HDFC AMC IPO Opens today – What do brokers and experts say?

HDFC AMC IPO Opens today – What do brokers and experts sayHDFC AMC IPO Opens today – What do brokers and experts say?

HDFC AMC IPO opening for subscription today. HDFC AMC offer savings and investment products across asset classes, which provide income and wealth creation opportunities to its customers. Company revenues grew by 19% CAGR in the last 5 years. It earned a decent profit of 38% for FY2018. We have indicated that though the issue price is highly priced, considering the good brand of this company in the mutual fund industry, investors can consider investing in this IPO. Many experts believe that an HDFC AMC IPO would provide value to investors. In this article, we would provide 10 brokers / expert views about an HDFC AMC Limited IPO

Also Read: Best Rural Based Mutual Funds to invest in India

HDFC AMC IPO Issue details

IPO opening date: 25-July-2018

IPO closure date: 27-July-2018

Face Value: Rs 5 per share

Issue price band: Rs 1,095 to Rs Rs 1,100 per share

Issue size: 2,800 Crores

IPO Lot size: 13 shares and 13 shares, there-off

Minimum investment: Rs 14,300 on higher price band

Leading Managers: Kotak Mahindra Capital, Citigroup Global Markets, IIFL Holdings, Axis Capital, DSP Merril Lynch, ICICI Securities, CLSA India, JM Financial and JP Morgan India

Listing: BSE / NSE

Download HDFC AMC IPO RHP Prospectus at this link.

HDFC AMC IPO Opens today – What do brokers and experts say?

#1 – Myinvestmentideas says HDFC AMC has a good brand, but Highly priced, can be considered for medium to long term

As per our analysis earlier, HDFC AMC posted good revenue growth of 19% CAGR in the last 5 years and earns decent profits. However, we have indicated that the issue price is highly priced and said that we would have been excited if the issue price was on the lower side. Considering its brand in the mutual fund business and positive factors, we have recommended investors to invest in this IPO for 4-5 year tenure. Investors may or may not get listing gains. Complete review about HDFC AMC IPO can be read here.

#2 – Motilal Oswal says Subscribe to HDFC AMC IPO

Motilal Oswal says HDFC IPO is a good bet as it has:

a) Strong investment performance with experienced and stable management

b) Consistent market leadership position.

c) Favorable perception of HDFC AMC’s brand, higher mix of higher-margin equity oriented AUM, consistent RoE of ~40%, a wide distribution network (209 branches and >65,000 distributors), and increasing dividend payouts work in HDFC AMC’s favor. Over FY15-18, it recorded Revenue/ EBITDA/ PAT CAGR of 19.8%/ 17.8%/ 20.2%. At the upper price band, HDFC AMC is valued at 32x 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. They recommend SUBSCRIBE.

#3 – Sharekhan says Premium valuations are justified in HDFC AMC IPO

Even Sharekhan says that HDFC AMC is:

a) Consistent market leadership position in Indian mutual fund industry.

b) Superior and diversified product mix distributed through a multi-channel distribution network.

c) Consistent profitable growth

d) Experienced and stable management and investment teams.

e) At a price band of Rs. 1,095-1,100 per share, the issue is priced at 31.4x FY18 EPS. It has very healthy RoNW of 33.4%, which is among the highest in the industry. Premium valuations are justified by healthy RoNW, the AMC’s leadership position, reputed pedigree and structural growth trend given the financialisation of household savings in India.

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#4 – Angle Broking says Subscribe to HDFC AMC IPO

Angle Broking believes that HDFC AMC has:

a) Huge potential for growth (Industry) in Mutual Fund AUM.

b) Most profitable AMC among top 5 AMCs.

c) Healthy financials to support higher dividend payout.

d) Outlook & Valuation: At the upper end of the IPO price band, it is offered at 32x its FY2018 EPS and 11x its FY2018 book value, demanding Rs 23,318cr market cap, which is 7.6% of the MF AUM (Rs 3,06,841cr for the month of June 2018). Considering that HDFC AMC is the second largest AMC coupled with the huge potential of MF industry growth, strong return ratios, asset light business, higher dividend payout ratio and track record of superior investment performance, they are positive on this IPO and rate it as SUBSCRIBE.

#5 – Ajcon Global says Subscribe to HDFC AMC IPO, which has robust growth potential

Ajcon Global says they are recommending this IPO considering several factors like:

a) Consistent market leadership position in the Indian mutual fund industry.

b) Trusted brand and strong parentage.

c) Strong investment performance supported by comprehensive investment philosophy and risk management.

d) Superior and diversified product mix distributed through a multi – channel distribution network.

e) Focus on individual customers and customer centric approach.

f) consistent profitable growth.

g) Company reaps the benefits of strong operating leverage.

h) Robust ROE of 33.4 percent in FY18 as compared to other AMCs in the industry, they recommend “SUBSCRIBE” to the issue for long term wealth creation.

#6 – Asit C Mehta from says Subscribe for Long Term

They says that “It is among the very few players which is best positioned to capture the high-growth potential of India’s mutual fund industry, which is interpenetrated in comparison with developed nations (11% of GDP as compared to a world average of 62%). With increasing household savings and financial awareness, there is gradual shift from physical saving to financial saving. Further, with demonetization, RERA implementation, and GST rollout, value of real estate and gold as an investment option has reduced. Given the underpenetrated nature of the MF industry coupled with first-mover advantage followed by well-diversified suite of products and multi-channel distribution network, strong brand image, superior return ratios we believe the company is set to benefit in the long run. As an Upper price band of Rs 1100/-, the company trades at 10.7x its FY18 P/B Value of Rs 102.6/-, & 31.5x its FY18 EPS of Rs 34.9/-, which we believe is reasonably priced. Hence we recommend to SUBSCRIBE to the issue on a long term basis”.

#7 – BP Wealth says Subscribe to this IPO

BP Wealth believes that HDFC AMC has:

a) Sustained leadership position in the mutual fund industry

b) Strong parentage coupled with reliable brand

c) Diversified product mix supported by multi channel distribution network higher share of AUM from individual customers.

d) higher proportion of equity oriented AUM  increasing contribution of systematic transactions.

e) Further, a well diversified distribution network, superior brand and strong parentage contribute positively. The management’s ability to deliver strong investment performance and commitment towards constantly increasing distribution reach, strengthen product portfolio are indicative of sustained future growth. At the upper end of the price band the company available at a P/E of 31.4x FY18 earnings, compared to Reliance Nippon AMC,s P/E of 26x implying a ~20% premium. They feel the premium is justified owing to the stated reasons and therefore recommend a ‘SUBSCRIBE’ rating to the IPO.

#8 – Canara Bank Securities says subscribe for listing gains as well as for the long term

They indicate that “HDFC AMC Ltd has an EPS of Rs. 35.02 and NAV of Rs.102.58 for FY18 respectively. The company would trade at 31.41x P/E and P/B of 10.72. Considering the robust growth rate, consistent market leadership, strong credentials of Promoter companies, we believe that the stock is fairly priced and has an upside potential. One may subscribe to the IPO for listing as well as long term gains”.

#9 – Choice Equity Broking says Subscribe to HDFC AMC IPO

Choice Equity says “On the valuation front, HDFCAMC is demanding a value of 7.8% to its FY18 AUM, whereas as its only peer Reliance Nippon Life Asset Management Ltd. is trading at 5.6% to its AUM. Considering the higher concentration of equity assets in the AUM, most profitable AMC tag and the brand name associated, we feel that the higher valuation demanded by HDFCAMC seems to be justified. Thus, we assign a “SUBSCRIBE” rating for the issue”.

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#10 – GEPL Capital Says Subscribe

GEPL believes that HDFC AMC is:

a) Consistent market leadership position in the Indian mutual fund industry

b) Trusted brand and strong parentage

c) Strong investment performance supported by comprehensive investment philosophy and risk management.

d) HDFC Asset Management company Ltd (HDFC AMC) stands to gain from operating leverage. At a P/E of 31x of FY18 EPS. We believe that its strong growth perspective in the upcoming period will drive the future growth, which is higher to its domestic peers. We assign a Subscribe rating to the IPO.

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HDFC AMC IPO Opens today – What do brokers and experts say

Suresh KP

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