HDFC AMC IPO, which opened on Wednesday, attracted strong demand from investors. The ₹ 2,800 crore issue, which was fully subscribed on Day 1 itself, closed today. Many brokerages remained optimistic on the initial public offering (IPO) of HDFC Asset Management Co, citing strong brand value, large network, strong growth in assets under management and robust outlook for the sector. As of 5 pm today, the issue was subscribed 82.71 times, according to NSE data. HDFC AMC offered 25.46 million shares in a price band of ₹ 1,095-1,110 apiece. Retail investors could apply up for shares up to ₹ 2 lakh, with a lot size of 13 shares and in multiples of 13 thereafter.
At the upper end of the IPO price of ₹ 1,100, HDFC AMC is expected to raise ₹ 2,800 crore, valuing the fund house at over ₹ 23,000 crore.
Indicative HDFC AMC IPO timeline, according to Choice Broking, which has a subscribe rating to the issue:
Finalization of basis of allotment: 1 August 2018
Unblocking of ASBA account: 2 August 2018
Credit to demat accounts: 3 August 2018
Listing on stock exchanges: 6 August 2018
HDFC AMC is the second largest asset manager in the country. It is a joint venture between mortgage lender Housing Development Finance Corp. Ltd (HDFC) and Standard Life Investments Ltd. HDFC AMC won’t receive any funds raised from the issue. The IPO consisted entirely of an Offer for Sale (OFS) of 25.5 million shares (12.1% of equity) by promoters. Of this 16.9 million shares (8.0% of equity) was sold by Standard Life Investments and 8.6 million (4.1%) shares by HDFC Ltd.
(Also read: How to evaluate HDFC MF IPO)
HDFC AMC, according to a note from ICICI Securities, made a reservation of up to 9.43% of the total offer size for HDFC shareholders. Also there was a reservation of up to 1.26% and 2.2% of the total offer size for eligible employees of HDFC AMC and HDFC respectively.
Citing CRISIL data, a note from ICICI Securities said that HDFC AMC has been the most profitable AMC in India since fiscal 2013. Its asset under management has grown at a CAGR of 33.9% since FY 2001 and AUM stood at 2.9 trillion as of March 31, 2018. Profits have grown at a CAGR of 32.1% since fiscal 2002.
Brokerage Motilal Oswal Securities Ltd recommended “subscribe" to the HDFC AMC IPO. “At the upper price band, HDFC AMC is valued at 32 times FY18 EPS (20% premium to its only listed peer Reliance Nippon AMC), which is justified given the strong parentage, consistent market leadership and superior growth," the brokerage said in a note.
“Favourable perception of HDFC AMC brand, higher mix of high-margin equity oriented AUM, consistent RoE of 40%, a wide distribution network and increasing dividend payouts work in HDFC AMC’s favour," Motilal Oswal added.
Angel Broking also had a “subscribe" recommendation to HDFC AMC IPO, citing huge growth potential of mutual fund industry growth, strong return ratios of HDFC AMC and higher dividend payout ratio.
Market fluctuation, government regulations and underperformance of investment products are some of the risk factors to HDFC AMC’s business, Angel Broking added.