part of RFP that was issued and both of these were awarded to us.
How do you think artificial intelligence tools are going to affect the mutual fund industry? And how do you see going ahead the role of a mutual fund distributor in raising up the AUM for any AMC? Do you think there is any chance of disruption from AI or any cloud computing?
Our digital strategy is organized around becoming the digital AI wealth creator for every Indian. Clear focus on three stakeholders: our investors, our distribution partners and the HDFC group ecosystem. The approach is not to merely adopt technology, but to use it to strengthen our scale, efficiency, investor experience. With AI and digital tools, we continue to simplify onboarding, discovery, engagement to drive long-term participation. We are clearly on a trajectory towards becoming a 100% digital transaction AMC. Across the organization, AI is being embedded as an operating layer - marketing, client engagement, investment processes, risk management, compliance. This acts as a force multiplier for our teams rather than a replacement. All built on a robust cloud-based technology foundation with strong data architecture and rigorous cybersecurity standards. Board has approved appointment of Mr. Rajan Anandan as an invitee and external expert on the Technology Committee for a three-year term.
Picking up from opening remarks on investor behaviour, especially in March - we don't see major change in trends on the reported numbers, but maybe under the hood have you seen any change in behaviour in terms of ticket sizes or self-directed customers' share kind of coming down in overall flows? Anything beyond the reported numbers?
March industry flow data and the numbers really speak for themselves. Looking at the book at the start of the year versus now, one thing is quite clear - domestic households are increasingly investing with a long-term mindset and beginning to appreciate the benefits of rupee cost averaging. Feedback from all distribution partners suggests many investors are comfortable with market corrections because it allows them to accumulate more units. Highest flows in equity and equity-oriented funds, hybrid funds came in the month of March, where we had significant global geopolitical volatility. Another month with higher flows was July, when India got hit with additional tariffs by US. That clearly shows that in extreme volatility, investors use that an opportunity to put more money to work - very mature behaviour. SIP book of industry has grown by INR6,000 crores during the year. On a cautionary note, we have to see investor behaviour if markets stand under pressure for a much longer period.
Would you say that this contrarian approach is true across both the assisted as well as the self-directed channel or is there like a marked difference between the two?
I think across both. You can see the way number of contributing accounts have increased during the year on the SIP side. At the beginning of the year, there were 81 million SIP contributing accounts that AMFI publishes and that number closed at 97.2 million as of March 26. So, there is an increase of 16 million accounts. And as we mentioned in the opening remarks that this year markets have not done well.
Can you spell out the asset class-wise yields? This quarter, on a blended basis, yields are slightly down. So, is that mainly because of mix or is there some internal sort of change in the yield? Second, on expenses, admin and other opex has seen a slight increase - what sort of run rate? And also, on your flow versus book market share, how has that trended in 4Q? Are we sort of broadly flow share is beating book share?
On the yields for the different classes, equity was around 56 basis points, debt 28 and liquid 13. And blended for the year was 45. There is actually no yield compression in the quarter. This quarter the Q4 is a 90-day quarter and Q3 was a 92-day quarter. So that, if you simply divide without adjusting for number of days, then you may have come to that number, but the yields are flat from there.
Follow-up clarification on equity yields - what is the equity yield excluding index funds?
Madhukar just one thing, this 56 of equity that Naozad touched upon, that includes equity index funds. If you take that out, if you look at only actively managed equity and equity-oriented, it is 60-61 basis points.
On expenses, admin and other opex - what sort of run rate are we looking at? Looking at it more on a quarter-on-quarter basis.
On expenses, it's just BAU, there is nothing - it's up by 7%. Quarter-on-quarter other expenses up 8%. So, in absolute terms is like a really small number. Even the CSR and all these things, because those things which are linked directly like a royalty, CSR, they are linked with our profits, revenues. So as that goes up by default these are like mandatory/statutory expenses. We've always said that we run a very tight ship. Look at our expense as a basis point of our AUM, we would be one of the best run not only in India but in the world. And we are in a growth business. We are at very early stage of financialization of savings in India. We are expanding our footprint on the physical side. We are expanding our digital capabilities, the investment in AI, in our investment capability, product capability. We're very excited from a long-term perspective on the alternatives. Given the scale of our business, few crores here and there - be it like marketing, be it technology, be it in people, these are like foundational blocks for long-term growth and should not shy away from that.
On the regulatory change with respect to TERs - any update on how are you looking at the change in TERs and whether you have kind of gone into any negotiations with the distributors?
On the new TER regulations, we have a new terminology in the industry now, it's called BER, the Base Expense Ratio. It is still early days, and you will hear more from us over time on how we propose to deal with the impact, including changes in distribution commission, our margins and the overall impact on the ecosystem. This time, the impact is on select few schemes. Largest strategies are the ones seeing the impact, and smaller strategies are even seeing some degree of markup. On the existing book, for us the gross impact is about 3 to 4 basis points and our approach is to largely offset this through optimization of commission structures, along with prudent management of both the direct as well as indirect costs. So overall, the targeted impact on our P&L should not be material. Still early for us to give a precise number. On the flows, there are couple of changes here as well. The earlier 5 basis points available in lieu of exit load is now removed, which is a straight reduction. And there is a shift in the structure post April 1, 2026 - earlier it was TER which included GST on distribution commission and other expenses, while GST on management fees was in addition to TER, whereas now we move to a base expense ratio framework with GST kept completely outside of TER.
On the unique investor market share increase to around 27% - what would be the kind of geographies driving this and through which channels would be the major driver? And are you planning to come out with any NFOs in future?
We get money from almost 98% or so of zip codes from the country. The share of new investors have been coming from like almost all geographies. The B30 towns, beyond the top 30 towns, have been adding lot of new investors and we have been a beneficiary of that. Fintech is a channel where lot of new accounts on the SIP side getting opened up where we have a very decent share. On NFOs - we look at some product gap, but overall if you look at our product bouquet, portfolio is fairly well-rounded. We are present across most of the key categories. So, there isn't a need to keep adding products for the sake of it. The bigger opportunity for us actually is within the existing lineup. There are funds which have delivered steady consistent outcome for decades, but haven't necessarily been in the top bracket in terms of visibility and the AUM that they have. So, lot of our effort is going into sharpening these and moving them up the curve. On new launches, we'll stay very selective. If we do something in the thematic or sector space or in the passive space, it will be backed by strong conviction from the investment team and a clear market opportunity.
I wanted to understand flow market share qualitatively. While I understand we have a robust track record of investment performance, but our calculations suggest that in Q4, the flow market share has been lower than the flow market share that was in Q3. Can you help us understand the reasons behind it?
No, I don't think so. Actually, you would have missed the dividend payout. See, most of our schemes payout dividend in the last quarter, you would have taken dividend payouts as redemptions, IDCW in the way it is now called. For the investors who have subscribed for the IDCW scheme - that would have led to your computation, but that's not the data point.
On the impact on yields - existing book you highlighted no material impact, and on new flows 5 basis point in lieu of exit load. So overall on new flows there will be 5 basis point impact?
No. So, the earlier 5 basis points available in lieu of exit load is now removed. So that will be a straight reduction from the distribution commission, right, because this was paid out as the commission. The new commissions that we have published factors that into account and thereby we have kind of come out with new commission structure, which is lower to that much an extent. There is overall no material impact on P&L is what we are striving for.
On the yields on the AIF and the PMS book - could you spell that out, so it's easier for us to think about what kind of incremental revenue contribution that can come in from these two products over the next few years?
On the alternative business, marginal premium to our equity margins. On the PMS side, pure discretionary is in line with equity margins. The non-discretionary, particularly the EPFO and SPFO kind, these are Government of India mandates and among the most prestigious and very tightly contested opportunities. So, we are honored to have been selected. That said, this is a segment that operates under very, very tight economics. These are the net yields, X of distribution commissions.
Any color on how the SIP trajectory has been - any change because obviously March data was good and probably was because of some rollover effect of February. Any color on how the SIP book has been progressing and also any difference between how the direct channel versus assisted channel is kind of seeing differential trends?
I mentioned earlier the numbers in terms of the SIP contributing accounts - started year at 81 million in March '25 and closed at 97.2 million. An increase of 16 million accounts in a year where markets were down. In the last quarter of the financial year where we saw significant volatility, particularly in the month of March, we not only closed with highest ever SIP monthly flow, but we also had relatively higher the overall flow into equity and equity-oriented funds. That reflects the maturity of individual investors. There is more stickiness of investor behaviour and really reinforces the long-term nature of SIP participation. We are seeing that across both direct as well as distributor led. Over a longer period of time, AMFI has published data that the longevity of investors has been greater with those who have come through distributors because there is more hand-holding versus the direct investors. In last couple of years, we have seen very significant increase in investors who have invested directly. Last couple of quarters numbers have been encouraging, but we have to see that trend observe over a longer period of time.
Is there some color around the lumpsum flows or the additional flows that came in during March or during the market correction - was it from new investors or existing investors putting in more money into the existing folios?
A larger part of flows into equity and equity-oriented funds are coming in the form of SIPs. They are relatively more sticky. Predicting lumpsum flows have not been easy, but there is some variability in that. The interesting trend - two particular months where there was volatility and more FPI selling, month of July last calendar year and month of March in '26, both the months saw higher flows on a relative basis. May last year where FPIs turned buyers and markets were volatile, but were better and we saw lower flows. So maybe there is a contrarian behaviour among the investors who are investing in a lumpsum manner, trying to take advantage when market is down while waiting on the sidelines or booking little bit of profit when market is up.
On the distribution mix - looking at the share of banks excluding HDFC Bank. Over the last 12 months, the share has been down by around 30 to 40 basis points both on an overall basis as well as on the equity AUM basis. Is the flow market share higher than the book market share here as well and what are the strategies to increase the share here?
Other than few banks like SBI which is almost a closed architecture and few other banks which are more guided, particularly on the retail distribution side where there would be a lesser share, but we have a very healthy relationship with almost all the other banks, continue to work hard with them and won't be able to share like individual data but with all the other banks who operate under an open architecture, our share has been a decent, has been healthy. What you are seeing is the overall pie - there is broad-based growth across all distribution channels. Banks are growing, national distributors are growing, MFDs are growing, fintechs are growing and direct investors are growing. So, it's like opportunity is expanding for all the channels. Endeavor at our end is to ensure that we optimize across all channels.
As retail investors increasingly seek personalized portfolios rather than generic mutual fund units, how do you see the firm positioning its technology stack to offer direct indexing kind of a thing at a scale? Over the next decade, how do you foresee this impacting the traditional active asset management?
We have large number of products which have been in existence for a long period of time. I am a very big believer in active investing and our track record speaks about it. Over the next several years, given the opportunity in Indian market, I always call this as stock pickers' paradise. There is time arbitrage. If you think long term and ignore the short-term noise, there is research opportunity if you put in good resources with good people, a well-laid out philosophy, the processes in place, you can continue to generate alpha and we continue to invest in those capabilities. We have one of the most experienced team in the industry and remain positive on that. On the other side, there would be investors who would meet their certain needs through the passive funds and we have the best-in-class product bouquet on that, be it index fund or ETFs, be it market cap indices or the smart beta or sector thematic passive.
On the other income component - I'm assuming this has come from the dip in yields towards the end of March. But because one of the other AMCs reported a loss in this quarter, was this driven because of a heavier tilt towards debt instruments as yields softened or was it more through active tactical rotation? And given the correction in Nifty in March, how are we adjusting our investment books, bond books duration or equity sensitivity to ensure that other income continues to remain a smoothed-in proportion of our total income?
If you see page 34 of our investor presentation, we have given the breakdown of the investments across multiple asset classes. The equity investment in mutual funds that we have on the balance sheet is largely due to the skin in the game circular from SEBI. So that portion of the equity investments saw a drawdown because of the market correction in the Q4. The rest of the portfolio is largely in liquid and debt mutual funds and we of course have invested in some of our own AIFs, those are early days of investment. On the liquid and debt side, we run a fairly reasonable duration and we keep it fairly passive there. We are not trying to do too much active management on the mutual fund debt investments that we have on the balance sheet. And equity is largely, almost all of the equity investment in the mutual funds are because of skin in the game circular. So, this is an outcome of the market movements.
Going forward, do you plan to continue this comfortable duration on the debt side?
Yes, we are not very long on the debt duration in any case.