HDFC AMC is Asset management arm of HDFC. It is joint venture between Housing Development Finance Corporation and Standard Life Investments. The initial public offer IPO is going to hit market tomorrow (25th July 2018).
The price band is 1,095-1,100 INR. You have to subscribe 13 shares. That is the minimum money you have to invest is 14,300 INR (taking the maximum of price band). You can subscribe in multiples of 13 shares if you want to invest more.
This is only the second Mutual Fund company to get listed on Stock Exchange. The first company was RNAM. RNAM stands for Reliance Nippon Life Asset Management company.
In this article I will cover Why you should subscribe to this IPO? In a nutshell it is excellent opportunity to make quick money by selling on listing date or you can also hold it for long time.
This IPO is recommended because of below reasons.
HDFC is one of the best performing brands on Indian Stock Exchanges. The companies from this brand are
- HDFC bank
- HDFC Life Insurance
HDFC Bank and HDFC are one of the top ten companies in terms of market capitalization. Both of them were great wealth creators for investors and are regarded as of new the safest bets with best returns.
HDFC Life Insurance was listed last year and have made decent return in this period. So all the companies have performed well and are in good books of investors.
The Management is regarded as one of the finest which is reflected in Share price.
Current State of Company
Below points cover the state of company as of now
- It is second largest asset management company in India
- The market share of this company is roughly 14%
- It is the most profitable AMC
- The Mutual Funds from this company mainly focus on Equities making it most profitable
- The market share in profit is 18%
Above statistics proof that this company is in healthy state. But the stock price of a company also depends on future prospects of a company.
Future prospect of Company
The investment in Mutual Funds in India is not par with Developed Countries. The retail investors still have very minimal participation. With growing economy and increase in middle class and upper middle class the interest and participation in Mutual Funds will increase.
Note the year 2017 was very important for India. The FII were selling for long but DII were buying. They out performed the FII and market made new highs. This shows the maturity of Indian markets and economy as a whole.
Since HDFC is already second largest Asset management company behind only ICICI. The ever increasing participation of public in Mutual Funds will help it. The growth in HDFC Bank and increase in its coverage will help it as well.
So from future point of view the company will grow and continue to hold and increase the market share. It already has a head start and will continue to do so.
Competition and Risks
Main competitors of HDFC AMC are
- ICICI Prudential
- Aditya Birla Sunlife
These are positioned at first and third as of now. Since the Mutual Fund penetration will increase despite competition companies will have chance to increase their customer base. ICICI bank has advantage of far reach penetration because of its vast network of branches.
These two also compete in banking and Insurance verticals as well. So it is fair assumption that despite the competition HDFC AMC will perform well as HDFC Bank is also performing over the years.
The major risk however is Indian stock market crash and India not growing. Stock market crash is cyclical and will not impact long term investors. It may be that for one year or two you have not received desired return but in long term it is intact (remember 2007 everyone thought that is end of Indian banking majors).
India will grow as a market and country. I will not cover it in details as there is so much in press already on it. The money will flow in India and people will look for better way to invest their money. With bank rates going down Mutual Funds will emerge as major option.
Stocks of HDFC companies enjoy higher PE compared to other companies in same niche. This is due to point one. The PE of HDFC AMC will be 32 as per the IPO price. This is slightly above the PE of Reliance Nippon as of today.
As of today Reliance Nippon is trading at 27. The listing price is in par with the competitor. Also for long term investors the listing price does not matter much. You also have the chance to get listing gain as well.
I have touched upon key figures and outlook of company. The future of a sector is important for any company. Great companies if catering a shrinking market will have no future (I am looking at you Kodak). So it is better to find good companies in ever increasing sector.
Based on this principle HDFC AMC is good bet for listing gain as well as future investment. In case you are interested in knowing the figures and other details refer below article on Money Control
Feel free to share your thoughts on this IPO and your suggestions (Pros and Cons of investing in it).