Started in 2000, HDFC Asset Management Company Limited is the investment manager to HDFC Mutual Fund. They have been the largest asset management company in India in terms of equity-oriented AUM since the last quarter of Fiscal 2011 and have consistently been among the top two asset management companies in India in terms of total average AUM since the month of August 2008 (according to CRISIL). Company also provides portfolio management and segregated account services, which includes discretionary, non-discretionary and advisory services. HDFC AMC operates as a joint venture between Housing Development Finance Corporation Limited ('HDFC') and StandardLife Investments Limited ('SLI'). The strong parentage and trusted brand enhances its appeal and provides confidence to its customers. Company offers a large suite of savings and investment products across asset classes, which provide income and wealth creation opportunities to the customers. As of March 31, 2018, they offered 133 schemes that were classified into 27 equity-oriented schemes, 98 debt schemes (including 72 fixed maturity plans ('FMPs')) and three liquid schemes, and five other schemes (including exchange-traded schemes and funds of fund schemes). This diversified product mix provides them with the flexibility to operate successfully across various market cycles, cater to a wide range of customers from individuals to institutions, address market fluctuations, reduce concentration risk in a particular asset class and work with diverse sets of distribution partners which helps them expand the reach. Company also provides portfolio management and segregated account services, including discretionary, non-discretionary and advisory services, to high net worth individuals ('HNIs'), family offices, domestic corporates, trusts, provident funds and domestic and global institutions. As of March 31, 2018, company managed a total AUM of Rs 64.74 billion as part of the portfolio management and segregated account services' business. Company had a total number of Live Accounts of 8.10 million as of March 31, 2018, and their Monthly Average AUM ('MAAUM') from individual customers accounted for 62.2% of the MAAUM, compared to the industry average of 51.4%, for the same period. Systematic transactions have gained significance among individual customers, and company had a monthly flow of over Rs 11.5 billion through approximately 3.16 million systematic transactions as of March 31, 2018. As of December 31, 2017, company served customers in over 200 cities through the pan-India network of 209 branches (and a representative office in Dubai) and service centres of their registrar and transfer agent ('RTA'), which is supported by a strong and diversified network of over 65,000 empaneled distribution partners across India, consisting of independent financial advisors ('IFAs'), national distributors and banks. As of March 31, 2018, IFAs, national distributors and banks generated 27.6%, 21.0%, 17.3% of their total AUM, respectively, while the remaining 34.1% was invested in direct plans. In terms of the equity-oriented AUM, IFAs, national distributors and banks generated 39.2%, 24.2%, 19.1% of their equity-oriented AUM, respectively, while the remaining 17.5% was invested in direct plans, as of March 31, 2018. Company offers its products and services through the online portal, HDFC MFOnline and mobile applications. Company has an established track record of delivering robust financial performance. Company's total revenue increased from Rs 9031.14 million in Fiscal 2014 to Rs 18,672.46 million in Fiscal 2018, with a CAGR of 19.91%, and the net profit has grown from Rs 3577.70 million to Rs 7216.16 million during the same period at a CAGR of 19.17%. They had a net worth of Rs 21,599.68 million as of March 31, 2018. The return on average net worth exceeded 40% every year since Fiscal 2013 and was 40.28% for Fiscal 2018. As on March 31, 2018, company has 1010 employees on the pay rolls. On performance front, HDFC AMC has posted income/net profits of Rs. 783.98 cr. / Rs. 318.75 cr. (FY13), Rs. 903.11 cr. / Rs. 357.77 cr. (FY14), Rs. 1064.28 cr. / Rs. 415.50 cr. (FY15), Rs. 1494.34 cr. / Rs. 477.88 cr. (FY16), Rs. 1587.91 cr. / Rs. 550.21 cr. (FY17) and Rs. 1867.25 cr. / Rs. 721.62 cr. (FY18). Thus company has posted healthy growth over last couple of years on consistent basis. Company has posted an average EPS of Rs. 30.42 and average RoNW of 36.51% for last three fiscals. Issue is priced at a P/BV of 10.72. If we attribute latest earnings on fully diluted equity post issue, then asking price is at a P/E of around 31.46, whereas Industry average is 26.01. So issue looks fully priced. Comparison with listed peers are shown above. On BRLM's front, 12 merchant bankers are associated with this issue. As per financials, company's growth is good, RoNW is 36.51% for last three fiscals and issue is priced at P/E of around 31. Mutual Fund sector is expected to fare better and industry experts are very positive on this sector, also brand value of HDFC associated with this company. So we give 'RECOMMENDED' rating to this IPO with very bright long term prospective.
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