HDFC Asset Management Company delivered a resilient and earnings-accretive performance in Q3FY26, reinforcing its position as one of India’s most structurally sound asset managers. Backed by robust equity inflows, record-high SIP participation, and disciplined cost controls, the company reported revenue and profit numbers that exceeded market expectations. Operating leverage remained the dominant driver of margin expansion, even as management acknowledged long-term pressure from regulatory TER compression. With equity-oriented assets accounting for nearly two-thirds of AUM—well above industry averages—HDFC AMC continues to benefit from superior fee yields. Deven Choksey Research reiterates a BUY call with a target of Rs 2,957, implying a 15.8% upside from current levels.

Research House View: Deven Choksey Reaffirms BUY

Deven Choksey Research has reiterated a BUY recommendation on HDFC Asset Management Company Ltd., valuing the stock at 34x Dec’27E earnings and assigning a target price of Rs 2,957. The call is underpinned by sustained retail participation, strong SIP-led inflows, and HDFC AMC’s structurally superior equity-heavy AUM mix. At the current market price of Rs 2,554, the stock offers an upside potential of nearly 16%, supported by consistent earnings compounding and industry-leading margins.

Q3FY26 Financial Performance: Earnings Beat Across Metrics

HDFC AMC reported operating revenue of Rs 10,742 million in Q3FY26, registering a 15% year-on-year and 5% quarter-on-quarter growth, outperforming estimates. EBITDA rose to Rs 8,773 million, reflecting a healthy 15% YoY increase and a margin expansion to 81.7%, aided by operating leverage and controlled employee and operating expenses.

Profit after tax came in at Rs 7,701 million, up 20% YoY and 7% QoQ. While the PAT margin of 71.7% was marginally below estimates due to a higher effective tax rate, absolute profits still exceeded expectations, reinforcing earnings resilience.

Asset Mix Advantage: Equity Bias Drives Margin Superiority

Equity-oriented assets accounted for approximately 66% of QAAUM, materially higher than the industry average of around 56%. This favorable mix continues to structurally support higher fee yields compared with debt and liquid funds.

HDFC AMC’s market share in actively managed equity AUM improved to nearly 13%, reaffirming leadership in the highest-margin segment of the industry. This equity bias remains a key differentiator, particularly in periods of muted market returns where SIP-led flows sustain asset growth.

Industry Context: SIPs Anchor Retail Financialisation

Industry AUM stood at Rs 80.2 trillion as of December 2025. Equity and equity-oriented funds recorded net inflows of Rs 1.19 trillion in Q3FY26, taking CY25 inflows to Rs 4.75 trillion. Although slightly lower than CY24 levels, the data points to moderation rather than any structural slowdown.

SIP inflows reached a record Rs 310 billion in December, with SIP AUM rising to Rs 16.6 trillion—about 20% of total industry AUM. This divergence between subdued market returns and rising SIP participation underscores the structural nature of retail flows rather than return-chasing behavior.

Scale and Market Share: Steady Participation in Industry Growth

Quarterly average AUM stood at approximately Rs 9.25 trillion, growing about 5% sequentially. Overall industry market share remained stable in the 11.4–11.5% range, indicating consistent participation in industry growth rather than aggressive share capture.

The geographical mix also remained balanced, with over 80% of MAUUM sourced from T30 cities and around 20% from B30 locations. Incremental B30 inflows continue to support long-term diversification of the investor base.

Cost Discipline and Operating Leverage Remain Core Strengths

Total expenditure declined sequentially, driven by lower marketing and CSR spends, while employee costs remained well controlled. Management reiterated that while long-term TER compression is inevitable under telescopic structures, disciplined cost management and scale benefits should help sustain profitability within a 33–36 bps blended yield band over time.

This quarter once again highlighted HDFC AMC’s ability to protect margins even in a maturing regulatory environment.

Capital Allocation: High Payouts with Strategic Optionality

The company has distributed nearly 100% of post-tax profits as dividends over the past two years, reinforcing its status as a high-quality cash compounder. Simultaneously, the balance sheet is being selectively deployed to seed alternative platforms, including structured credit funds and fund-of-funds strategies.

Management emphasized that acquisitions remain an option, but only at disciplined valuations, ensuring return metrics are not compromised.

Distribution Strength: Bank and Fintech Channels Complement Each Other

The HDFC Bank channel remains a strategic anchor, with equity market share through the bank in the high-20% range—significantly above industry averages. SIP penetration through the bank is even higher, supporting long-term compounding visibility.

Fintech platforms are emerging as a meaningful growth lever, with over 25 million SIPs registered industry-wide through fintech channels in 9MFY26. HDFC AMC has established a strong presence across these platforms, enhancing incremental reach.

Valuation and Stock Levels: Upside Supported by Visibility

Deven Choksey Research values HDFC AMC at 34x Dec’27E EPS, arriving at a target price of Rs 2,957. At current levels of Rs 2,554, the stock offers a 15.8% upside, supported by a projected revenue CAGR of 16.2% and PAT CAGR of 16.8% over FY25–27E.

The equity-heavy asset mix, stable market share, and disciplined execution provide strong visibility on earnings compounding.

Investor View: A Structural Compounder in Indian Asset Management

HDFC AMC continues to stand out as a structurally strong, retail-led compounder. While regulatory headwinds around TER compression remain a long-term risk, the company’s scale, brand strength, and operating discipline position it well to navigate industry evolution.

For long-term investors seeking exposure to India’s financialisation theme through a high-margin, capital-light business model, HDFC AMC remains a compelling BUY candidate at current valuations.