HDFC MF looks to raise Rs 4,000 crore via IPO
, ET Bureau|
Dec 26, 2017, 08.01 AM IST
MUMBAI: India's largest mortgage company HDFC Ltd and its British joint venture partner Standard Life Investments are planning to raise Rs 4,000 crore by selling a 10% stake in asset management company HDFC Mutual Fund, valuing it at Rs 40,000 crore, said two people with direct knowledge of the plan.
Bank of America Merrill Lynch, Credit Suisse and Citigroup are close to being appointed to manage the initial public offering (IPO), they said. The issue will be the second from an asset management company in India to hit the market after Reliance Nippon Asset Management raised Rs 1,540 crore in November by selling a 10% stake in the primary market. The issue was oversubscribed 81 times and the asset manager now has a market value of Rs 17,350 crore, reflecting a 13% rise in the stock.
HDFC MF is 60% owned by HDFC while Standard Life Investments holds the rest. Both will sell about 5% stake each in the IPO, which the HDFC board approved in November.
With assets under management of Rs 2.92 lakh crore, HDFC MF is the most profitable asset management company, having posted a net profit of Rs 550 crore for the year ended March 31. Net profit stood at Rs 310 crore in the six months to September. Bank of America Merril Lynch and Citigroup declined to comment.
HDFC MF and Credit Suisse did not respond to queries. Foreign and local investors are drawn to asset management companies as Indians have turned increasingly to mutual funds.
Investors have been pumping around Rs 5,000 crore every month into Systemic Investment Planning schemes of mutual funds as they shift away from gold and bank deposits for better returns.
"Financialisation of savings has just started, with investors moving from physical assets such as gold and real estate to mutual funds," said Amit Kumar, partner and director, Boston Consulting Group.
"The asset management industry is at the beginning of a growth cycle. The industry has seen a large number of retail investors coming over the last couple of years on the back of high returns. Managing their expectations and educating them will be a challenge in the near term." Experts said HDFC MF's track record will ensure a successful IPO.
"Given that penetration of mutual funds is still 3-4% only, growth for the sector is there to stay,'' said Kaustubh Belapurkar, director, research, Morningstar India. "HDFC is one of the most well-managed AMCs with profitable assets and will command premium valuations."
The Indian mutual fund industry is still at a nascent stage with less than 4% of the population investing in mutual funds. Demonetisation in November 2016 accelerated the shift from physical savings to financial savings and assets under management rose 23% to Rs 22.79 lakh crore in November 2017 from Rs 18.48 lakh crore in December 2016.
The Reliance Nippon offer drew marquee foreign institutional investors such as Fidelity International, Morgan Stanley, Eastspring Investments, Columbia Threadneedle Investments and Pictet. They were joined by local mutual funds including HDFC MF, Birla MF, SBI MF, UTI MF, DSP Blackrock MF and IDFC MF.
HDFC has been raising resources by listing some of its subsidiaries in the primary market, starting off with its insurance venture with Standard Life last month.
Bank of America Merrill Lynch, Credit Suisse and Citigroup are close to being appointed to manage the initial public offering (IPO), they said. The issue will be the second from an asset management company in India to hit the market after Reliance Nippon Asset Management raised Rs 1,540 crore in November by selling a 10% stake in the primary market. The issue was oversubscribed 81 times and the asset manager now has a market value of Rs 17,350 crore, reflecting a 13% rise in the stock.
HDFC MF is 60% owned by HDFC while Standard Life Investments holds the rest. Both will sell about 5% stake each in the IPO, which the HDFC board approved in November.
With assets under management of Rs 2.92 lakh crore, HDFC MF is the most profitable asset management company, having posted a net profit of Rs 550 crore for the year ended March 31. Net profit stood at Rs 310 crore in the six months to September. Bank of America Merril Lynch and Citigroup declined to comment.
HDFC MF and Credit Suisse did not respond to queries. Foreign and local investors are drawn to asset management companies as Indians have turned increasingly to mutual funds.
Investors have been pumping around Rs 5,000 crore every month into Systemic Investment Planning schemes of mutual funds as they shift away from gold and bank deposits for better returns.
"Financialisation of savings has just started, with investors moving from physical assets such as gold and real estate to mutual funds," said Amit Kumar, partner and director, Boston Consulting Group.
"The asset management industry is at the beginning of a growth cycle. The industry has seen a large number of retail investors coming over the last couple of years on the back of high returns. Managing their expectations and educating them will be a challenge in the near term." Experts said HDFC MF's track record will ensure a successful IPO.
"Given that penetration of mutual funds is still 3-4% only, growth for the sector is there to stay,'' said Kaustubh Belapurkar, director, research, Morningstar India. "HDFC is one of the most well-managed AMCs with profitable assets and will command premium valuations."
The Indian mutual fund industry is still at a nascent stage with less than 4% of the population investing in mutual funds. Demonetisation in November 2016 accelerated the shift from physical savings to financial savings and assets under management rose 23% to Rs 22.79 lakh crore in November 2017 from Rs 18.48 lakh crore in December 2016.
The Reliance Nippon offer drew marquee foreign institutional investors such as Fidelity International, Morgan Stanley, Eastspring Investments, Columbia Threadneedle Investments and Pictet. They were joined by local mutual funds including HDFC MF, Birla MF, SBI MF, UTI MF, DSP Blackrock MF and IDFC MF.
HDFC has been raising resources by listing some of its subsidiaries in the primary market, starting off with its insurance venture with Standard Life last month.
