IPO Report HDFC ASSET MANAGEMENT COMPANY LTD SUBSCRIBE IPO Details Issue Date 25 th July-27 th July 2018 Price Band 1095-1100/Share Bid Lot 13 & in multiplethereof Face Value Rs 5/Share Listing BSE, NSE Offer For Sale 25,457,555 Eq Shares Fresh Issue ---- Pre Issue Eq Shares 211,988,800 Eq Shares Post Issue Eq Shares 211,988,800 Eq shares BRLM Kotak Mahindra Capital, Citigroup Global Markets Axis Capital, DSP Merrill, CLSA India, HDFC Bank Registrar karvy Computershare Private Ltd Research Analyst : Astha Jain For Private Circulation Only HDFC AMC 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. Co had a total AUM of Rs 2919 billion as of March 31, 2018. Co s profits have grown every year since the first full year of operations in Fiscal 2002. As of March 31, 2018, co s equity-oriented AUM and non-equity-oriented AUM constituted Rs 1497.13 billion and Rs 1422.73 billion respectively of its total AUM. Co s actively equity -oriented AUM (which excludes index linked & arbitrage schemes) constituted Rs 1449.25 billion of co s total AUM as of March 31,2018. Strong Financial Performance: Co s total revenue increased from Rs 9,031.14 million in fiscal 2014 to Rs 18,672.46 million in Fiscal 2018, with a CAGR of 19.91%, and co s net profit has grown from Rs 3,577.70 million to Rs 7,216.16 million during the same period at a CAGR of 19.17. Co had a net worth of Rs 21,599.68 million as of March 31, 2018. Co s return on average net worth exceeded 40% every year since Fiscal 2014 and was 40.28% for Fiscal 2018. Trusted brand & strong parentage : HDFC group has a strong presence across financial products and services, especially in retail sector. Co benefit from HDFC s brand name as it gives a unique advantage of being a trusted provider of financial services & SLI provides access to international practices for operations and risk management. HDFC is one of India s leading housing finance companies. Robust growth: Co s AUM has grown at a CAGR of 33.9% since Fiscal 2001. Co s proportion of equity-oriented AUM to total AUM was at 51.3%, which was higher than the industry average of 43.2%, as of March 31, 2018, according to CRISIL. As of March 31, 2018, co had the highest share of individual customers of 15.7% and the second largest market share of MAAUM of 12.7% from B-15 cities in India. Valuation The co is bringing the issue at price band of Rs 1095-1100/share. On higher band, co is valued at 7.98% of its total AUM of Rs 2919 billion as on FY18. Although co s valuations are at premium when we compare it to listed domestic AMC as well as some of global AMCs but looking after co s consistent market leadership in mutual fund industry coupled with strong parentage with trusted brand & profitable growth, we recommend Subscribe on issue.
Company Overview Company operate as a joint venture between Housing Development Finance Corporation Limited ( HDFC ) & Standard Life Investments Ltd( SLI ).HDFC is one of India s leading housing finance companies. SLI is indirect subsidiary of Standard Life Aberdeen pls ( Standard Life Aberdeen ), one of the world s largest investment companies,created in 2017 from merger of Standard Life Plc & Averdeen Asset Management PLC. Co had a total AUM of Rs 2,919.85 billion as of March 31, 2018. Co offer a large suite of savings and investment products across asset classes, which provide income and wealth creation opportunities to customers. As of March 31, 2018, co offered 133 schemes that were classified into 27 equity-oriented schemes, 98 debt schemes (including 72 fixed maturity plans ( FMPs )),three liquid schemes, & five other schemes (including exchange-traded schemes and funds of fund schemes). Co also provide 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 & domestic & global institutions. As of March 31,2018, co managed AUM of Rs 64.74 billion as part of co s portfolio management & segregated accounts services business. Additionally, as part of co s portfolio management and segregated accounts services co provide non-binding investment advisory services to a fund which had an AUM of Rs 4.69 billion as of March 31, 2018 and is managed by Standard Life Investments Global SICAV. Co had a total number of Live Accounts of 8.10 million as of March 31, 2018, and co s Monthly Average AUM ( MAAUM ) from individual customers accounted for 62.2% of its MAAUM, compared to the industry average of 51.4%, for the same period, according to CRISIL. As of March 31, 2018, co served customers in over 200 cities through its pan-india network of 209 branches (and a representative office in Dubai) and service centres of co s registrar & 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. For Private Circulation Only \
Investment Rationale Consistent market leadership position in the Indian mutual fund industry Co have been a leader in the Indian mutual fund industry.co have been the most profitable asset management company in India in terms of net profits since Fiscal 2013. Co s AUM has grown at a CAGR of 33.9% since Fiscal 2001. Co 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. Co s proportion of equity-oriented AUM to total AUM was at 51.3%, which was higher than the industry average of 43.2%, as of March 31, 2018, according to CRISIL. As of March 31, 2018, co s market share of total AUM was 13.7% and of actively managed equityoriented AUM (which excludes index linked and arbitrage schemes) was 16.8% among all asset management companies in India, as of March 31, 2018, according to CRISIL. As of March 31, 2018, co had the highest share of individual customers of 15.7% and the second largest market share of MAAUM of 12.7% from B-15 cities in India, according to CRISIL. As of December 31, 2017, MAAUM from individual customers accounted for 62.2% compared to 51.4% for the mutual fund industry in India as a whole for the same period, which increased from 54.6% compared to 43.9% as of March 2014, respectively, according to CRISIL. Co s leading industry and financial position provides it with a robust platform for growth and efficiencies of scale. Wide distribution network As of March 31, 2018, co served customers in over 200 cities through its pan-india network of 209 branches (and a representative office in Dubai), and service centers of co s RTA. As of March 31, 2018, co had over 65,000 empaneled distributors across India marketing the entire range of co s schemes with its largest distribution partner (HDFC Bank Limited) accounted for 10.3% of co s total AUM and 12.1% of co s equity-oriented AUM, while co s second and third largest distributor accounted for 3.2% and 2.6% of its total AUM, respectively. As of March 31, 2018, 60 of co s branches were located in top 15 ( T-15 )cities & 149 were located in B-15 cities in India, where co have the second highest market share of 12.7%, according to CRISIL. Co s share of MAAUM from T-15 and B-15 cities as of March 31, 2018 was 81.9% and 18.1%, respectively. Risk factors A large portion of co total AUM is concentrated in a few schemes. For example, as on March 31, 2018, co s top six equity-oriented schemes constituted 79.1% of co s total equity-oriented AUM and co s top six debt schemes constituted 65.5% of co s total debt AUM. The performance of these schemes has a significant impact on co s AUM and consequently co s revenue. Underperformance by any of these schemes may have a disproportionate adverse impact on the AUM and co s revenue. For Private Circulation only
Objects of Offer The objects of the Offer are to achieve the benefits of listing the Equity Shares on the Stock Exchanges and for the sale by the Promoter Selling Shareholders. Further, Company expects that listing of the Equity Shares will enhance co s visibility and brand image and will provide a public market for the Equity Shares in India. Company will not receive any proceeds from the Offer and all the proceeds from the offer will be received by Promoter Selling Shareholders, in proportion to the Equity Shares offered by the respective Promoter Selling Shareholders as part of the offer. Financial Statements Rs Cr Particulars FY15 FY16 FY17 FY18 Total Income 1022.44 1442.55 1480.04 1759.75 Operating Exp 431.54 775.03 776.15 793.29 EBIDTA 590.90 667.51 703.89 966.46 EBIDTA Margin (%) 57.79 46.27 7.56 54.92 Other Income 41.84 51.80 107.88 107.50 Depreciation 10.14 11.06 11.96 11.44 EBIT 6212.60 708.25 799.80 1062.52 Interest 0.00 0.00 0.00 0.00 PBT 622.60 708.25 799.80 1062.52 E/O Item 0.00 0.00 0.00 0.00 PBT After E/O Item 622.60 708.25 799.80 1062.52 Tax 207.10 230.37 249.56 340.89 PAT 415.50 477.88 550.25 721.62 Other Comp Inc 0.00 0.00 0.00 0.00 Adjusted PAT 415.50 477.88 550.25 721.62 NPM(%) 40.64 33.13 37.18 41.01 Eq Capital 25.24 25.16 25.17 105.28 Res & Surplus 1094.65 1126.06 1397.77 2054.69 Non Con Int 0.00 0.00 0.00 0.00 Net Worth 1119.89 1151.22 1422.94 2159.97 Eq Shares ( In No) 5.05 5.03 5.03 21.06 EPS 82.31 94.95 109.32 34.27 ROE (%) 37.10 41.51 38.67 33.41 ROCE (%) 55.59 61.52 56.21 49.19 Book Value 221.84 228.74 282.70 102.58 For Private Circulation only
research@hemsecurities.com HEM SECURITIES LIMITED MEMBER-BSE,CDSL,SEBI REGISTERED CATEGORY I MERCHANT BANKER Sebi Registration No For Research Analyst: INH100002250 MUMBAI OFFICE: 904, A WING. 9 TH FLOOR, NAMAN MIDTOWN, SENAPATI BAPAT MARG, ELPHINSTONE ROAD, LOWER PAREL,MUMBAI - 400013 PHONE- 0091 22 49060000 FAX- 0091 22 2262 5991 JAIPUR OFFICE: 203-204, JAIPUR TOWERS, M I ROAD, JAIPUR-302001 PHONE- 0091 141 405 1000 FAX- 0091 141 510 1757 GROUP COMPANIES HEM FINLEASE PRIVATE LIMITED MEMBER-NSE HEM MULTI COMMODITIES PRIVATE LIMITED MEMBER-NCDEX, MCX HEM FINANCIAL SERVICES LIMITED NBFC REGISTERED WITH RBI Disclaimer & Disclosure: This document is prepared for our clients only, on the basis of publicly available information and other sources believed to be reliable. Whilst we are not soliciting any action based on this information, all care has been taken to ensure that the facts are accurate, fair and reasonable. This information is not intended as an offer or solicitation for the purchase or sell of any financial instrument and at any point should not be considered as an investment advice. Reader is requested to rely on his own decision and may take independent professional advice before investing. Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited, Directors and any of its employees shall not be responsible for the content. The person accessing this information specifically agrees to exempt Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and further agrees to hold Hem Securities Limited, Hem Finlease Private Limited, Hem Multi Commodities Pvt. Limited or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays. The companies and its affiliates, officers, directors, and employees, including persons involved in the preparation or issuance of this material may from time to time, have long or short positions in, and buy or sell the securities there of, company (ies) mentioned herein and the same have acted upon or used the information prior to, or immediately following the publication. Analyst Certification The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the