HDFC Asset Management Company Ltd’s initial public offering was fully subscribed on the first day of bidding.
The Rs 2,800-crore offer of India’s second-largest asset manager received demand for 1.03 times the shares on offer as of 5:00 pm on Wednesday, according to data available with stock exchanges. It was driven by qualified institutional buyers and retail investors.
The portion reserved for QIBs was subscribed 1.19 times. The retail investors’ portion was subscribed 1.34 times. High-net-worth individuals subscribed to 55 percent of the shares allocated to them.
HDFC Ltd. and Standard Life are selling a little over 2.5 crore shares at Rs 1,095-1,100 apiece. At the upper end of the price band, the company will be valued close to Rs 23,319 crore.
HDFC AMC had raised Rs 731.9 crore from anchor investors at Rs 1,100 apiece. Foreign investors in the anchor allotment included DSP Blackrock, Goldman Sachs, Fidelity Investments. Domestic investors who participated were ICICI Prudential Capital, Aditya Birla Sunlife, Axis Mutual Fund.
How Much Exiting Shareholders Will Make?
Business
HDFC AMC is the country’s largest equity-oriented asset management company. More than 97 percent of the total assets under management are in mutual funds, while the rest are under other managed accounts. As on 30 June, its assets under management stood at Rs 3,07,585 crore.
It has 209 branches and 65,000 distribution partners in over 200 cities. The company manages 27 equity-oriented, 98 debt, three liquid and five other schemes.
HDFC AMC: Scheme-Wise AUM Break-Up
HDFC AMC – the most profitable asset management company in India – has seen a steady rise in the number of customers and the average transaction size.
Financials
- The company’s net worth stood at Rs 2,160 crore for the year ended March, which translated into a book value per share of Rs 102.
- Its asset under management during the period grew at an annualised rate of 27.5 percent.
- HDFC AMC’s revenue clocked a compounded annual growth rate of 19.7 percent and net profit rose at 19.2 percent over the last five financial years.
- The company has been paying dividends on a regular basis for the last five years.
Money Managed By HDFC AMC
Peers
Reliance Nippon Life Asset Management Ltd is the only direct listed peer of HDFC AMC. But it has 40 active unlisted asset management peers – both private and public. ICICI Prudential Asset Management Company Ltd is the largest AMC in India. Reliance Nippon is the fourth largest.
HDFC AMC’s growth rates were better than its listed peers, but lagged behind ICICI Prudential AMC.
Peer Comparison
The company’s net profit as a percentage of assets under management was the highest at 0.24 percent on higher revenue and lower expenses. All the three unit metrics – revenue, net profit and total expenses as a percentage of assets under management – declined for the financial year through March 2018.
Peer Comparison
(As % Of AUM)
HDFC AMC’s return on equity and return on asset were better than that of its listed peer but fell short of ICICI Prudential AMC. The company’s return on equity declined to 33.4 percent over last year, according to BloombergQuint’s calculations.
Peer Comparison
Valuations
Earnings per share for the previous financial year stood at Rs 34. At the upper end of the price band, the price-to-earnings multiple is at 32.3, according to BloombergQuint’s calculations.
The company’s market capitalisation as a percentage of assets under management is expensive compared to Reliance Nippon.
Valuation Comparison
Analysts’ View
Angel Broking
- Huge growth potential of mutual fund industry.
- Strong return ratios, asset light business and higher dividend payout ratio.
- Has a track record of superior investment performance.
MOSL
- Favourable perception of HDFC AMC’s brand and higher mix of high-margin equity-oriented asset under management.
- Premium valuations justified given strong parentage, consistent market leadership and superior growth.
Choice Broking
- Higher valuation is justified on higher concentration of equity assets in assets under management, most profitable AMC tag and the brand name associated.
(This story has been updated to reflect the IPO has been fully subscribed.)
(This story was originally published on BloombergQuint.)
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