Motilal Oswal Financial Services

Sector Update | 19 May 2025

Financials - AMC

Rising share of direct plans; AMCs continue to benefit

Share of direct in Equity AAUM (%)

Share of direct in equity AAUM (%)

Our top picks: HDFC AMC and Nippon AMC



Trends in Direct plan route in the

B30 cities (%)

Share of Direct in B30 based on

Overall AUM

Share of Direct in B30 based on Equity

AUM



The direct channel in India’s mutual fund industry has shown a clear trend of steady

growth, marked by increased adoption across investor segments, particularly among

corporates, high-net-worth individuals (HNIs), and a growing number of younger

investors.

As of Mar’25, assets under management (AUM) via direct plans accounted for 30% of

the total industry equity AAUM, up from 21% in Mar’20. This growth signals a shift

toward cost-efficient investing, especially among financially savvy investor segments.

Corporates remain the largest contributors to direct AUM, making up 61% of this

channel, followed by HNIs and retail investors. In contrast, regular plans continue to

be the preferred route for most retail and HNI investors, underscoring their reliance

on intermediaries such as distributors and advisors.

While direct plans are gaining traction, they still exhibit shorter holding periods

compared to regular plans. As of Mar’24, only ~7.7% of direct plan investments had a

holding period of over five years vs. ~21.2% in regular plans. Among SIPs, this gap is

evident as well—~23.0% of regular plan SIP AUM had been held for over five years,

compared to just ~12.4% for direct SIPs. This suggests that while the direct channel is

expanding, long-term investment discipline is still more prevalent among guided

investors using regular plans.

Interestingly, the younger age groups (18-34 years) are increasingly opting for direct

SIP investments, reflecting growing digital literacy and self-driven financial decision-

making. Their share of direct SIP AUM rose to 23.6% in Mar’24 from 20.1% in Mar’19.

Women are increasingly opting for direct mutual fund investments (20.3% in Mar’24

vs. 14.2% in Mar’19), especially younger investors. Their share in direct SIP AUM has

grown, driven by rising financial awareness and digital adoption. This marks a shift

toward more independent, cost-effective investing.

AMCs are taking measures to maintain a balanced approach that caters to both self-

directed investors and those seeking advisory services through regular plans.

For AMCs, the adoption of the direct route has led to strong inflow growth. On the

other hand, distributor-led models such as Prudent will face challenges. HDFC AMC

and Nippon AMC are our top picks, while we have a Neutral rating on Prudent

Corporate.

Holding period as on Mar’25

< 1 year

1-5 years

> 5 years

Growth catalysts for direct plans



Platforms like Groww and Zerodha have democratized access to mutual fund

investing with easy, commission-free direct plans, attracting a wave of first-time

investors.

Lower expense ratios in direct plans enhance long-term returns by minimizing

costs, thereby allowing greater capital compounding over extended investment

horizons. For e.g., based on 5-year CAGR returns, 1) the SBI Blue-chip direct plan

gave 0.85% higher returns than the regular plan, 2) the HDFC Large Cap Fund

direct plan gave 0.69% higher returns than the regular plan.

The younger generation has led the shift, with SIP AUM growing 2.6x over five

years, reflecting growing confidence in self-managed investing, supported by

fintech platforms and financial awareness.

Research Analyst: Prayesh Jain

(Prayesh.Jain@MotilalOswal.com) |

Nitin Aggarwal

(Nitin.Aggarwal@MotilalOswal.com)

Research Analyst: Kartikeya Mohata

(Kartikeya.Mohata@MotilalOswal.com) |

Muskan Chopra

(Muskan.Chopra@MotilalOswal.com)

Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.

Investors are advised to refer through important disclosures made at the last page of the Research Report.

Financials - AMC



Passive investment products (index funds and ETFs) are increasingly being

purchased via direct plans (~73.1% of index fund AUM as of Mar’24).

Corporate entities continue to be the largest contributors to direct plan AUM,

holding a 61% share. For corporates, direct plans are a cost-effective way to

manage treasury investments without the need for intermediaries.

As of Mar’24, ~90% of mutual fund transactions were conducted digitally vs.

~79% in FY19. E-KYC, user-friendly apps, and seamless online onboarding have

made investing through direct plans easier and more accessible than ever

before.

Share of direct plan on an uptick



The SEBI’s mandate in Sep’12, directing mutual fund houses to offer direct plans

alongside distributor-led options, marked a pivotal shift in the industry, serving

as the foundation for the subsequent growth of direct investing, which began

with the launch of direct plans in Jan’13.

The share of direct plans in the total equity AAUM of the mutual fund industry

increased to 30% in Mar’25 from 21% in Mar’20, with the contribution from B-

30 locations rising to 22% in Mar’25 from 14% in Mar’20.

Exhibit 2: Share of direct in Equity AAUM (%)

Share of direct in equity AAUM (%)

Exhibit 1: Share of direct in Overall AAUM (%)

Share of direct in overall AAUM (%)

Source: AMFI, MOFSL

Exhibit 3: Share of direct in B30 based on Overall AAUM

Share of direct in B30 based on Overall AUM

Exhibit 4: Share of direct in B30 based on Equity AAUM

Share of direct in B30 based on Equity AUM

Source: AMFI, MOFSL

19 May 2025

Financials - AMC

Diverging preferences between direct and regular plans



Exhibit 5: Direct plan AUM total bifurcation

Retail Investor

16%

17%

70%

Trends in the direct total AAUM plans indicated that corporate investors

occupied a dominant position with a 61% share of the total direct plan AUM,

followed by HNIs at 20% and retail investors at 15% as of Mar’25. In Equity

AAUM direct category, the retail segment dominated at 39%, followed by HNIs

at 35%.

In the regular plan category, HNIs accounted for the largest share (46%),

followed by retail investors (37%) and corporate investors (17%) as of Mar’25.

The preference for regular plans, particularly among HNIs and retail investors,

implies a continued reliance on intermediaries such as advisors or distributors.

For Equity AAUM, the retail segment constituted 47%, followed by HNIs.

However, when focusing solely on individual investors (HNIs, retail, and NRIs), a

different trend emerges. HNIs show a higher preference for direct plans,

leveraging their financial awareness (20% in Mar’25 vs. 16% in Mar’20).

Nevertheless, a significant portion of their investments still remains in regular

plans, reflecting a continued reliance on intermediaries.

Retail investors, on the other hand, have a higher allocation in regular plans,

highlighting their ongoing dependence on advisors and distributors. This

suggests that while cost-effective investing is gaining traction, many retail

investors still prefer the ease of access and guidance provided by

intermediaries.

Corporates

19%

High Networth Individuals

20%

62%

21%

60%

Others

20%

60%

20%

61%

72%

73%

67%

63%

Mar-20

Mar-21

Mar-22

11%

Mar-23

14%

Mar-24

14%

Jun-24

15%

Sept-24

15%

Dec'24

15%

Mar'25

Source: AMFI, MOFSL

Exhibit 6: Regular plan AUM total bifurcation

Retail Investor

47%

22%

30%

Mar-20

45%

21%

34%

Mar-21

44%

20%

35%

Mar-22

Corporates

45%

19%

36%

Mar-23

High Networth Individuals

45%

17%

38%

Mar-24

45%

17%

38%

Jun-24

46%

16%

38%

Sept-24

Others

46%

16%

38%

Dec'24

46%

17%

37%

Mar'25

Source: AMFI, MOFSL

19 May 2025

Financials - AMC

Deepening reach beyond T30



Over the past few years, mutual fund investments in India’s B30 (beyond top 30)

cities have witnessed a significant structural evolution, transforming from

nascent participation into a key growth driver for the industry, underpinned by a

combination of targeted investor education, rising digital penetration, and the

growing financial aspirations of a younger, tech-savvy demographic.

AMFI’s continuous efforts to highlight mutual funds as a retail-friendly product

with options for all income groups have helped bridge the gap between urban

and rural investors.

A strong preference for equity-oriented schemes (86%), increasing adoption of

direct plans, and deeper engagement from first-time and women investors

(28%) further underscore the momentum.

B30 AUM rose to INR12.2t by Mar’25 (18%) from INR3.9t in Mar’20,

representing a 26% CAGR. Equity AUM in B30 cities saw a robust CAGR of 37%,

increasing to INR9.3t from INR1.9t in Mar’20.

Between Mar’23 and Jan’25, the mutual fund investor base in B30 cities grew

significantly from ~10.3m to ~20.8m, clocking a CAGR of 36%. In contrast, T30

cities have seen a 22% CAGR during the same period, indicating a faster

adoption of mutual fund investments in emerging cities.

(https://tinyurl.com/3adkh5yk).

Systematic investment plans (SIPs) have witnessed increased traction in B30

cities. The share of B30 locations in new SIP registrations rose to 56% in FY25

(up to Jan’25) from 49% in FY23 (https://tinyurl.com/3adkh5yk), while in direct

plans, it rose to 49% from 33% during FY23-25.

As distribution models evolve and fintechs continue to democratize access, B30

cities are fast becoming the next frontier of retail mutual fund expansion in

India.

Exhibit 8: Share of B30 in total Equity AAUM (%)

18.2%

B30 share in total Equity AUM (%)

24.6%

23.1%

24.8%

25.0%

25.3%

25.8%

Exhibit 7: Share of B30 in total AAUM (%)

B30 share in total AUM (%)

17.9%

16.3%

15.6%

16.6%

17.1%

Mar'20

Mar'21

Mar'22

Mar'23

Mar'24

Mar'25

Mar'20

Mar'21

Mar'22

Mar'23

Mar'24

Mar'25

Source: AMFI, MOFSL

19 May 2025

Financials - AMC

Exhibit 9: Diversification of New SIP count across B30 cities (%)

New SIP count contribution from B30 (%)

Top 10

B30 cities

Next 25

B30 cities

Next 50

B30 cities

Remaining 100

Other smaller

towns

Source: Industry, MOFSL

Exhibit 10: Trends in direct plan route in B30 cities (%)

Share of Direct in B30 based on Overall AUM

Share of Direct in B30 based on Equity AUM

14.4%

7.3%

16.1%

7.3%

18.2%

7.8%

19.7%

8.7%

20.5%

9.6%

20.8%

10.1%

21.4%

10.6%

21.8%

10.8%

22.0%

10.7%

Source: AMFI, MOFSL

Exhibit 11: AUM distribution among B30 investors (%)

AUM distribution amongst B30 investors

> INR10m

INR2.5m-10m

INR1m-2.5m

INR0.5m-1m

INR0.1m-0.5m

INR0.05m-0.1m

INR0.01-0.05m

Below INR0.01m

0.3%

2.0%

5.0%

6.0%

22.0%

10.0%

21.0%

32.0%

Exhibit 12: Age group bifurcation in B30 cities (%)

above 60

51-60

41-50

31-40

20-30

below 20

10%

15%

20%

25%

30%

35%

26%

10%

17%

30%

Age group

0.0% 5.0% 10.0%15.0%20.0%25.0%30.0%35.0%

Source: Industry, MOFSL

Regular plan investors hold on to investments for longer period



Recent data from the AMFI-CRISIL Fact book - Mar’24

(https://tinyurl.com/2s3afecc) highlights a notable trend -- regular plan

investors (guided by mutual fund distributors or registered investment advisors)

tend to maintain their investments for longer periods compared to direct plan

investors.

The data shows that ~15.7% of total MF AUM stayed invested for over five years

in Mar’24 vs. ~6.5% in Mar’19, with the share of regular investments with more

than five years of holding period at 21.2% vs. 7.7% in direct plans in Mar’24.

Further, in case of regular and direct SIP AUM, 23% of investments through

regular plans have a holding period of more than five years compared to 12.4%

of the AUM through direct plans.

19 May 2025

Financials - AMC



This trend underscores the role of professional guidance in fostering long-term

investment discipline. Investors working with advisors are more likely to stay

invested through market fluctuations, benefiting from the compounding effect

over-time. In contrast, direct plan investors, managing their portfolios

independently, may be more susceptible to short-term market movements,

leading to earlier redemptions.

Exhibit 13: Holding period table in % in Mar’19

< 1 year

59.9%

38.8%

43.0%

47.3%

1-5 years

53.9%

43.1%

> 5 years

45.5%

41.4%

13.0%

1.3%

Industry AUM-Direct

9.7%

Industry AUM-Regular

3.0%

Direct SIP AUM

Regular SIP AUM

Source: Industry, MOFSL

Exhibit 14: Holding period table in % in Mar’25

< 1 year

51.4%

40.9%

29.8%

21.2%

7.7%

Industry AUM-Direct

Industry AUM-Regular

12.4%

49.0%

33.8%

1-5 years

> 5 years

53.8%

50.4%

26.6%

23.0%

Direct SIP AUM

Regular SIP AUM

Source: Industry, MOFSL

~ 21% of women’s MF assets invested via direct plans



AUM held by women investors in the mutual fund industry more than doubled

to INR11.3t in Mar’24 from INR4.6t in Mar’19. Women now account for about

33% of the total AUM contributed by individual investors—a proportion that has

remained largely stable over the five-year period ending Mar’24.

This growth can be attributed to stable efforts by the Association of Mutual

Funds in India (AMFI), whose initiatives and awareness campaigns have played a

pivotal role in enhancing financial literacy and empowering women to make

informed investment decisions.

An analysis of the investment patterns shows that a significant majority of

women’s AUM continues to be held in regular plans, which accounted for

~79.7% as of Mar’24. However, this marks a decline from ~85.8% in Mar’19,

indicating a gradual shift toward direct plans. The share of direct plans rose to

20.3% in Mar’24 from 14.2% in Mar’19.

A breakdown of AUM by age brackets reveals a shift in preference for direct

among all age groups.

19 May 2025

Financials - AMC

Exhibit 15: Movement toward direct plans across all age groups of women

Mar-19

83.8%

78.5%

84.0%

Mar-19

Mar-24

86.9%

72.7%

Mar-24

82.9%

86.1%

82.4%

16.2%

21.5%

16.0%

27.3%

13.1%

45-58 years

17.1%

13.9%

17.6%

Below 25 years

25-44 years

Above 58 years

Source: AMFI, MOFSL

Distributor business intact despite structural headwinds



Distributors in the mutual fund industry face rising headwinds amid shifting

investor behavior toward direct plans. The growing preference for direct plans,

especially among younger and tech-savvy investors, is eroding their market

share.

At the same time, reduced margins due to lowering of commissions by AMCs

(HDFC AMC and Nippon AMC have cut in the recent past) and increasing

compliance requirements are squeezing profitability. Many also struggle to

match the seamless digital experience offered by fintech platforms.

Despite the rise of direct plans, distributors continue to play a crucial role,

especially in guiding new investors and those from non-metro regions. The

industry on-boarded a net of 0.18m individual distributors in FY25 (45% of which

are located in B30 cities).

Distributors are increasingly adopting hybrid models, combining digital tools

with personalized advisory services to cater to diverse investor needs.

Exhibit 16: Ranking of distributors based on average AUM of FY24

1,738

1,610

1,192

743

698

626

557

461

299

283

INRb

Source: Industry, MOFSL

19 May 2025

Financials - AMC

Exhibit 17: Ranking of distributors based on gross revenue of FY24

1,882

1,039

790

736

INRb

597

521

400

324

291

169

Source: Industry, MOFSL

Prudent: Position remains intact despite changing industry trends



Despite a structural shift toward direct investments and the rise of fintech

platforms, Prudent has maintained strong AUM growth and distribution channel

by 1) leveraging a B2B2C model, 2) enhancing its digital infrastructure platform

by offering tools, insights, and seamless execution, 3) expanding its reach to B30

cities where investors still prefer advisor-led engagement, 4) providing value-

added services such as offering trainings, compliance support and portfolio

analysis to IFAs beyond just being a distributor leading to stickiness, and 5)

diversifying the product suite by focusing on non-MF products such as

insurance, PMS/AIF and loans, positioned it well to navigate the evolving mutual

fund distribution environment in India and maintaining its market share.

This approach has enabled the company to continue growing its commission

income and AUM, even as traditional distributors face increasing pressure from

direct investment channels.

Exhibit 19: Prudent sharing commission (%)

Prudent sharing commission (%)

29,605

33,308

Non-Bank Rank of Prudent

4.0

3.0

2.0

Exhibit 18: Trend in number of MFDs added

No. of MFDs

23,763

11,620

14,007

16,853

26,949

FY19

FY20

FY21

FY22

FY23

FY24

FY25

FY17

FY18

FY19

FY20

FY21

FY22

FY23

FY24

Source: MOFSL, Company

19 May 2025

Financials - AMC

Exhibit 20: Peer comparisons based on revenue and AUM

Source: MOFSL, Company

NJ Wealth: Strategic responses to structural changes



NJ Wealth, India's one of the largest non-banking mutual fund distributors in the

financial services industry with a wide presence across India, offering a

comprehensive platform with a wide choice of products and solutions catering

to their investment needs.

Its strategic responses to the shifting preferences of investors toward direct

plans include 1) providing comprehensive training and support to ensure their

distributors can offer personalized advisory services, 2) enhancing its platforms

to offer online onboarding, seamless transactions, and real-time portfolio

tracking, 3) venturing into asset management business by introducing rule-

based investment products, and 4) creating financial and educating investors via

their flagship program, FLAP (Financial Literacy Awareness Program).

Measures taken by AMCs with respect to changing investor preferences



In response to the structural shift in the MF space toward direct plans, AMCs in

India have taken strategic steps to strengthen their presence in the growing

direct space.

With more investors seeking low-cost, self-directed investment options, AMCs

have significantly enhanced their digital platforms enabling seamless on-

boarding, real-time portfolio access, and direct transactions through their

websites and apps.

Many have also introduced rule-based and thematic investment products

tailored for informed, tech-savvy investors. To further empower these

individuals, AMCs are investing in financial literacy through webinars, investor

awareness campaigns, and online tools.

19 May 2025

Financials - AMC



Additionally, AMCs are forging partnerships with fintech platforms to expand

their reach and improve service delivery. Together, these moves reflect a

deliberate shift to future-proofing their business models while meeting the

evolving preferences of a new generation of investors.

With regard to regular plans, AMCs are responding by adjusting commission

structures, investing in digital platforms, and providing support to distributors to

navigate this evolving landscape. These measures aim to maintain a balanced

approach that caters to both self-directed investors and those seeking advisory

services through regular plans.

Measures taken by listed AMCs with regard to commission rationalizing



HDFC AMC

last undertook rationalization of distributor commissions in Aug’24.

This move involved a one-time reduction in commissions across its top 10-12

equity schemes, aimed at aligning with the impact of lower total expense ratios

(TERs). Notably, there were no further changes to distributor payouts.

Nippon India AMC

has revamped its distributor commission structure to align

with evolving industry norms and regulatory guidelines. The key change involves

transitioning from an upfront commission model to a trail-based structure,

wherein distributors earn a percentage of AUM for as long as the investor

remains invested through them. This change is designed to promote long-term

investor engagement by aligning distributor incentives with sustained investor

outcomes.

ABSL AMC

reduced commission payouts while ensuring distributor

engagement. It has stated that it will not completely eliminate commissions but

will implement measures to optimize them, including 1) focusing on B30

markets, 2) promoting direct plans, 3) motivating distributors to achieve higher

sales and AUM targets, and 4) leveraging technology.

UTI AMC:

With respect to distributor commissions, a six-month cool-off period

has been introduced following the transfer of client assets to a new distributor.

During this period, the new distributor will not be eligible to receive trail

commissions. Additionally, the trail commission rate payable to the new

distributor will be lower than the original distributor's rate, even after the

portfolio is transferred.

Investment in securities market are subject to market risks. Read all the related documents carefully before investing

19 May 2025

Financials - AMC

Explanation of Investment Rating

Investment Rating

BUY

SELL

NEUTRAL

UNDER REVIEW

NOT RATED

*In case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall be within following

30 days take appropriate measures to make the recommendation consistent with the investment rating legend.

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MOFSL has financial interest in the subject company(ies) at the end of the week immediately preceding the date of publication of the Research Report: Yes.

Nature of Financial interest is holding equity shares or derivatives of the subject company

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Expected return (over 12-month)

>=15%

< - 10%

< - 10 % to 15%

Rating may undergo a change

We have forward looking estimates for the stock but we refrain from assigning recommendation

19 May 2025

Financials - AMC

in the past 12 months.

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19 May 2025