Mutual fund companies post stronger Q1 profits as markets rebound, but core earnings lag
Key Takeaways
- •Higher equity markets helped mutual fund companies grow assets under management and support revenue in the June quarter.
- •Reported profit gains were largely driven by treasury and investment portfolio gains rather than stronger core operations.
- •Operating profit trends were mixed across the sector, with some companies posting strong growth and others seeing little change or declines.
- •Other income rose sharply for several AMCs compared with the previous period, providing a major boost to earnings.
- •FY26 valuation multiples remained elevated across the sector, ranging from 25x to 46x.
Mutual fund companies post stronger Q1 profits as markets rebound, but core earnings lag
India’s listed mutual fund companies reported a strong June quarter, with higher profits supported by a rebound in equity markets. However, a closer look shows that much of the earnings improvement came from gains on investment portfolios rather than a material improvement in core fund management operations.
The June quarter largely matched Street expectations. Higher markets supported assets under management (AUM) growth, revenue yields remained resilient despite concerns around TER and BER, and treasury gains helped drive a sharp recovery in reported profits. That mix matters for the sector because listed AMCs typically trade on a blend of steady fee income and market-linked sentiment, so earnings can improve even when the underlying business sees only a modest change in operating momentum.
Across the sector, AUM growth on a quarter-on-quarter basis included gains of 3.7%, 1.1%, 1.1%, 1.0%, and 0.8%, while one company reported a decline of 1.9%. Revenue growth and operating profit growth were more mixed. Revenue rose 4.6% in one case, while others posted 0.6%, 1.0%, 3.8%, and 1.0%. Operating profit changes included 34.4%, 25.5%, 30.8%, and 20.7% gains in some cases, but also a 3.0% decline and a 0.2% rise in another.
The broader takeaway was that higher markets supported revenues, but that did not translate into a proportionate improvement in operating earnings. Reported profit growth across the sector was largely driven by treasury gains rather than a sharp improvement in core operations.
Other income provided a major boost. One AMC reported other income of Rs 263 crore versus Rs 12 crore previously. Other companies posted Rs 181 crore versus a Rs 90 crore loss, Rs 170 crore versus a Rs 34 crore loss, Rs 162 crore versus a Rs 33 crore loss, Rs 30 crore versus a Rs 10 crore loss, and Rs 187 crore versus Rs 175 crore loss. For readers tracking the next quarter, this makes the composition of earnings important: the key question is whether higher market levels continue to support AUM and fee income, or whether reported profit growth moderates if treasury gains are less pronounced.
Systematic flows on a quarter-on-quarter basis were mixed, with changes of 1.5%, -1.4%, -4.5%, -5.0%, -5.0%, and -9.9%.
Valuations also remained elevated. FY26 price-to-earnings multiples stood at 46x, 40x, 39x, 29x, 29x, and 25x.
The earnings season therefore confirmed a familiar pattern: higher markets lifted AUM and helped revenues, but the main support to profit growth came from treasury gains rather than a decisive improvement in the underlying fund management business.
