Aditya Birla Sun Life AMC stable yields and flagship flows support AUM growth

Investment View and Valuation

Motilal Oswal Financial Services retains its Buy rating on Aditya Birla Sun Life AMC and values the stock at 42 times FY28E core P/E. The broker raised its FY27E and FY28E earnings estimates by 4% and 5%, respectively, to reflect higher other income, while retaining its AUM assumptions. The report has a target price of Rs 1,290 against a CMP of Rs 1,043.

The positive view is supported by improving flagship-fund performance, stronger distribution traction, broadly stable post-BER revenue yields and the prospect of operating leverage from disciplined costs. Recovery in flows and market share is a key earnings driver. The alternatives, PMS, passive and GIFT City businesses provide longer-term revenue diversification and profitability optionality, although execution and fundraising momentum remain important monitorables.

1QFY27 Financial Performance

Aditya Birla Sun Life AMC reported operating revenue of about Rs 460 crore in 1QFY27, up 3.5% year on year and broadly flat quarter on quarter, in line with Motilal Oswal's estimate. Management-fee yield was 43.3 basis points, compared with 44.3 basis points in 1QFY26 and 42.1 basis points in 4QFY26.

EBITDA margin declined to 55.6%, slightly below the broker's 56.8% estimate. Employee costs rose 26% year on year and 11% quarter on quarter, primarily because of the ESOP scheme introduced in January 2026. Management expects ESOP expense of about Rs 10 crore per quarter and employee costs to remain broadly at current levels. Other operating expenses are expected to rise broadly with inflation, without major incremental cost pressure.

Reported PAT exceeded the estimate because other income reached Rs 162 crore versus the broker's Rs 95 crore estimate, aided by mark-to-market gains. Core PAT was Rs 186 crore, down 2% year on year.

Revenue Yields and BER Transition

The BER framework transition and commission optimisation were fully implemented from April 1, 2026. Management indicated that 1QFY27 yields represent the normalised run rate. Future revenue yields are expected to remain broadly stable, with only 1–2 basis points of impact from AUM mix and telescopic TER pricing.

AUM and Product Mix

Mutual-fund QAAUM rose 6% year on year but was flat quarter on quarter at Rs 4.3 lakh crore amid volatile market sentiment. Equity, hybrid and ETF QAAUM increased 3%, 34% and 45% year on year, respectively, while debt and index QAAUM declined 5% and 7%.

Average AUM grew 42% year on year to Rs 6.3 lakh crore, principally due to EPFO mandates. Closing total AUM exceeded Rs 10 lakh crore after onboarding the approximately Rs 6.1 lakh crore EPFO mandate. EPFO and SEBI mandates have minimal direct revenue despite their large AUM, and management is targeting about 1,350 EPFO trusts for additional flows.

Fund Performance and Distribution Traction

Management said investment performance has improved across equity and hybrid portfolios, supporting inflows into Flexi Cap, Balanced Advantage, Mid Cap, Multi Cap, Small Cap and Index Funds. More flagship schemes were added to bank product lists, while over 1,900 new MFDs were empanelled in 1QFY27, taking the MFD base above 95,500. Investor folios reached 11.1 million.

SIP AUM was about Rs 87,000 crore and quarterly SIP collections were about Rs 3,300 crore, broadly stable versus 4QFY26. However, June monthly SIP flows fell 10% quarter on quarter to Rs 1,090 crore, and SIP market share moderated amid industry-wide cancellations and weakness in non-core schemes.

Alternatives, Passive and GIFT City Businesses

The company launched its first SIF Hybrid Long-Short Fund and intends to launch two further SIF products, including the Equity X Top 100 Long-Short Fund. It is supporting AIF scaling with seed capital of up to 10% of fund size and temporary bridge funding.

PMS and AIF contributed about 7% of gross revenue and 4% of net revenue after distributor payouts. Passive QAAUM was Rs 40,000 crore as of June 2026, up 14% year on year, while ETF AUM rose 43% to Rs 12,300 crore. GIFT City fundraising has commenced for the ABSL Flexi Cap Feeder Fund aimed at global and NRI investors.

Key Monitorables and Risks

• Recovery in flows and market share remains an important earnings driver.
• Market volatility, industry-wide SIP cancellations and weakness in non-core schemes could affect flow momentum.
• Execution and fundraising momentum in the alternatives, PMS, passive and GIFT City businesses remain important monitorables.
• The company expects employee costs to remain broadly at current levels, while other operating expenses should rise broadly with inflation without major incremental cost pressure.