HDFC AMC, Nippon, ABSL, UTI face 6–10% PBT hit from SEBI’s proposed MF norms: Centrum

SEBI's floating of consultation paper aimed at enhancing regulatory clarity, cost rationalisation, and transparency in the mutual fund industry, if implemented, would shave 6-10 per cent profit before tax (PBT) off asset management companies such HDFC AMC, Nippon Life India Asset Management, Aditya Birla Sun Life Mutual Fund and UTI AMC, analysts said.

The market regulator's proposed steep cuts in brokerage and transaction cost caps: from 12 bps to 2 bps for cash trades and 5 bps to 1 bps for derivatives, are seen putting pressure intermediaries such as Nuvama Wealth and 360 One WAM, while potentially raising research and execution costs for AMCs, Centrum Broking said on Wednesday.

SEBI has proposed to disallow the additional 5 bps expense that AMCs were earlier permitted to charge to mutual fund schemes. But to partially offset the impact of the proposed change on AMC operations, SEBI has revised the first two slabs of the TER for open-ended active schemes upward by 5 bps. 

"Assuming no mitigating actions by AMCs to offset the proposed TER reductions, the estimated decline in PBT over FY25–FY28E stands at 7–8 per cent for HDFC AMC, 8–10 per cent for Nippon Life AMC, around 7 per cent for ABSL AMC, and 6–7 per cent for UTI AMC," Centrum Broking said.

To enhance clarity and transparency, SEBI has proposed that all statutory levies—including STT, GST, CTT, and stamp duty—be kept outside the total expense ratio (TER) limits, along with other permissible charges such as brokerage, exchange, and regulatory fees.

"We believe the proposed removal of additional 5bps exit load as applicable could have an impact on the AMC ecosystem where it is borne by all stakeholders. While there has been an effort to offset the impact by increasing the TER of first two slabs of the expense ratio of open-ended active schemes by 5bps, there could be a bigger impact on smaller AMCs, in our view," ICICI Securities said.

The proposed differential TER based on performance and investment management and allowance of advisory of non-pooled funds are directionally positive steps, it said.

Centrum Broking said steep cuts in brokerage and transaction cost caps are as negative for Nuvama Wealth as well as 360 One WAM. For AMCs, the change could increase operational costs, as they may either need to pay more for external research support or expand internal research teams tomaintain research coverage and execution efficiency under the tighter expense limit.