Day 2 (26th July) : The IPO is over-subscribed 5.52 times (QIB – 5 times, Retail – 3.5 times oversubscribed)
Day 1 (25th July) : The IPO is 100% subscribed (QIB – 1.19 times, Retain – 1.34 times oversubscribed)
HDFC Asset Management Company (HDFC AMC) Limited, a well-known fund house has its IPO opens from 25th July to 27th July 2018
It is a joint venture between Housing Development Finance Corporation Limited (HDFC) and Standard Life Investments Limited (SLI). SLI is part of Standard Life Aberdeen plc., one of the world’s largest investment company.
Issue Details of HDFC AMC IPO:
- IPO Open: Jul 25, 2018 – Jul 27, 2018
- Issue Price band: Rs 1095 – Rs 1100 Per Equity Share
- Issue Size: Rs 2800 crore
- Market lot: 13 shares
- Minimum Investment: 13 shares
- Max Investment for Retail Investor – 181 shares
- Book Running Lead Managers:
- Registrar:
- Listing: BSE/NSE
- Download –
HDFC AMC IPO Grey market Premium :
- 26th July 2018 – GMP Rs XX per equity share
IPO Issue Allocation:
- Qualified institutional buyers (QIBs) – 50% of the offer.
- Non-institutional bidders – 15% of the offer.
- Retail individual bidders – 35% of the offer.
Background:
HDFC AMC has been the most profitable AMC of the country in terms of net profits since Fiscal 2013 with a total AUM (Assets Under Management) of ₹2,932.54 billion. Its profits has grown every year since 2002.
It has been the largest AMC in equity-oriented AUM since the last quarter of Fiscal 2011 and has consistently been among the top two asset management companies in India in terms of total average AUM since the month of August 2008..
HDFC AMC offers a wide range of savings and investment products across asset classes. As of December 31, 2017, it offered 127 schemes categorized into-
- 28 equity-oriented schemes
- 91 debt schemes
- 3 liquid schemes
- 5 other schemes (including exchange-traded schemes and funds of fund schemes).
Industry Overview:
Top Shareholdings: Top Shareholders:
The Promoters of the Company are HDFC and Standard Life Investments. HDFC holds 120,772,800 Equity Shares and Standard Life Investments, holds 80,515,200 Equity Shares, which constitutes 57.36% and 38.24%, respectively, of the Company’s pre-Offer, issued, subscribed and paid-up Equity Share capital.
Objective of the issue: The company will not receive any proceeds from the Offer. The objects of the Offer-
1. To carry out the sale of Equity Shares offered for sale by the Selling Shareholders.
2. Enhance the company’s visibility and brand image,
3. Provide a public market for Equity Shares in India.
Anchor Investors:
On Tuesday, the most profitable fund house had raised Rs 732 crore from anchor investors. It has allotted 66.53 lakh shares at a price of Rs 1,100 per share to 61 anchor investors, including Capital, Fidelity, Blackrock, and Temasek.
Financials:
| Particulars | For the year/period ended (in Rs. Millions) | |||||
|---|---|---|---|---|---|---|
| 31-Dec-17 | 31-Mar-17 | 31-Mar-16 | 31-Mar-15 | 31-Mar-14 | 31-Mar-13 | |
| Total Assets | 25,831.58 | 15,995.90 | 14,227.17 | 13,117.50 | 11,213.36 | 8,294.39 |
| Total Revenue | 13,167.21 | 15,879.10 | 14,943.42 | 10,642.76 | 9,031.14 | 7,839.76 |
| Profit After Tax | 4,955.55 | 5,502.46 | 4,778.80 | 4,155.00 | 3,577.70 | 3,187.46 |
Valuation as compared to its peers:
| Financial | HDFC AMC | Reliance AMC | ICICI AMC |
|---|---|---|---|
| Revenue Growth | 19.7% | 23.8% | 36.1% |
| Net Profit Growth | 19.2% | 17.8% | 36.0% |
| AUM Growth | 27.5% | 21.1% | 30.1% |
| Return on Equity | 33.4% | 22.8% | 76.0% |
| Return on Asset | 36.4% | 22.6% | 58.0% |
| Revenue (% of AUM) | 0.59% | 0.40% | 0.59% |
| Net Profit (% of AUM) | 0.24% | 0.13% | 0.20% |
| Total Expense (% of AUM) | 0.27% | 0.27% | 0.31% |
Valuation Comparision
| Key Ratio | HDFC AMC | Reliance AMC |
|---|---|---|
| Price-to-Earning (x) | 32.3 | 27.1 |
| Price-to-Book (x) | 10.8 | 6.2 |
| Market Cap As % Of Total AUM | 7.8 | 3.6 |
The HDFC AMC IPO is all set to get a valuation of close to 8 % of its AUM of Rs 3 lakh crore. This is at the extreme high end of the traditional band as AMCs have traditionally received valuations as low as 2-3 percent of their respective AUMs.
Reliance’s valuation today is Rs 13,341 crore, or roughly around 5 % of its AUM. IDFC’s AMC is being negotiated at a valuation of around 5 % of its AUM, at a premium to norms but a discount to HDFC, due to the latter’s superior market positioning, branding, and execution.
Brokerage Recommendations:
| Brokerage | Recommendation |
| Angel Broking | Subscribe |
| Centrum | Subscribe |
| Motilal Oswal | Subscribe |
| PrabhuDas Liladhar | Subscribe |
| Emkay | Subscribe |
| Geojit Research | Subscribe |
| Way2Wealth | Subscribe |
| KRChoksey | Subscribe |
| SPA Securities | Subscribe |
Important Dates
- Finalisation of Basis of Allotment: On or about Aug 1, 2018
- Initiation of refunds: On or about Aug 2, 2018
- Credit of Equity Shares to demat accounts: On or about Aug 3, 2018
- Commencement of trading of the Equity Shares on the Stock Exchanges: On or about Aug 6, 2018
Should you invest:
HDFC has superior market positioning, branding, and execution as compared to its peers and that is reflected in the IPO pricing. I tis valued at 8% of the AUM, while Reliance and IDFC are about 5% of AUM.
So, the IPO price looks a bit expensive, but given the HDFC AMC brand positioning, the investor can consider investing in this IPO from long term perspective.
I also do not have any personal interest in investing in this IPO.