HDFC chairman Deepak Parekh.
HDFC chairman Deepak Parekh.

HDFC mutual fund arm to launch its ₹2,800 crore initial share sale next week

HDFC Asset Management has priced its shares at 1,095-1,100 apiece in the IPO, which will open on 25 July

Mumbai: HDFC Asset Management Co. Ltd, the second largest mutual fund company in India, will launch its 2,800 crore initial public offering (IPO) on 25 July, the company said on Wednesday.

HDFC AMC, a joint venture of mortgage lender Housing Development Finance Corp. Ltd (HDFC) and Standard Life Investments Ltd, has fixed a price band of 1,095-1,100 per share. The IPO will close on 27 July. At the upper end of the price band, the asset manager is valued at 23,319 crore. The other listed AMC, Reliance Nippon Life Asset Management Co. Ltd, was valued at 13,540 crore at the end of trading on Wednesday.

The HDFC AMC IPO is a pure offer for sale. HDFC is selling a 4% stake in the company, while Standard Life Investments is selling 8%.

This is the fifth HDFC group company to go public, said Deepak Parekh, chairman of HDFC Ltd. “Creating long-term value requires patience. We have been building HDFC AMC for the last 18 years. Based on the way we envisage India’s growth in the coming years, we felt that this is the right time to take the company public," said Parekh.

Last year, HDFC Standard Life Insurance Co. Ltd went public in an IPO that saw shareholders HDFC and Standard Life sell shares worth 8,695 crore to the public. The insurance company was valued at 58,277 crore at the time of the IPO.

Since its IPO, the stock price of HDFC Standard Life has grown by 63.2% to 473.45 per share. Parekh added that several factors have made mutual funds a vehicle of choice for Indians. “Demonetization was a shot in the arm for the mutual fund industry. If you see the interest rates on bank deposits have been going down. Rental yields on real estate have become low and are at around just 2-3%, while gold, in the last five years, has appreciated just 1% year over year. All these factors have contributed to making mutual funds a preferred choice for investments," said Parekh.

The total assets under management (AUM) of the industry stands at 23 trillion, he said, adding that the potential for growth going ahead is immense.

“The total AUM of the mutual fund industry is just 11% of the Indian GDP (gross domestic product), while the global average is 62%. In US, the mutual fund industry size is 101% of the GDP. Equities under management of mutual fund industry account for just 4-5% of the total market capitalization of Indian stock markets, while in US this number stands at 42%," said Parekh.

As of 31 March, HDFC AMC’s assets under management stood at 2.91 trillion, of which equity-oriented AUM and non-equity-oriented AUM constituted 1.49 trillion and 1.42 trillion, respectively.

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