HDFC Asset Management Company (HDFC AMC), the joint venture between Housing Development Finance Corporation and Standard Life Investments, will open its initial public offering for subscription today.

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Peer Comparison

The issue closes on July 27, 2018. The price band for the offer is fixed between Rs 1,095 and Rs 1,100 per share.

The company aims to raise Rs 2,787.6 crore at the lower end of price band and Rs 2,800.33 crore at higher price band.

The expected market captialisation is between Rs 23,212.8 crore and Rs 23,312.8 crore.

Top 5 AMC’s based on quarterly average AUM

After the IPO, HDFC Ltd's holding will come down by 4.05 percent to 52.92 percent from 56.97 percent.

Another promoter Standard Life Investments' holding will come down by 7.95 percent to 30.03 percent from 37.98 percent.

As of first-quarter of FY19 HDFC AMC's average asset under management (AUM) stands at Rs 3,07,585 crore.

Distribution mix of all funds (FY18)

Distribution mix of equity oriented schemes (FY18)

The Strength Of HDFC AMC

HDFC AMC is the most profitable AMC.

It has an excellent distribution channel.

Persistency ratio is higher due to penetration in smaller ticket sizes. Ticket

sizes are lower by 27 percent from industry levels

Wide distribution network with a strong focus in Tier II and below cities.

Market leader in the balanced fund category with 35 percent market share.

Opportunities

Indian mutual fund (MF) industry has grown strong in last three years.

AUM has nearly doubled from Rs 10 lakh crore to Rs 20 lakh crore.

Lower fixed deposit rates make MF investment more attractive.

AUM to GDP ratio is at 13 percent vs more than 50 percent in the developed market.

HDFC AMC is well positioned for distributor consolidation.

Mutual funds have been increasing their penetration.

Weakness

Losing market share.

Market share loss is coinciding with under-performing schemes.

Moderate PAT (profit after tax) growth despite strong AUM growth.

Core earnings are lower due to the high share of treasury investment as a percentage of net worth.

Threats

If SEBI reduces management fees, revenues can be impacted.

The underperformance of investment would adversely impact new investment flow and could lead to the redemption of existing investment.

Company Background

HDFC AMC is the joint venture between HDFC and Standard Life Investment. Through organic growth and acquisitions (Zurich India, Morgan Stanley MF), HDFC AMC became one of the top AMCs in the country, with a significant 13 percent market share in the industry. The company enjoys a 51.3 percent share of high-yielding equity assets in its AUM mix, which is higher than the industry average of 43.2 percent.

First Published:Jul 25, 2018 12:30 PM IST