HDFC Asset Management Company Ltd

Dear Shareholders,

It is my pleasure to present to you the annual report of HDFC Asset Management Company Limited for FY 22-23.

I would like to take this opportunity to convey my optimism on the future of India. The country is now driven by aspirations to become a developed nation by the centenary of its independence in 2047. This vision includes a technology-driven and knowledge-based economy, with strong public finances and a robust financial sector.

India's key priorities, as outlined in the Union Budget for FY 23-24 focuses on Inclusive Development, Reaching the Last Mile, Infrastructure and Investment, Unleashing the Potential, Green Growth, Youth Power and the Financial Sector.

I am confident as a preferred global leader in many areas. We, at HDFC AMC, are proud to participate in this journey. Our products and services will contribute towards overall economic growth and enable increased financial savings. By focusing on inclusion, we want to help millions achieve their financial goals.

India resilient amidst global uncertainties

FY 22-23 was a volatile year for the global economy and the capital markets. While the world was still reeling from the economic impact of the pandemic, it was met with heightened geopolitical tensions. This was followed by unprecedented inflationary pressures and subsequent rate hikes by most central banks to rein in inflation. The US Federal Reserve raised its policy rates by

475 bps between March 2022 to March 2023, after holding rates at near 0% for a record period. The Bank of England raised rates by 4.15%. The People's Bank of China, in a departure from major central banks, adopted an accommodative stance owing to a slowdown in the growth momentum. With higher interest rates, bouts of uncertainty arose with the eruption of the banking crises in certain segments in US and Europe. With global macroeconomic headwinds, FY 22-23 turned out to be a turbulent year for global equity markets.

Yet, the Indian financial environment remained resilient and second advance estimates released by the National Statistical

Office placed India's real gross domestic product growth at 7.0% for FY 22-23. Growth was underpinned by strong investment activity, bolstered by the government's capex push, buoyant private consumption, the Production Linked Incentive Scheme, impetus to Micro, Small and Medium Scale Enterprises and the increased thrust on digitalisation.

Investors continue to believe in mutual funds as a vehicle for wealth creation

In the past five years, the AUM of the Indian mutual fund industry has grown about two-fold from Rs21 Lakh Crore to around Rs40

Lakh Crore. Inflows into equity oriented schemes continued to remain buoyant during the fiscal year on back of robust flows into Systematic Investment Plans (SIP).

Debt funds, however, witnessed net outflows for the second year in a row. The Finance Bill, 2023 proposed an amendment in the income tax laws w.e.f. April 1, 2023, where investments in Specified corpus being invested in domestic equity shares) would no achieveitstruepotentialandemerge longer receive indexation benefits when computing long term capital gains and would be taxed at applicable slab rates. Much as the industry would have preferred status quo on the taxation norms, the policy makers' push for the development of the debt market, coupled with inherent as liquidity, diversification and professional management will, in my opinion, continue to make debt mutual funds an attractive asset class. The industry continued its growth streak with the total number of folios growing to 14.57 Crore as of March 31, 2023, as against 12.95 Crore in the previous year, highlighting domestic investors' confidence in the Indian growth story and in mutual funds as an effective vehicle for wealth creation. In fact, growth in domestic investment industry has emerged as a strong bulwark against the uncertainties of Foreign Portfolio Investor flows.

Financialisation of savings and increasing.Further penetration to drive growth

Indian investors are increasingly adopting capital market products, leading to a gradual ‘financialisation' of assets in the country. A young working population with growing income, increasing financial inclusion, digitalisation of the economy and increased awareness about capital market products like mutual funds are likely to fuel financialisation even further.

The ratio of AUM to the country's GDP is an important indicator of the industry's growth. Penetration of mutual fund assets in the US, as a percentage of country's GDP, grew from 23% in 1991 to 68% in 2001, and approximately 150% in 2021. As against this, the current mutual fund penetration in India has just crossed 16%. Mutual funds are on a strong footing and we have plenty of reason to believe that the trust in products and services offered by the industry will enable further growth in the coming years.

Regulator and Industry working with a growth mindset

SEBI has done a commendable job in building investor confidence over the years. Investor confidence is one of the main drivers for the growth of any investment management industry. SEBI has also played a pivotal role in promoting investor protection and market development in India while maintaining efficiency and DebtMFs(definedasnot more than35%ofitstotal transparency of the mutual fund industry. Due credit must be given to all other stakeholders, i.e., the government, industry body AMFI, media, distributors and all other industry players for contributing to the growth of the mutual fund industry in India.

At HDFC AMC, we endeavour to deliver growth that benefits every of debt mutual funds such section of society by integrating sustainability in our decision making. I am grateful to our shareholders and customers for putting their trust in us. I would also like to thank our employees, service providers and distribution partners for their hard work, dedication and unwavering commitment.