HDFC AMC vs Nippon life AMC – Profitability, Valuation & Future Prospect

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HDFC AMC vs Nippon life AMC: The Indian stock market has seen exponential growth in participation especially by the retail investors over the last few years. And this was not just in stocks. Mutual funds, which are professionally managed investment schemes have seen a boom.

In fact, during the last year, the Asset Management Companies (AMCs) added more than Rs.3.17 crore in investor accounts. In this article, we take a look at two of the biggest AMCs in India- HDFC AMC vs Nippon life AMC. Keep reading to find out!

Mutual Fund Industry in India

The asset management business in India still remains largely under-penetrated with AUMs-to-GDP of just 13-15 per cent against the global average of about 75-80 per cent. Similarly, equity AUMs-to-GDP is also low at 5 per cent.

In fact, over the last decade, the Indian MF industry has grown at a steady pace from 7.0 lakh crore to 32.1 lakh crore i.e. approx. 4 times increase in a span of 10 years.

Rising awareness about the benefits of investing in equity markets, the growing popularity of ways of investing, for example through SIP, are some of the factors contributing to the increased participation of domestic individual investors in the Indian mutual fund industry.

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Systematic Investment Plans (SIPs) offer the benefit of regular investing coupled with the benefits of rupee cost averaging. The number of SIP transactions processed in March 2021 was Rs. 3.73 Crore as compared to Rs. 1.01 Crore in April 2016.

Institutional brokerage and financial services firm CLSA expects mutual funds assets to increase 16 per cent between FY22-25, driven by 18 per cent growth in equity AUMs. The share of equity AUM will increase to 51 per cent from about 48 per cent currently.

About the Companies

HDFC Asset Management Company Ltd

HDFC AMC Logo

The company started as a joint venture between Housing Development Finance Corporation Limited and Standard Life Investments Limited in 1999. Today it stands as India’s most profitable mutual fund manager.

The company offers a comprehensive suite of savings and investment products across asset classes and has a customer base consisting of more than 9.9 million live accounts. HDFC AMC is the investment manager of HDFC Mutual Fund.

Nippon Life India Asset Management Ltd

Nippon life AMC - logo

The Company started mutual fund operations in 1995 as the asset manager for Reliance Mutual Fund. Nippon India Mutual Fund (NIMF) offers a well-rounded portfolio of products i.e. Equity, Debt, Liquid as well as ETF for investors to meet varying requirements.

The company offers a well-rounded portfolio of products i.e. Equity, Debt, Liquid as well as ETF for investors to meet varying requirements. The Company caters to one of the largest investor folios in the industry at 99.8 lakh investor folios. Nippon Life India Asset Management Limited (NAM India) is the asset manager of Nippon India Mutual Fund (NIMF).

Financials of the Companies

Let us compare two of the biggest AMCs in India based on their financials.

HDFC AMC vs Nippon life AMC – Revenue Mix

In FY21, HDFC Asset Management Company earned a total revenue of Rs 1,853 Crores. Whereas Nippon Life India AMC earned a total revenue of Rs 1,419 Crores.

On a quarterly basis, HDFC Asset Management Company reported a total income of Rs Rs 580.93 Crore in Q4 of FY22. On the other hand, Nippon Life India Asset Management company reported total revenue of Rs 372.44 Crore.

HDFC AMC vs Nippon life AMC - Revenue mix

HDFC AMC vs Nippon life AMC – Profitability

In the last quarter of FY22, HDFC AMC reported an 8.7% growth in profit after tax (PAT) to Rs 343.55 crore. Nippon Life India AMC reported a PAT of Rs 175 crore during the quarter ended March 2022.

20172018201920202021
Net Profit (RS in Cr)
HDFC AMC550.25711.29930.61,262.411,325.76
Nippon Life India AMC401.96455.74486.09415.25680.33

HDFC AMC vs Nippon life AMC- Assets Under Management

As of March 2022, the asset under management of HDFC Asset Management Company is Rs 4.16 trillion. And during the same period, the total AUM under Nippon Life India Asset Management is Rs Rs 3.45 trillion.

HDFC AMC vs Nippon life AMC- Return Ratios

The return on equity signifies how good the company is in generating returns on the investment it received from its shareholders. A higher ratio is considered ideal. While HDFC AMC has shown a declining trend, Nippon Life India AMC has seen an increase in FY21 from the year before.

The ROCE is a financial ratio that shows if a company is doing a good job of generating profits from its capital. The ROCE also considers the debt of the company. HDFC AMC has shown a declining trend while Nippon Life India AMC has seen a fluctuating ratio.

The EPS indicates how much money a company makes for each share of its stock and is a widely used metric for estimating corporate value. In the last five years, it can be seen that HDFC AMC has had a higher ratio than Nippon Life India AMC.

The ROA is used to determine how efficiently a company uses its assets to generate a profit. HDFC AMC has shown a declining trend over the last five years. While Nippon Life India AMC has seen an increased ratio in the last two years.

Return ratios
20172018201920202021
Return On Equity (ROE)
HDFC AMC42.7538.7935.0835.6430.18
Nippon Life India AMC22.321.7419.7916.3524.53
Return On Capital Employed (ROCE)
HDFC AMC62.1457.5651.6446.8239.93
Nippon Life India AMC31.7331.0428.3821.930.96
Earnings Per Share (EPS)
HDFC AMC033.7843.7859.3262.25
Nippon Life India AMC348.927.457.946.7811.04
Return On Assets
HDFC AMC36.6935.0232.6833.6228.26
Nippon Life India AMC20.2519.1717.7214.721.66

HDFC AMC vs Nippon life AMC – Valuation of the company

The  PE ratio is one of the most popular valuation metrics of stocks which provides an indication of whether a stock at its current market price is expensive or cheap. The sectoral PE ratio for both companies is 24.51. The TTM PE of Nippon Life India AMC is 24 and that of HDFC AMC is 24.51.

The PB ratio measures the market’s valuation of a company relative to its book value. A lower ratio is considered ideal. Both HDFC AMC and Nippon India life AMC  have shown an increasing trend in the last three years.

The EV/EBITDA metric is generally used while comparing companies within the same industry or sector and a lower ratio is considered ideal. In comparison, HDFC AMC has a higher ratio than Nippon Life India AMC.

Valuation Parameter
20172018201920202021
Price to Earnings Ratio (PE)
HDFC AMC0035.0535.646.91
Nippon Life India AMC033.1426.4536.6830.64
Price to Book Value (P/B)
HDFC AMC0010.6511.1713.06
Nippon Life India AMC06.395.036.026.93
EV/EBITDA
HDFC AMC0.030.123.4826.2334.3
Nippon Life India AMC021.7517.3324.6622.39

Future Prospects of the Companies

HDFC Asset Management Company Ltd

The company is focusing on capitalizing on the emerging global capitals. This is because the Foreign Portfolio Investors as a group are the second largest after promoters in terms of ownership of India’s market capitalization.

Apart from that, the company is also focusing on improving their digital presence. They aim to provide a best-in-class User Interface and User Experience to our customers and partners.

Nippon Life India Asset Management Ltd

Since the breakout of covid the company has ramped up its digital initiatives. It has built a strong tool of networks to execute its transactions online. Their customer-first focus has helped them become one of the largest players in the ETF space in India. Moving ahead, the company will also focus on optimising its cost to increase its profitability.

In closing

In this article, we looked at how the mutual fund industry in India has fared over the years. Along with that we also compared two of the biggest players in the Asset Management industry.

Both companies are in a neck-to-neck competition with each other. Going forward the leadership will be decided based on the strategies adopted by them. That’s all for this post on HDFC AMC vs Nippon life AMC! Happy Investing!

Have you invested in either of the AMC? Let us know in the comments.

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