NEW DELHI: HDFC Asset Management Company Ltd or HDFC AMC, the second largest mutual fund company in India and the most profitable one, is launching an initial public offering (IPO) on July 25. Arshad Khan of The New Indian Express caught up with the company’s managing director Milind Barve to discuss in detail various aspects of the IPO, opportunities in Mutual Fund market, changes in household investment and more. Excerpts:
You are going public on July 25. Please detail our readers about the price band of your IPO, how much you are planning to raise and where would it take your company’s valuation?
HDFC AMC will open its IPO on July 25 at a price band of Rs 1,095 to 1,100 per share. The proposed IPO offers up to 2.54 crore equity shares of the fund house through an offer for sale of 85.92 lakh shares (4.08 per cent stake) by HDFC and up to 1.68 crore shares (7.95 per cent holding) by our JV partner Standard Life Investments. At the upper end of the price band, we are valued at Rs 23,319 crore.
Investors can apply up to a maximum of Rs 2 lakh in the retail category, with a lot size of minimum 13 shares and in multiples of 13 thereafter. The IPO closes on July 27.
What is the headroom for growth in the Mutual Fund market?
India’s MF market is still at a nascent stage as asset base of mutual funds as a percentage of GDP is just 11 per cent and there is room for growth. The global average for the same is 62 per cent, while in USA, it exceeds over 100 per cent. India has a culture of saving. Indians save Rs 20-30 lakh crore every year, which indicates immense scope for channelising this saving into MF industry.
Has there been a change in the way Indians invest their savings?
In the past few years, we are seeing a shift as people have started saving more in financial tools, while physical savings such as real estate and gold is going down. As one would expect, a significant part of household saving is going into deposits. It will remain a favourite but people have started looking at other incremental avenues to invest, apart from bank deposits.
A majority of IPOs this year haven’t performed well in the market. Your views?
My understanding is that there is always an audience and a reasonable good reception for what people perceive as good quality IPOs coming at a reasonable price. I think it is the nature of the business that is presented to the investors and the valuation at which it is presented that makes an IPO attractive or not attractive. However, terming it as a success or failure is not the right thing.
Equity is a long-term asset. You cannot just judge them over a short period of time.
You have to look them over three to five years of time. For people also, it is important to hold on their equity for a reasonable duration to get a good return.