Ajcon Global has come out with its report on HDFC Asset Management Company. The research firm has recommended to "Subscribe" the IPO in its research report as on July 20, 2018.
The company offers their products and services through their online portal, HDFC MFOnline and mobile applications, both of which have become increasingly relevant to their business in recent years. With this IPO, HDFC is reducing its stake from 57.3 per cent to 53.2 per cent. Standard Life is bringing down its stake from 38.2 per cent to 30.2 per cent. As far as HDFC is
concerned, it remains committed to keeping its stake at the threshold of 50 per cent. In the past 18 years, the Company has hardly added any capital. When the company was started in 2000, the Company had a capital of just Rs 200 million. In 2003, when it completed the acquisition of Zurich AMC, the Company’s capital stood at Rs 1.08 billion. And recently, when it did a private placement, the Company added Rs 1.5 billion to its capital. The reason for its high return on equity (ROE) is its low levels of capital. The Company has a liberal dividend payout policy, which also helps in maintaining low levels of capital. In the past five years, the Company has paid Rs 10.6 billion in dividends.Valuation and Outlook
At the upper end of the price band, the issue is valued at a P/ E 31 times and P/BV of 10.6x at FY18 EPS and FY18 BV respectively which is at a premium owing to the to the following factors like:
a) consistent market leadership position in the Indian mutual fund industry, b) trusted brand and strong parentage, c) strong investment performance supported by comprehensive investment philosophy and risk management, d) superior and diversified product mix distributed through a multi – channel distribution network; e) focus on individual customers and customer centric approach; f) consistent profitable growth, g) Company reaping the benefits of strong operating leverage, h) robust ROE of 33.4 percent in FY18 as compared to other AMCs in the industry, we recommend “SUBSCRIBE” to the issue for long term wealth creation.
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