AMCs step up spending on employees and technology as mutual fund industry scales up

AMCs step up spending on employees and technology as mutual fund industry scales up

Asset management companies increased spending on employees and technology in FY26, but revenues grew faster than overall costs, helping the mutual fund industry improve operating margins as the business expanded.

Industry-wide employee expenses rose 18.5 percent to Rs 6,789 crore from Rs 5,730 crore in FY25, according to an analysis by Equirus Securities. Revenue from operations grew slightly faster at 19 percent to Rs 32,901 crore.

As a result, employee costs remained broadly stable at 20.6 percent of revenue, compared with 20.7 percent a year earlier. Over the past five years, employee expenses have grown at a compound annual rate of 16 percent.

The broader cost picture also showed signs of operating leverage. Total expenses increased 15.9 percent in FY26, trailing revenue growth, while other expenses rose 11.8 percent.

EBITDA climbed 21.1% to Rs 20,433 crore, lifting the industry’s EBITDA margin to 62.1 percent from 61 percent in FY25.

Equirus assessed operational efficiency using employee and other operating costs, excluding fee and commission expenses.

On this measure, ICICI Prudential AMC reported the lowest combined cost ratio at 18.2 percent of revenue in FY26. SBI AMC followed at 19.4 percent, while HDFC AMC stood at 19.8 percent.

The advantage of scale was even clearer when costs were measured against average quarterly assets under management.

SBI AMC recorded the lowest employee and other operating expenditure at 7 basis points of average quarterly AUM. HDFC AMC followed at 9.2 basis points and ICICI Prudential AMC at 10.2 basis points.

Nippon India AMC, UTI AMC and SBI AMC recorded substantial improvements in operational efficiency over the five-year period, according to Equirus.

Employee costs also remained relatively low at the largest fund houses. SBI AMC spent 10% of its revenue on employees, followed by ICICI Prudential AMC at 11.1 percent and HDFC AMC at 11.7 percent.

Measured against average quarterly AUM, employee costs stood at 3.6 basis points for SBI AMC, 5.4 basis points for HDFC AMC and 6.2 basis points for ICICI Prudential AMC.

At the other end of the spectrum, employee expenses consumed 31.4 percent of UTI AMC’s revenue. The corresponding ratios were 26.4 percent for Axis AMC and 25.2 percent for Canara AMC.

Technology spending accelerates

Technology has emerged as a significant component of AMC operating costs, with spending rising sharply across the fund houses analysed by Equirus over the past five years.

SBI AMC, Nippon India AMC, ICICI Prudential AMC and Axis AMC each spent more than Rs 75 crore on technology in FY26. HDFC AMC’s technology expenditure stood at Rs 52.9 crore.

Relative to revenue, Axis AMC spent the most on technology at 4.4 percent, followed by Nippon India AMC at 3.3 percent. Technology costs accounted for 1.8 percent of revenue at SBI AMC and 1.3 percent at HDFC AMC.

Measured against average quarterly AUM, technology expenditure ranged from 0.5 basis points at Kotak AMC to 1.7 basis points at Axis AMC.

Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!

Find the best of Al News in one place, specially curated for you every weekend.

Stay on top of the latest tech trends and biggest startup news.