Ladies and gentlemen, good day and welcome to the Q2 FY26 earnings conference call of HDFC Asset Management Company Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing * then 0 on your touchtone phone. Please note that this conference is being recorded. From the management team, we have with us Mr. Navneet Munot, Mr. Naozad Sirwalla, and Mr. Simal Kanuga. I now hand this call over to Mr. Simal Kanuga, who will give us a brief, following which we will proceed with the Q&A session. Thank you, and over to you, Simal.
Thank you very much. Good evening, everyone, and thank you very much for joining us today. We trust you will have an opportunity to review our presentation. We'll start with the industry. Nifty 50 declined by 2.9% in July, 1.4% in August, and was up by 0.8% in September. Industry witnessed net new flows of INR 593 billion, INR 458 billion, and INR 439 billion, respectively, in equity-oriented funds. The net new flows for the quarter add up to INR 1,490 billion, as against INR 911 billion in the previous quarter, when Nifty 50 delivered 8.5% positive returns. Over the last 12 months ending September 2025, equity-oriented funds have recorded net inflows of INR 5.1 trillion. Nifty 50 has delivered negative returns in the last one year. The SIP contribution continues to grow, reaching INR 294 billion for the month of September 2025.
What is particularly noteworthy is the net addition of 6 million contributing SIP accounts in the quarter. In our view, this reflects the growing maturity and long-term orientation of Indian investors. On the fixed income side, debt mutual funds experienced some moderation, with quarterly inflows easing to INR 148 billion, down from INR 1,339 billion in quarter-ended June 2025. Liquid funds, in particular, witnessed outflows of INR 219 billion, as compared to net inflows of INR 609 billion seen in the previous quarter. There is indeed a noticeable increase in demand for gold and silver ETFs recently, with inflows amounting to INR 208 billion in this quarter. This surge in investor interest has been reflected in AUM growth for our gold and silver ETFs as well.
Our gold ETF AUM has increased significantly from INR 102 billion to INR 141 billion, while the silver ETF AUM has more than doubled from INR 9 billion to INR 24 billion in this quarter. During the quarter, equity-oriented NFOs collected INR 141 billion. Now we move to us. We close the quarter with AUM of INR 8.7 trillion, reflecting a market share of 11.5% and 12.8% on ex-ETF basis. Actively managed equity-oriented AUM on closing basis inched up to INR 5.4 trillion, a market share of 12.9%. Within fixed income, debt and liquid fund market share stood at 13.3% and 11.8%, respectively. Total AUM has crossed INR 9 trillion mark since then. The asset mix furthered towards equities, with equity proportion rising to 64.9% on QAUM basis. Systematic transactions activity remained robust, with monthly flows in September 2025 reaching INR INR 45.1 billion across over 13 million transactions.
Corresponding number for systematic flows in September 2024 was INR 36.8 billion. We maintained our position as the preferred choice amongst individual investors, with market share of 13.1%. During the quarter, we launched two NFOs: HDFC Innovation Fund, which collected INR 24 billion, and HDFC Diversified Equity All-Cap Active FOF, which collected INR 11 billion. Move to financials now. Revenue from operations came in at INR 10,260 million, a growth of 16% YOI. The reduction in other income was mainly on account of adverse mark-to-market changes. Total expenses were INR 2,464 million, and this includes non-cash charge towards ESOPs and PSUs, adding up to INR 211 million. Operating profit grew by 13% YOI to INR 7,796 million. That is 35 basis points of AUM. Profit after tax is now at INR 7,179 million.
We would like to highlight that the company has reassessed its income tax provision and reversed income tax provision for earlier periods, amounting to INR 468 million, resulting in a lower tax rate for the current quarter. PAT, without this particular reversal, would have been INR 6,711 million. Lastly, the Board of Directors, earlier today, approved a 1:1 bonus share issue. This is, of course, subject to shareholders' approval. Thank you very much for patient hearing. Navneet and Naozad, and I are here to take questions. Nirav, if you can just start lining up questions, please.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press *1 on their touchtone telephone. If you wish to remove yourself from the question queue, you may press *2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press *1 to ask a question. The first question is from the line of Sukhret Patil from Eyesight Fintrade. Please go ahead.
Yes, good evening to the HDFC team. I have a question for Mr. Navneet. Good evening, sir. How are you?
Good evening. All well, thank you. How are you?
Good, good, thanks.
I just want to understand a forward-looking question. As the industry is changing, how do you plan to stay ahead of the game? Will it be through new products or any tech upgrades or deeper client engagements? What is the long-term vision for where the company is going to be heading? Yes, thank you.
Thank you. Over the last 25 years, we have built a significant franchise. You mentioned about the product. I think we have an absolutely best-in-class product bouquet. We have a very long-term performance track record, funds going back 5, 10, 15, 20, 25, 30 years of track record. We have representation across 280 branches, physical offices, as well as absolutely best-in-class digital assets. We have partnerships with hundreds of thousands of distributors, banks, national distributors, MFDs, and of course, our presence on fintech and serving direct customers.
We have 14 million customers that we have been serving. We see tremendous potential for growth in our industry. I think with all of this, what we have put in place over the next several years, along with the pedigree of the HDFC brand, we see tremendous growth. We continue to invest in everything that I have mentioned so far, having the best people across our investment, rest, product, and all other functions. We continue to expand our presence. Over the last two years, we have opened 15 new offices. Fifteen new offices, a large number of them are in what we call in our industry B30 towns, in the smaller towns where penetration is still low, and given our pedigree, brand, and everything else, we see a lot of potential to grow there.
We continue to invest in our digital assets, in our technology to create the best possible experience for our investors and distribution partners. We see a lot of growth apart from the mutual funds where we have been one of the dominant players. We have been investing to grow in the alternative space, in the PMS space, and of course, offering all of this to global institutions who would like to invest in India.
Great, thank you. Just to close on that, just to make all this happen, I just want to understand what are the top two or three things which are focusing right now, which is already in motion.
I think I answered what are the things that we have been doing, but maybe another way to put it is that it may sound very audacious, but we have put a mission for ourselves that is to be the wealth creator for every Indian, to be the wealth creator for every Indian. We serve 14 million investors, but we think we have a long way to go if we have an audacious mission like that. Our vision may sound even more audacious, which is to be the most respected asset manager in the world, to be the most respected asset manager in the world.
For that, I think our entire team won't leave any stone unturned to ensure that we create value for each and every stakeholder, be it our people, be it our shareholders, be it our clients, be it our distribution partners, be all our vendors, ecosystem partners, and society at large. Some of the things are getting covered in the presentation and the other things that we put on our website, but I think we get governed and get inspired by our mission and vision every day.
Okay, great. Thank you very much for the guidance, and I wish you the best of luck for the next Q3.
Thank you so much.
Thank you very much. Next question is from the line of Lalit Deo from Equirus Securities. Please go ahead.
Hi, Sukhdeep. Congratulations on the product developer report. Just one first data-feeding question. This quarter, we are seeing that yields have remained stable. Could you just give us the segment-wise yield? We saw an increase in the other expenses materially during the quarter. What would be the reason for the same? I'll ask you that question later.
Yeah, hi. The equity yield for the quarter was around 58 basis points. The debt yields were around 27, 28 basis points. Liquid, again, has been stable at around 12, 13 basis points. That's the one for the quarter. On the expenses, the other expenses have increased from INR 87 crore to about INR 101 crore on a year-on-year basis, right? That's an increase of about INR 14 crore. Our revenue from operations during this period has increased by INR 139 crore to INR 1,026 crore. This increase in other expense is mainly on account of business promotion and CSR expense. CSR, which is a mandatory spend, contributes largely to this. What was your third question?
No, I think this is good. Now, did you want to add on expense?
Over the last three years, our business has grown significantly across every dimension. You have been seeing the numbers. Our AUM has expanded from INR 4.2 trillion- INR 8.7 trillion, almost doubled. The number of investors has also more than doubled from 6 million- 14.5 million. Our team has grown. You have seen in the presentation from 1,233 people to 1,700 plus now. We have reinforced our culture of ownership through ESOP and PSU grants in 2023 and then 2025. We have talked about it earlier. We have expanded our reach significantly. I mentioned earlier that we have added 15 new offices across the country. We have deepened our presence. We have also made significant strides in digital and technology, which enhances the investor experience and partner experience. We have automated a lot of our internal processes, trying to build a more and more data-driven organization.
During this period, we have launched a large number of new products across both active as well as passive categories. We have diversified our business footprint by setting up our alternative platform. We expanded international business with the establishment of the subsidiary in GIFT City. All of this growth and all of this investment in future, the cost has remained well under control. It is just 11 basis points of AUM, probably makes us one of the most efficient asset managers in the world as far as costs are concerned. I would also like to request that you look at absolute numbers. Our spend for the quarter ended September 2022 was INR 156 crore, and this quarter it is INR 246 crore. So INR 90 crore extra when AUM has doubled and the number of customers have increased 2.4x . The numbers that I gave you earlier.
Seeing in that context, I think we have been running an extremely tight ship. We have been very frugal. We have been very constrained in our spending. At the same time, continue to invest in the future. We have a very optimistic view about the growth trajectory of this industry in India, the potential that we have. Continue to invest. At the same time, remain extremely cost-conscious.
Lalit, that addresses the question?
Yes. Actually, the question I was asking was from a sequential point of view because there was still some one-time, like there seems to be some reason that cost line item, like on a sequential basis. I guess it's a trend.
Yeah, it's again about INR 1,670 crore. Yeah, and it's largely on CSR. Yeah, this promotion and CSR. That's the question.
Right. So just lastly on this, on the distribution side, we are seeing some strong growth from this direct channel point of view. I just wanted to understand whether this would be mostly attributable to the fintech channel only. Is the whole of this growth funneled through the fintech channel, or is it also due to the fact that we have been adding a lot of employees on the sales side? Will that also form a significant proportion of this mix?
Direct includes three things. One is most of the fintechs who bring clients in the direct plan. Number two is the direct clients who may come to our portal or through the app or visit through the branches. Third could be RIA, Registered Investment Advisor, who charge fee from the client while putting money in the direct plan. It's a combination of all three. Over the last couple of years, we have seen significant growth in the fintech as a distribution channel. They've emerged as a vital channel for the mutual fund industry. They've played a significant role in expanding the reach and accessibility for investors. If you look at the last six months or so in the current financial year, they've registered 15 million SIPs. They've become quite big and have built a strong presence among the investors of all cohorts.
We have a very strong presence on leading fintech platforms. We have a notable share both in the new flows as well as SIP registrations.
Sure. Yes. Thank you, sir.
I would add on direct, you need to keep this in mind that it is natural for the share of direct plan to rise gradually over time, also because of the lower total expense ratio of direct plans compared with regular plans. There is a difference between the TER of regular and direct, so to that extent, it will keep inching up every quarter.
Right. Right. Yep. Thank you.
Thank you.
Next question is from the line of Harish Modi from JP Morgan. Please go ahead.
Hi. Thanks for this. The question is more regarding the market share over the next, let's say, 12- 18 months. Fantastic traction over the last three years, as you said, across asset, across customers. How does that extend, let's say, over 12- 18 months purely on market share? If you could break it up between equity and the fixed income and liquid portfolio, that would be great. Thank you.
Sure. The way we monitor at our end is we look at market share across asset classes. We look at market share across our distribution channels, market share across products, market share across geographies. We try our best to optimize or maximize our market share across all of this. Fixed income, which is relatively more institutional, we enjoy best relationships with most of the institutions, family offices, corporates, treasuries, etc. Over a period of time, the idea is that how do we promote fixed income among the individual investors also? Relative participation is less, but we see a lot of opportunities, particularly through the hybrid funds, asset allocation products, etc. On the equity side, overall, we have the full product bouquet, performance track record.
You can see we have been doing very well and, of course, have a long-term track record and continue to work hard on all channels and across all geographies to get the best possible share. Does that answer your question?
Harish, can I request you to unmute your line, please? There is no response. We move on to our next participant. Next question is from the line of Priya Shain from Motilal Oswal. Please go ahead.
Yeah, hi. Just on this expense front again, this business promotion, increase in business promotion sequentially is mainly led by the new scheme launches. Whether that's a sustainable increase, and the CSR, obviously, generally, it's lumpy in nature. Could you highlight as to what are the, what is a sustainable kind of, or a mix of these one-time bumps? What would be the sustainable run rate on the OpEx front?
I would request you to look at OPEX on an overall annual basis. Broadly, we've been discussing this on past calls as well, that between 12% to 15% is what we should expect OPEX to grow. Certain quarters, you may spend. In this quarter, there was also a CSR expense, which is mandatory, and there were some NFOs and a new business promotion, which we spent on. On an annual basis, if you look at the sustainability, on a sustainable basis, 12%- 15% of OPEX is something which we would look at from a growth point of view.
Okay. On the ESOP, we have come down from 14 basis points to 11, and that 11 includes the ESOP cost additional. If you adjust for that, Naozad, it would be 10 basis points.
Yeah, 10 is it.
Yeah.
It's phenomenal, but you know we always want more, right?
More growth or?
Yeah. Both.
That's what we have been delivering for decades. Thank you.
Yeah, absolutely.
Absolutely.
Yeah, the other question was on the, you know, the alternate side of the business. Could you apprise us about, you know, what's the kind of AUMs we've built across alternates, alternate channels, and you know, what's the kind of growth we've seen there? What are the plans going ahead?
Sure. Our alternatives platform has been building traction and continues to grow. We've strengthened our investment capabilities in this space, including bringing on board a dedicated team to drive upcoming AI initiatives and deepen our expertise. We have onboarded a couple more people on the investment side, on the risk side, and product side. Last year, we closed our first Category II AIF, a fund of fund of around INR 1.2 billion, and are now in the market with our Performing Credit Fund, which has seen a promising start to fundraising. We are in the final stage of discussions with a large global investor for participation. Meanwhile, in our PMS business, we are steadily expanding on the strong foundation we have built, looking at both discretionary as well as non-discretionary offerings.
We have strengthened our team again by hiring Ashish, a highly experienced professional who has worked with reputed tech firms and more recently with a top-tier AMC. On the international side, you asked, under our GIFT City platform, at present, we have five active funds, one of which we launched during the last quarter. These are the feeder funds into our mutual funds. Additionally, work is underway for the launch of inbound funds as well as for outbound strategies. In our partnership with UBS Asset Management, both the mandates, India small and mid-cap and India all-cap strategies, where we act as an investment advisor, have gone live a few months back. There is continued distribution and institutional coverage and engagement for both the strategies across geographies. We remain committed to seizing any opportunities to drive growth and strengthen our competitive edge.
Just on this, extending this point, in our five years down the road, do you think that the alternates can be like a 10%, 15% contribution to the overall revenues for HDFC AMC?
I wouldn't give that forward-looking statement. All I can say is that we are putting a very solid foundation, and whatever it takes, the best-in-class investment capability, best-in-class risk management capability, product capability, we are putting. We have the distribution might, which you all are aware of. We enjoy a great brand, HDFC, where the comfort of both individual investors, which include HNIs, ultra HNIs, family offices, etc., and on the other side, institutions, both domestic and global, have deep comfort with. We remain quite optimistic in terms of our journey on the alternatives. We believe that being part of the HDFC group, we have tremendous responsibility on our shoulders to ensure that the whole alternative industry in India, the whole ecosystem, develops well.
Our team members also spend a lot of time engaging with various stakeholders to ensure that over the next several years, as the alternative industry grows, we play a leadership role the way we have done on the mutual fund industry side. We are reaping the benefit today the way industry has grown. We remain very optimistic on the alternative side as well.
I have just last bit on last bit. When we talk about costs also, there will be some burn right now going into alternates business. Is there a way to quantify it where you can highlight that, okay, so far the alternate business is running at an annualized cost of INR X? That will help us understand the profitability of the core business as well.
You're calling it burn. I'm calling it probably one of the best investments we are making in the future.
Absolutely. All right, sir. Thank you so much.
Thank you.
Thank you very much. Next question is from the line of Madhukar Ladda from New Amba Wealth. Please go ahead.
Hi, sir. Thank you for taking my question. One on net inflow market share. Reverse calculations suggest that you continue to do quite well over there. Maybe, if you could add some color, what is driving that and some trends on that, that would be helpful. Second, the admin and other OpEx has gone up. Can you quantify any one-time expense over here? When you give a guidance of about 12% to 14-15% increase year over year, that would also include any NFO-related expenses, right? The right way to look at it would be last year's number plus 12%- 14%, whatever that number comes. That would include everything, or will there be some one-time NFO or any other related expenses? Some clarity on that, that would be helpful. Thanks.
I mean, we have continuously been investing on many things that I mentioned before. We had two NFOs, and both were quite successful. One fund of fund, and one was the HDFC Innovation Fund. Probably it was, if I think correctly, the largest NFO of the quarter. The HDFC Diversified Equity All-Cap Active Fund of Fund (FOF), which has also kind of got good response from our investors and distributors. Those were the NFOs during the quarter where some bit of spending would have gone. Otherwise, as Naozad Sirwalla mentioned earlier, it's on account of higher CSR expense, a bit of other business promotion, and the general business-related expense. Your first question was on.
On the net inflow market share.
The net inflow, we don't share. There is so much information already there.
Yeah, no, but.
From a trend perspective, I mentioned that I think the engagement with distributors has been great. We keep trying to maximize our share with each and every one of them. Work at, like I mentioned earlier, every asset class, every product, every geography, every channel partner, and of course, on the direct side. Continue to kind of work on maximizing our share.
A lot of the market in general is positively surprised with the strength of the SIP numbers despite, you know, now one-year returns not being that attractive. Normally, what I've heard from a lot of companies and also distributors is, when one-year sort of returns are not that good, that's when SIP numbers can get weak. I wanted to get your comments on this. As analysts, what should we look at and what's driving this trend?
Yeah. If we look at the SIP book today at over INR 290 billion, it was INR 40 billion in 2017 or so. Over a period of time, it has steadily been increasing. I mentioned this before that there are many factors at play. First and foremost is the long-term track record. Now investors can go back and see last 20, 25. I mean, some of HDFC funds have a track record of 30 years and can go back and see across cycles how funds have delivered. Second is the transparency. I think over the years, thanks to the efforts made by the regulator as well as the industry at large, all of us have worked very hard to build more transparency, more trust in the product. Third, I would say technology has played a big role.
We have doubled our unique investors in the last two, two and a half years. That wouldn't have been possible but for the technology. Fourth, last but not the least, is the effort that all of us are putting on investor education, the efforts made by AMFI collectively for collaboratively that we do as an industry. Each one of us within the industry, the efforts we have been making to reach out to a larger number of investors, conveying the message of long-term investing, power of compounding, don't get swayed by the volatility, invest for the long term, invest for your goals, so on and so forth, the importance of asset allocation. The steady increase we are seeing in SIPs reflects the growing maturity and the long-term orientation of investors that Simal also talked about earlier.
On that part, I'm very optimistic that over a period of time, there is potential for it to increase. There would be some cyclicality. We have seen that before, and maybe month to month or quarter to quarter, some bit of volatility in flows. The heartening feature of flows is an increasing amount coming through the monthly SIP. Number of accounts also, you should notice, they've also been growing quarter after quarter.
Understood, sir. Thank you and all the best.
Thanks, sir. Thank you.
Thank you. Next question is from the line of Mohit Mangal from Centrum Broking. Please go ahead.
Yeah, yeah. Thanks for the opportunity. My first question is towards the B30. Last month, you know, SEBI reintroduced new incentives for B30. How do you see this? Maybe if you can quantify if there's any sizable impact on our top line because of that going forward.
Yeah. We are yet to get the final guidelines on that, and in what manner and what shape it will be implemented. We heartily welcome SEBI's guidance on that, to increase both the number of women investors as well as new investors from B30 towns. In fact, over the last couple of years, we have seen greater traction and flows, particularly in the form of SIPs coming in from B30 towns. We remain fully prepared, both in terms of our physical presence there and being part of HDFC Group, our brand, and the overall ability to make the most of it as and when the opportunity arises to do something more with our distribution partners.
Understood. It's not still in practice, you mean?
Not yet.
Okay. Our second question is towards the investment book. I was looking at your press release, and your investment book actually declined in September 2025 as compared to March. What could be the reason for that?
We paid the dividend out in June, right?
Gotcha. Okay. Understood. Our last question is about the NFO. You said, you know, we launched on two NFOs, basically. What is the pipeline? We do have a comprehensive product bouquet, but do we have any pipeline for the future?
The current product lineup is more or less complete given the SEBI classification and within that, the products that are allowed. While I've said before also that our portfolio is largely complete, opportunities continue to emerge whenever we see the right fit for the customer, such as the recently launched HDFC Innovation Fund, where we saw very good interest and got INR 24 billion in the NFO. It was the largest equity-oriented NFO in the quarter. We also launched a fund of fund, which was HDFC Diversified Equity All-Cap Active FOF that raised INR 11 billion. On the passive side, we have launched a lot of products, but we'll be on the lookout if there is any more opportunity on that. I would mention that many of our existing funds have plenty of room to grow. Our focus is on strengthening their position and scale. I'll give you one example.
If you look at our value fund, that is an AUM of around INR 7,000 crore. It's not yet in the top five of its category, even though it has a very strong long-term track record. There is significant potential to move it into a leadership position. At the same time, our teams are scanning the market for new opportunities. I've always mentioned that at our end, new product offer is always guided by what our investment team believes in, rather than what's selling in the market and what's the latest fad. We actually look at what's the best fit for the investor and the belief and conviction and capability of the investment team on the other side.
Right. My last question is that, you know, I mean, we always maintain that HDFC Bank's flow market share is higher than the book market share. That even continued this quarter as well, right?
First, just to clarify, the pie chart that you see represents how our AUM is distributed across all channels. That includes direct, MFD, ND, banks. It does not indicate market share in any channel. It's possible for one channel to grow at a faster pace than another. While our overall market share across both remains unchanged, the HDFC Group continues to play an important role in our growth, and we have a healthy flow share from them. They are a force to reckon with in distribution. They remain a key partner for us, and we see a lot of opportunity to further deepen and expand this relationship. Our major focus with the bank has been on the SIPs, penetration of SIPs among their clients, and it's yielding encouraging results. Market share in the new SIP is higher than our book share substantially.
There is strong intent to build tighter alignment and have greater collaboration across various touchpoints between HDFC Bank and us.
Understood. Thanks, and wish you all the best.
Thank you.
Thank you. Next question is from the line of Dipanjan Ghosh from Citi. Please go ahead.
Hi, good evening, sir. Just one or two questions.
Good evening.
Yeah. Two questions from my side. First, if you look at across channels, obviously, your market share has been holding up well on the active equity side across most of the channels. If you were to kind of look at, let's say, the past 12 months or 18 months, has the trajectory of improvement or a shift in your market share across all the channels been similar, or do you feel there are one or two channels where you can probably kind of scale up a bit more? If so, what would be the strategy around it? The second question is more on the cost side of things. I just wanted to, again, get some color on, in terms of currently building capabilities on the alternate side or even on your investment management team on the mutual fund business or expanding on sales capabilities.
How should one think of incremental employee additions over the next, let's say, two to three years?
Incremental employee addition has been, you mentioned about the people that we have hired on the alternative side, on the international side, in our digital and tech capabilities. Of course, a larger number would be in sales and client service apart from investments. On the expense side, I mentioned, all of these investments, whether in increase in people, whether in the increase in number of offices, whether in building more capability on the alternative PMS AIF side, we've got six investment professionals on the VCP side and six on the credit side. We have built like having capabilities across the board. All of this is already part of the cost structure that you are seeing. I mentioned earlier that ESOP is, I mean, we remain fully committed to retaining the best talent.
You have seen recently the new ESOP and PSU initiatives, in addition to several ESOP programs we have implemented in the past. That cost is also part of the overall cost that you are seeing.
It depends on large amount of heavy lifting has already been done in terms of investment side of things.
On the channel share, yeah, we have healthy across the board, whether it's MFDs, whether it's NDs, whether it's banks, which includes HDFC Bank and Direct and FinTech. Of course, some of the banks which either have a closed architecture or a guided architecture, our market share wouldn't be higher relative to their own AMCs. Otherwise, yeah, we enjoy healthy share across all channels. Of course, aspiration is always to get more.
Got it. Thank you, everyone, and all the best.
Thank you.
Thank you.
Thank you. Next question is from the line of Abhijit Sakare from Codex Securities. Please go ahead.
Hi. Good evening, everyone. I have a question on the yields. If I go back to your comments from the last couple of quarters, it looks like the equity yields have kind of stayed at those levels around 58. If I look at the equity AUM growth, for example, let's say from March till now, it's like almost 15% odd. I'm just trying to understand, between, let's say, commission cuts implemented last year versus the telescopic repricing, how do we understand this movement over the last six odd months?
That rationalization has clearly helped us in reducing the impact of telescoping pricing. Margin compression from telescopic pricing is inevitable and remains an industry reality. We recognize that TER will structurally trend lower over time, and we factor that into our pricing decisions on the new flows. I must mention this, Abhijit, that one metric that I keep a particularly close eye on is our operating margin. We have typically operated in the 33, 35 basis point range, and the objective is to stay within that corridor, though that's not always straightforward. You have seen a significant increase in the equity AUM due to MTM as well as flows. What happens is that asset mix improves with higher equity AUM.
There is an impact on the equity margin, but the asset mix improves, and we are able to rationalize on the cost side in terms of cost as a basis point of AUM. The operating margin we have been able to maintain in that range. Also, I should mention we don't view margin in isolation. It's simply an outcome. The real focus is on expanding absolute profitability. I assume you would agree that that's where our real focus has to be.
Got it, sir. Sorry, one clarification. Would it be fair to say that the entire commission cuts were fully absorbed by the March quarter, or some of it has flowed through in the first half of this year as well?
No, it will be there every quarter, right, Abhijit, in the sense we cut it in August last year, right? Basically, the numbers are rationalized last year. Numbers from there on have been rebased. See, what you've seen is, I think Navneet touched upon, right, between March and now when you're talking about increasing equity AUM, but the asset mix also has got tilted in favor of equity further out from 63%- 64%. That has kind of kept the revenue margins at that 58% kind of a number.
Okay. I'll revisit this later. Just one smaller number question. This employees' cost of about INR 124 crore, fair to assume that this is more or less like the base for the rest of the year or the quarter?
Abhijit, we had disclosed in the previous quarter, since we did our issuance of ESOPs in the June quarter, there is a particular amount of Black-Scholes amortization that will happen, right, in the books. We had given out those numbers in our previous call, which should be in addition to the normal employee cost. This is a one-time non-cash amortization of Black-Scholes cost. If you want, I can just give you the broad numbers again. The non-cash expense on account of ESOPs only, I'm talking for the second half of this year, would be around INR 42 crore. For FY 2027, we think it's about INR 67 crore. For FY 2028, INR 53 crore, then it tails off. FY 2029, about INR 33 crore, and it tails off after that. These are, again, broad numbers.
A lot of things go into this, but this is the broad amortization non-cash expense on account of stock options.
Got it. Thanks for that. That's from my side. Thank you so much.
Thank you.
Thank you. Next question is from the line of Ranveer Singh from Yash V Securities. Please go ahead.
Hello, sir.
Hi.
Hello.
Yeah. I just wanted to understand, does the yield of the AMC differ if someone subscribes for a direct plan versus a regular plan?
The margin is.
Management fees remain the same.
Sir, pardon, I couldn't hear you.
Management fees are the same whether you come in for the direct plan or the regular plan.
Okay, sir. My next question is, like, say, for example, a hybrid fund which has 60% in equity and 40% in debt. To think of the yield, would this be the right approach that we think 60% of 58 basis points and 40% of 28 basis points would be the blended yield for that product?
Anything above 65, so equity-oriented hybrid funds, the fee structure is aligned with that of equity schemes. When you look at hybrid, equity-oriented hybrid, it will be at 58 basis points.
Which minimum 65% equity.
Yeah.
Okay, sir. This is the last question. The non-cash expense ESOP, you said, it's INR 42 crore for this year. How much of it has already come to a P&L account?
I'm talking about the second half.
Oh, for the second half. Okay, sir. Okay, thank you. Happy Diwali.
Happy Diwali.
Thank you.
Thank you. Next question is from the line of Vinod Rajmani from Nirmal Bang. Please go ahead.
Thank you for the opportunity. Most of my questions have been answered, but I just wanted to know what is the philosophy around the new SIP plans which, you know, many AMCs are planning to launch? I mean, what kind of timeline do we have in case we are also planning to go down that path? What kind of yields could that benefit for us?
We already have approvals in place for launch of SIF. We want to be full-service providers across categories, say, active, passive, alternatives, and even the newer categories as they emerge. We are watching this space closely and will decide on how we want to progress on this front. The team here is evaluating all possible options and products that can be well-suited for our client segment. You will hear more from us on this front going forward.
Okay. Yeah. Thank you.
Thank you. As there are no further questions, I'll now hand the conference over to Mr. Navneet Munot for closing comments.
Thank you. In summary, while equity markets softened in Q2 FY 2026, the mutual fund industry continued to demonstrate resilience, supported by record SIP flows and steady equity funding flows. I salute the resilience and maturity of Indian investors, supported by distribution and advisory partners. HDFC AMC's AUM stood at INR 8.7 trillion with a steady market share. We remained the most preferred choice among individual investors with a market share of 13.1%. Our investor base reached 14.5 million unique investors. That represents a healthy 25% penetration. That's on the mutual fund side, and we have been progressing very well on our initiatives in PMS and alternatives and international business. We are wishing you and your loved ones a very happy Diwali and a prosperous New Year ahead. Thank you for your time today.
Thank you very much. On behalf of HDFC Asset Management Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect the lines. Thank you.