The stellar movement in the stock price of HDFC AMC has left not only the promoters and shareholders but also the top employees at the fund house substantially richer.
On November 22, the stock ended at Rs 3,703, more than double the listing price of Rs 1,738 in August 2018.
The employee stock options (ESOPs) allotted to Managing Director Milind Barve, who owns 11.7 lakh shares, are now valued at approximately Rs 433 crore from an estimated Rs 212 crores on the day of listing.
Similarly, ESOPs value of ace fund manager Prashant Jain who owns 928,000 shares, has also more-than-doubled to roughly Rs 344 crore from Rs 168 crore on listing day in August 2018.
Two other fund managers from the stable, Shobhit Mehrotra and Chirag Setalvad, own 371,200 shares and 336,000 shares, respectively. Their holding is now worth Rs 137 crore and Rs 124 crore, respectively.
Apart from HDFC AMC, Reliance Nippon Life Asset Management is the only fund house that is listed on the exchange.
Here is how they both have fared after the listing.
Reliance Nippon Life Asset Management (Nippon India Mutual Fund) got listed on November 6, 2017, while HDFC Asset Management got listed on August 5, 2018.
In November 2017, Reliance AMC was listed at 16.7 percent premium. The stock opened at Rs 294 on the BSE as against its issue price of Rs 252.
In comparison, on August 5, 2018, HDFC AMC stock was listed at Rs 1,738 on the NSE, up 58 percent as compared to the issue price of Rs 1,100 per share.
With average assets under management at Rs 3.76 lakh crore as in the quarter ended in September 2019, HDFC AMC is at the numero uno position among the top among 43 MF players.
The AUM of HDFC AMC rose 23 percent in the last year.
In comparison, in the last one year from September 2018, the AUM of RNAM has dropped little over 17 percent to Rs 2.02 lakh crore after several corporates pulled out their investments, particularly after cash-strapped Reliance Capital was in the process of exiting its mutual fund business to pare debt.
Reliance Nippon Life’s AMC market share fallen to eight percent in August from 12 percent in March.
In May, Nippon Life decided to buy out the stake of RNAM co-promoter Reliance Capital and solely run the AMC.
Experts said HDFC AMC's premium valuations to peers were 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.
HDFC AMC: In 2019 itself, the share touched its 52-week high of Rs 3,844.00 and its 52-week low Rs 1,302.00 on November 22 and February 18 respectively.
Currently, it is trading 6.67 percent below its 52-week high and 175.55 percent above its 52-week low.
The market capitalisation of HDFC AMC stands at Rs 76,248.74 crore. The company's trailing 12-month (TTM) EPS was at Rs 55.47 per share. (June 2019). The stock's price-to-earnings (P/E) ratio was 64.65.
The latest book value of the company is Rs 143.98 per share.
At the current value, the price-to-book value of the company is Rs 24.91. The dividend yield of the company was 0.67 percent.
The stock's price-to-earnings (P/E) ratio stands at 64.69 on (NSE).
RNAM : In 2019, the share touched its 52-week high at Rs 386.50 on November 22 and its 52-week low at Rs 120.20 on February 14.
Currently, it is trading 3.79 percent below its 52-week high and 209.36 percent above its 52-week low. The AMC's market capitalisation stands at Rs 22,758.61 crore.
The company's trailing 12-month (TTM) EPS was at Rs 8.36 per share. (September 2019).
The stock's price-to-earnings (P/E) ratio was 44.48. The latest book value of the company is Rs 41.17 per share. At the current value, the price-to-book value of the company is Rs 9.03. The dividend yield of the company was 1.61 percent.
The stock's price-to-earnings (P/E) ratio stands at 44.50 on (NSE).
Market experts said that the AMC space would be a ‘consistent compounder’.
In India, the total deposits in banks is Rs 117 lakh crore in March 2018, and the total MF AUM is around Rs 25 lakh crore. Out of savings, 10-15 percent of savings are into mutual funds compared to 50 percent globally in developed nations.
“We are confident that the mutual fund pie of investments will increase at a higher rate than FDs in the savings portfolio of an investor. AUM for HDFC AMC has doubled in the last three years. The company’s market share is around 15 percent,” Vineeta Sharma, Head of Research - Narnolia Financial Advisors, told Moneycontrol.
Agreeing with Sharma, an ex-SEBI officer who is an investor now said, “The AMC as a business has more upfront cost-such as set up costs and investor acquisition cost whereas, later on the running basis, the cost is less, only needed for fund operations. Thus, profits in later years are higher for AMCs, giving good valuation visibility.”
For established AMCs with long track record, it gives them a regular investor base through SIPs translating into regular incomes for annual expense ratio. This recurring revenue model helps sound AMCs fetch healthy valuations.