HDFC AMC to launch IPO on 25.07.2018.Learn how to evaluate - ArthikDisha

HDFC AMC to launch IPO on 25.07.2018.Learn how to evaluate

HDFC AMC to launch IPO on 25.07.2018

HDFC AMC to launch IPO on 25.07.2018

HDFC AMC to launch IPO on 25.07.2018

India’s second largest Asset Management Company HDFC AMC to launch IPO on 25.07.2018. This offer to the public is going to be for Rs.2800 Crores. This IPO is starting on 25.07.2018 and will remain open till 27.07.2018. The price band of this IPO has been fixed at Rs.1095-1100 per share against Face value Rs.5 per share. Minimum order quantity or lot size for this IPO has been set at 13 no. of equity shares.

HDFC AMC is offering 2.54 Crores of its equity shares to the public through this IPO. HDFC AMC will become India’s second AMC to launch IPO after Reliance Nippon AMC collected Rs.1542 Crores. And now this IPO from HDFC AMC  is going to be highest IPO by any AMC in India till date. Kotak Mahindra Capital, Axis Capital, DSP Merrill Lynch, Citigroup Global Markets India, CLSA India, HDFC Bank, ICICI Securities, IIFL Holdings, JM Financial, Morgan Stanley India and Nomura Financial Advisory are managing this IPO starting from 25.07.2018 and to continue up to 27.07.2018.

HDFC AMC to launch IPO on 25.07.2018

Objectives of this IPO

  •  To carry out the sale of Equity Shares offered for sale by the Selling Shareholders;
  • Enhance the company’s brand image along with capturing future growth in the Mutual Fund industry;
    The Company will not receive any proceeds from the Offer and all the proceeds from the Offer will be received by the Selling Shareholders.

HDFC AMC to launch IPO on 25.07.2018. Should you go for this IPO? 

Now comes the analysis part.

HDFC AMC has been a market leader consistently for the last several returns with both equity AUM and retail AUM. Continuous investment in its AUM by retail investors have made HDFC AMC to deliver stable returns for the last couple of years with least capital infusion. This has resulted in delivering superlative equity returns.

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The performance of HDFC AMC in regards to this IPO will largely depend on its Mutual Fund business. Unlike any manufacturing business entity, it does not have any production or supply line whereby the fate of investors is solely dependent on the manufacturing and selling business. But in the case of AMC, the fate of the investors will depend on the fund houses business. The profit generated by it and also minimisation of expense ratio or commission paid to its distributor partners.

Angel Broking has stated HDFC AMC to be one of the top performing AMC amongst all others. For FY18, HDFC AMC had reported Profit after Tax(PAT) /Average Assets under Management(AAUM) of 0.26 per cent, whereas the other top five AMCs had reported the same in the range of 0.21-0.14 per cent.

Though HDFC Asset Management Company has strong potential for growth due to its huge customer base, strong return factor, high dividend payout ratio but it has to depend on continuous cash inflow in the form of revenue both in equity and debt funds. Any instability in revenue collection would make the investors in the IPO in panic-stricken mode.

One has to keep in mind that historical growth picture is not going to help them in managing their business in the future. It is only just an indication and not a strong driving force for future sustainable growth.

Final word on HDFC AMC to launch IPO on 25.07.2018

As far as HDFC AMC is concerned this AMC has the real potential to grow in future as well like previous years. During the downturn of 2008 i.e. during the global recession period, it continued to grow unlike other AMCs of the country in terms of the collection of funds from investors. SO, it may be a wise decision to invest in this IPO. However, before investing advice of the financial advisers make be sought for retail investors.