4. HDFC Asset Management Company (AMC) | Return: 42.41% | Issue size: Rs 2800 crore | Listing date: August 6, 2018 | Subscription ratio: 83.06 | HDFC AMC operates as a joint venture between Housing Development Finance Corporation (HDFC) and Standard Life Investments.
With a listing gain of about 58 percent on the NSE on Monday, HDFC Asset Management Company had a stellar debut on the bourses.
The HDFC AMC stock listed at Rs 1,738 on the NSE, up 58 percent as compared to the issue price of Rs 1,100 per share. It crossed Rs 1,800 levels on the exchange in intraday trade. The stock witnessed the second highest listing gains in 2018 and 6th highest since 2011, data showed.
HDFC AMC public issue was subscribed 83.06 times receiving bids for 156.19 crore equity shares against IPO size of 1.88 crore shares (excluding anchor portion).
This is the second asset management company to hit the market after Reliance Nippon Life AMC, which had raised Rs 1,542 crore last year.
When compared to HDFC AMC, Reliance AMC was listed at 16.7 percent premium on November 6. The stock had opened at Rs 294 on the BSE as against its issue price of Rs 252.
HDFC AMC shares closed at Rs 1,815.15, up 65.01 percent, while Reliance AMC stock had 12.7 percent at Rs 284.
Experts said HDFC AMC's premium valuations to peers are justified on account of higher profit CAGR, strong pedigree, HDFC's brand, distribution, long-term performance, relatively stable management profile, high dividend payout and high capital return ratios.
That is why all HDFC Group companies trade at premium valuations and so is the case with HDFC AMC.
While the average assets under management of second largest fund house HDFC AMC stood at Rs 306,841 crore, that of fourth largest fund house, Reliance AMC was Rs 240,445 crore.
With HDFC AMC listing with significant gains over issue price, Reliance AMC's valuation discount to HDFC AMC has widened to more than 50 percent.
At the day's closing prices, HDFC AMC's market cap to AUM was at 12.7 percent while for Reliance Nippon AMC it was 6.5 percent.
HDFC commanded a premium valuation for its brand and superior return ratio with return on equity (RoE) at 40 percent.
Siddharth Khemka, Head- Retail research, Motilal Oswal Securities advises investors’ to hold the stock post listing as well. “HDFC AMC being a market leader in the Indian Mutual fund industry is expected to be one of the best beneficiaries of the increasing financialisation of household savings in India,” he added.
Brokerage Nomura India last week initiated a bullish view on India’s asset management companies (AMCs), given the strong growth opportunity and improving operational metrics, which it believes are more structural and less cyclical.
"We expect a 20 percent CAGR in AUMs over FY18-25 with improving equity mix, as the sector is one of the key beneficiaries of the rising financial savings mix while penetration levels are still extremely low. In our view, operating leverage and improving equity and improving equity mix should take care of yield pressures, while strong AUM growth should support profitability improvement," it said.