HDFC AMC IPO: India’s second largest fund house HDFC AMC’s IPO to raise up to Rs 2,800 crore opens for subscription today. HDFC AMC has fixed a price band of Rs 1,095 to Rs 1,100 per equity share for its public offer following which the firm has expected to raise Rs 2,800 crore at the upper end of the price band. Notably, this is the 5th listing within the HDFC group of companies. The issue closes on Friday, July 27, 2018. The bid lot has been fixed at 13 shares, and in multiple of 13 thereafter. “The years ahead for the mutual fund industry are promising with greater financialisation of savings, rising incomes of the Indian middle-class and increased Indian aspirations for a better future. HDFC AMC looks forward to the journey of deepening the penetration of mutual funds in India and setting new market benchmarks,” Deepak Parekh, Chairman of HDFC said last week. Even as investors mull whether to subscribe to the issue, we take a closer look at what brokerages have to say.
HDFC AMC Rs 2,800 crore IPO: What brokerages say
“Favourable perception of HDFC AMC brand, higher mix of high-margin equity oriented AUM, consistent RoE of 40%, a wide distribution network and increasing dividend payouts work in HDFC AMC’s favour. At the upper price band, HDFC AMC is valued at 32 times FY18 EPS (20% premium to its only listed peer Reliance Nippon AMC), which is justified given the strong parentage, consistent market leadership and superior growth,” Motilal Oswal, which has a subscribe rating on the issue said in a note.
Taking stock of the strengths of the company, brokerage firm HDFC Securities notes that the AMC has a consistent market leadership position in the Indian mutual fund industry; Trusted brand and strong parentage and strong investment performance supported by comprehensive investment philosophy and risk management. However, the key concerns in the company include adverse market fluctuations and/or adverse economic conditions could affect the business in many ways; if investment products underperform, HDFC AMC’s AUM could decline and adversely affect the revenues, reputation and brand and historical growth rates may not be indicative of future growth and if it do not manage growth effectively, its financial performance could be adversely affected.
“At the upper end of the IPO price band, it is offered at 32x its FY2018 EPS and 11x its FY2018 book value, demanding Rs 23,318 crore market cap, which is 7.6% of the MF AUM (`3,06,841cr for the month of June 2018). Considering that HDFC AMC is the second largest AMC coupled with huge potential of MF industry growth, strong return ratios, asset light business, higher dividend payout ratio and track record of superior investment performance, we are positive on this IPO and rate it as subscribe,” the firm said in its IPO note.