The entire equity portfolio is actively managed, which is a major positive, as active funds typically command significantly higher yields than passive ones
ICICI Pru AMC’s faster AUM growth, steady market-share gains, and superior core profitability are driving a clear valuation premium over HDFC AMC—despite HDFC’s stronger equity mix.
Given the sectoral tailwinds, attractive valuation, and the vantage positioning, the company can be a long-term compounder
Valuation comfort, strong operational metrics, and favourable industry tailwinds make the AMC an attractive long-term opportunity
Given the strong tailwinds in the MF industry, the stock could be a long-term compounder
The company has recently acquired the MFD business of Indus Capital on a slump-sale basis
360 ONE has been on an acquisition spree for the past couple of years.
The AMC has a strong brand recall, favourable asset mix, multi-channel distribution network, and an experienced management
Given its asset-light business model, Prudent generates a healthy free cash flow that can be used as a war chest for inorganic growth during a downturn in equity markets
The premium valuation will sustain, given the sectoral tailwinds and HDFC AMC’s vantage positioning.
While the robust growth in mutual fund assets is the obvious factor for Prudent’s success, finer details indicate that the potential risks to the business waned in the past couple of years
The annuity kind of business makes the company an attractive proposition even at the current valuation
The company is investing in high opportunity new business segments
Earnings visibility strong, business model is asset light, operating leverage high, and cash flows robust
The company’s biggest drawback has been its rather volatile track record on profitability. Delinquencies have been lumpy and so have provisions. But all that may be about to change
Prudent Corporate Advisory is the second largest MF distributor after NJ India among the non-banks in terms of commission earned in FY22
The rise in passive investment is one of the reasons for the underperformance of AMC stocks
The stock has rallied 24 percent in the past one month on the back of reports that Tata Mutual Fund is in talks to buy a majority stake in the company
Though mutual funds remain the stronghold of this RTA, the rising trend of financialisation of savings and digitisation holds out immense opportunity for the entity in the non-MF space.
The asset-light business model with annuity kind of revenue stream, high operating leverage, and strong cash flows make Prudent a unique proposition
The management’s strategy of focusing on annual recurring revenue (ARR) as opposed to transaction/brokerage revenue has helped in reducing the volatility in revenue
Prudent is the third largest MF distributor after NJ India and ICICI Securities among the non-banks with a closing MF AUM of Rs 49,473 crore as of March end
In the recent correction in the equity markets, IIFL Wealth’s stock has fallen to Rs 1,550 which is 7 percent lower than the Bain’s acquisition price
Prudent is the third largest MF distributor after NJ India and ICICI Securities among the non-banks with an average AUM of Rs 48,411 crore as of end December ’21
The rise in passive investment is not the only reason for the underperformance of AMC stocks. It could also be breeding mistrust