HDFC AMC Navigates Q2 FY26 with Resilient Growth and Strategic Vision

HDFC Asset Management Company Limited (HDFC AMC) has reported a robust performance for the second quarter of Fiscal Year 2026, demonstrating resilience amidst a softening equity market. The company, a prominent player in India's mutual fund industry, showcased strong growth in its core operations, underpinned by strategic initiatives and disciplined financial management. For Q2 FY26, HDFC AMC recorded a revenue from operations of ₹10,260 crore, marking a significant 16% year-on-year increase. Despite a reduction in other income primarily due to adverse mark-to-market changes, the operating profit grew by a commendable 13% year-on-year to ₹7,796 crore. Profit after tax (PAT) for the quarter stood at ₹7,179 crore, a substantial 24% increase over the previous year, though this figure includes a one-time reversal of income tax provision from earlier periods.

The company's Assets Under Management (AUM) continued its upward trajectory, with Quarterly Average AUM (QAAUM) reaching ₹88,140 crore, securing an 11.4% market share in the mutual fund industry. Notably, actively managed equity-oriented QAAUM stood at ₹53,430 crore, commanding a 12.9% market share, solidifying HDFC AMC's position among the largest actively managed equity-oriented mutual fund managers. The asset mix further tilted towards equity, with the equity proportion rising to 64.9% on a QAAUM basis. Systematic Investment Plan (SIP) contributions remained robust, hitting ₹294 crore for September 2025, reflecting a growing maturity among Indian investors. The company also maintained its operating margin within the 33-35 basis points range, showcasing efficient cost control despite ongoing investments.

Strategic Expansion and Digital Prowess

HDFC AMC's growth narrative is not just about numbers; it is deeply rooted in strategic expansion and technological innovation. The company launched two new fund offerings (NFOs) during the quarter: the 'HDFC Innovation Fund' which garnered ₹240 crore and the 'HDFC Diversified Equity All Cap Active FoF' collecting ₹110 crore. These launches underscore the company's commitment to a comprehensive product bouquet tailored to investor needs. Beyond product innovation, HDFC AMC is aggressively expanding its reach, having opened 50 new offices, many in the underserved B30 towns, to deepen market penetration. This physical expansion is complemented by significant investments in digital assets and technology, enhancing the investor and partner experience. Customer onboarding via digital platforms surged from 89% to 94% from Q2 FY25 to Q2 FY26, highlighting the success of their digital maturity and adoption efforts.

The company is also making significant strides in diversifying its business footprint. The alternatives platform is gaining traction, with strengthened investment capabilities and a dedicated team for AIF initiatives. HDFC AMC successfully closed its first Category II AIF (Fund of Funds) at approximately ₹1,200 crore and is actively marketing a performing credit fund. The PMS business is also steadily expanding, offering both discretionary and non-discretionary solutions. On the international front, the GIFT City platform is operational with five active funds, including a new launch this quarter, serving as feeder funds into their mutual funds. Plans are underway for inbound and outbound strategies, including a partnership with UBS Asset Management for India small/mid-cap and all-cap strategies. These initiatives collectively aim to establish HDFC AMC as a full-service wealth creator for every Indian.

Navigating Challenges and Future Outlook

While the quarter demonstrated strong operational performance, HDFC AMC also addressed certain challenges. The reduction in other income due to adverse mark-to-market changes highlights the sensitivity of non-operational income to market fluctuations. Furthermore, the Finance (No.2) Act 2024, enacted in August 2024, brought changes to capital gains tax rates and withdrew indexation benefits, leading to an increase in Deferred Tax Liability by ₹69.8 crore. This resulted in an additional charge on the Profit After Tax for the quarter. Management acknowledged that margin compression from telescopic pricing is an industry reality, and Total Expense Ratios (TER) are expected to trend lower over time. However, they emphasized maintaining operating margins within the 33-35 basis points range through efficient cost management and focusing on expanding absolute profitability.

Looking ahead, HDFC AMC remains optimistic about the growth trajectory of the Indian asset management industry. The company has received approvals for the launch of Systematic Investment Funds (SIF) and is evaluating suitable products for its client segment. The Board of Directors also approved a 1:1 bonus share issue, subject to shareholder approval, signaling confidence in future growth. With a robust product portfolio, expanding distribution network, strong digital capabilities, and a clear strategic focus on alternatives and international business, HDFC AMC is well-positioned to capitalize on the immense potential of the Indian financial market and continue its journey as a leading asset manager.

Segmental AUM Comparison (Quarterly Average AUM - Q2 FY26)

Conclusion: Sustained Growth and Disciplined Execution

HDFC AMC's Q2 FY26 performance reflects a company committed to sustained growth and disciplined execution. Despite market headwinds and regulatory changes, the company's strategic investments in product innovation, digital transformation, and market expansion have yielded positive results. The focus on expanding its reach, particularly in B30 towns, and diversifying into alternative asset classes, positions HDFC AMC for long-term value creation. The management's emphasis on maintaining operating margins while investing for future growth underscores a balanced approach, reinforcing investor trust in its strategic direction.