HDFC ASSET MANAGEMENT COMPANY LIMITED IPO - PRICE BAND : ' 1095 -'1100 OUR RECOMMENDATION " SUBSCRIBE"

HDFC ASSET MANAGEMENT
     COMPANY LIMITED
            IPO
Price Band : ` 1095 –`1100

  our recommendation “ SuBScriBe”

THE OFFER
Issue Open : 25 July 2018 to 27 July 2018

»» Issue Type: Book Built Issue IPO

»» Issue Size:
 › 25,457,555 Equity Shares @ 5 aggregating up to ` 2,800.33 cr
»» Face Value: ` 5 Per Equity Share

»» Issue Price: ` 1095 - ` 11oo Per Equity Share

»» Market Lot: 13 Shares

»» Minimum Order Quantity: 13 Shares

»» Listing At: NSE, BSE

CAPITAL STRUCTURE
The share capital of Company, is set forth below:-
                                    (Amount in ` except share data)

Authorized Share Capital :-
600,000,000 Equity Shares @5 Aggregate value 3,000,000,000
50,000,000 Preference Shares @10 Aggregate value 500,000,000

Issued, subscribed and paid up capital before the Issue :-
211,988,800 Equity Shares @5 Aggregate value 1,059,944,000
Present Issue:-
25,457,555 Equity Shares @ 5 aggregating up to ` 2,800.33 cr

OBJECT OF THE OFFER
The objects of the Offer are

 To carry out the sale of Equity Shares offered for sale by the
  Selling Shareholders.

 Enhance the company's visibility and brand image.

 Provide a public market for Equity Shares in India.

COMPANY OVERVIEW
HDFC Asset Management Company (HDFC AMC), a joint
venture between Housing Development Finance Corporation
(HDFC) and Standard Life Investments (SLI), is the most
profitable asset management company in India in terms of net
profits since FY2013 with total AUM of Rs 291985 crore as of
end March 2018.
The company has been the largest asset management
company in India in terms of equity-oriented AUM since
the last quarter of FY2011 and consistently remains among
the top two asset management companies in India in
terms of total average AUM since August 2008.

HDFC AMC has recorded healthy 25.5% compounded annual
growth rate (CAGR) in AUM between March 2013 and
March 2018.
As at end March 2018, equity-oriented AUM constituted Rs
149713 crore and non-equity-oriented AUM at Rs 142273
crore of total AUM.
 The proportion of equity-oriented AUM to total AUM was at
51.3%, which was higher than the industry average of
43.2%, end March 2018.
The market share of total AUM was 13.7% and of actively
managed equity-oriented AUM (Rs 144925 crore which excludes
index linked and arbitrage schemes) was 16.8% among all asset
management companies in India.

The company offers a large suite of savings and investment
products across asset classes, which provide income and wealth
creation opportunities to its customers. As of March 31, 2018, it
offered 133 schemes that were classified into 27 equity-
oriented schemes, 98 debt schemes (including 72 fixed
maturity plans (FMPs)), three liquid schemes, and five
other schemes (including exchange-traded schemes and
funds of fund schemes)
As of March 2018, independent financial advisors (IFAs)
generated 27.6% of total AUM, national distributors 21.0%
and banks 17.3%, while the remaining 34.1% was invested in
direct plans.
In terms of equity-oriented AUM, IFAs generated 39.2% of
equity-oriented AUM, national distributors 24.2% and
banks 19.1%, while the remaining 17.5% was invested in
direct plans as of March 2018.

ROAD MAP AHEAD
  Company objectives are to expand their market share
  and aim to accomplish this through the following
  strategies:

 Maintain strong investment performance.
 Expand reach and distribution channels.
 Enhance product portfolio.
 Invest in digital platforms to establish leadership in the
  growing digital space.

STRENGTHS
Consistent market leadership position in the Indian
 mutual fund industry.
Trusted brand and strong parentage.
Strong investment performance supported by
 comprehensive investment philosophy and risk
 management.
Superior and diversified product mix distributed
 through a multi-channel distribution network.
Focus on individual customers and customer
 centric approach.
Consistent profitable growth

FINANCIAL HIGHLIGHTS
The total revenue increased from Rs 903.11 crore in FY2014
to Rs 1867.25 crore in FY2018, with a CAGR of 19.9%.

Net profit has grown from Rs 357.77 crore to Rs 721.62 crore
during the same period at a CAGR of 19.2%.

Dividend Payout Ratio increased from 41% in FY2014 to 56%
in FY2018 and paid a dividend of Rs 336.89 crore in FY2018
compared to Rs 126.20 crore in FY2014.

The net worth of the company stood at Rs 2159.97 crore as
of March 2018.
Return on average net worth exceeded 40% every year since
FY2014 and was 40.28% for FY2018.

CONTINUE
Net cash flow from operating activities increased
from Rs 454.8 crore in Fiscal 2017 to Rs 620 crore in
Fiscal 2018, with a CAGR of 31.2% in FY14-18.
Depreciation & amortization charges increased
by 7.9% CAGR, while other income increased by
24.6% CAGR during FY14-18.

SNAPSHOT

RESULTS

           PEER COMPARISION (FY 18 fig.) –
          Reliance Nippon the ONLY listed peer

RISK FOR THE BUSINESS
 Market fluctuations could affect business in many
  ways, by reducing the value of AUM, decline in
  investment management fees, portfolio management
  fees services, reducing systematic transactions causing
  customers to withdraw their investments, each of which
  could materially affect business prospects.
 Impact of changes to the regulations on the Total
  Expenses Ratio(TER) for Schemes, could adversely
  impact business.
 Data privacy laws, rules and regulations could have a
  material adverse effect on business.

CONTINUE
 Company is required to comply with certain obligations
 under SEBI (Mutual Funds) Regulations and other
 applicable SEBI Regulations.
 Weaknesses, disruptions or failures in, information
 technology systems could have a material adverse effect
 on business.
 The mutual fund business in India may be adversely
 affected by changes to the present favorable tax regime.

VALUATION
HDFCAMC has been the largest asset management company (AMC)
in India in terms of equity-oriented AUM.
 It has consistently been among the top two AMCs in India in terms
of total average AUM since the month of Aug. 2008. As on 31st Mar.
2018, it had a total AUM of Rs. 2,91985 crore.
Also it has been the most profitable AMC in India in terms of net
profits since FY13.
Taking into consideration, its trusted brand and strong
parentage, consistently delivered RoE of above 40% for last five
years to FY2018, consistent profitable growth and diversified
product mix distributed through a multi – channel distribution
network. On the upper price band of `1100 with EPS of ` 34.1 for
FY18, P/E works out at 32.2x, justified as Reliance Nippon is the
only listed peer.
 we recommend to “SUBSCRIBE” the issue for long term wealth
creation.

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