HDFC Asset Management Company Limited IPO Opens on 25 July 2017

HDFC Asset Management Company Limited -  IPO

Price: Rs. 1095 - 1100, Lot Size: 13 

Please find attached IPO Note of “HDFC Asset Management Company Limited”

Issue Details

	HDFC Asset management Company Limited
Issue Period	Issue Opens On*: Wednesday, July 25, 2018 Issue Closes On: Friday, July 27, 2018 *The Anchor Investor Bidding  shall be on 24th July 2018
Face Value	Rs.5/- Per Share
Issue Details	Offer for Sale of 25,457,555 Equity Shares
Issue Size (Rs. Cr)	Rs.2,788~ Cr – 2,800^ Cr
Price Band	Rs.1,095 – 1,100
Bid Lot	13 Equity Shares and multiple thereof
Reservation for
-  HDFC AMC Employees	320,000 Equity Shares (Rs.35^ Cr)
- HDFC Ltd Employees	560,000 Equity Shares (Rs.62^ Cr)
- HDFC Ltd Shareholders	2,400,000 Equity Shares (Rs.264^ Cr)
Issue Structure :
QIB	50% of the Net offer ( 11,088,776 Shares ) (Rs.1,214~Cr - Rs.1,220^ Cr)
NIB	15% of the Net offer ( 3,326,634 Shares ) (Rs.364~Cr - Rs.366^ Cr)
Retail	35% of the Net offer ( 7,762,145 Shares ) (Rs.850~Cr - Rs.854^ Cr)
	~ Lower Price Band and ^Upper Price Band
Mode of Payment	ASBA Mandatory ( No Cheque will be accepted)
BRLMs	Axis Capital, Kotak Mahindra Cap, DSP ML, Citigroup Global, CLSA India, HDFC Bank, ICICI Sec, IIFL Holdings, JM Financial, JP Morgan, Morgan Stanley, Nomura
Registrar	Karvy Computershare Pvt Ltd

Issue Highlights

•     HDFC Asset Management Company Limited (“HDFC AMC”) was incorporated on December 10, 1999. HDFC AMC operates as a joint venture between Housing Development Finance Corporation Limited (“HDFC”) and Standard Life Investments Limited (“SLI”). HDFC AMC is the largest Asset Management Company in India in terms of equity-oriented Asset under Management (“AUM”) since the last quarter of Fiscal 2011 and has consistently been among the top 2 Asset Management Companies in India in terms of total average AUM since the month of August 2008, according to CRISIL. The company is the most profitable asset management company in India in terms of net profits since Fiscal 2013 with a total AUM of Rs.291,985 crore as of March 31, 2018.

•     HDFC AMC offers a large suite of savings and investment products across asset classes, which provide income and wealth creation opportunities to their 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”)) 3 liquid schemes, and 5 other schemes (including exchange-traded schemes and funds of fund schemes).

•     As of March 31, 2018, the equity-oriented AUM and non-equity-oriented AUM constituted Rs.149,713 crore and Rs.142,273 crore, respectively, of their Total AUM. The actively managed equity-oriented AUM (which excludes index linked and arbitrage schemes) constituted Rs.144,925 crore of the Total AUM as of March 31, 2018. Company’s AUM has grown at a compounded annual growth rate (“CAGR”) of 25.5% between March 31, 2013 and March 31, 2018.

•     HDFC AMC has a total number of Live Accounts of 8.10 million as of March 31, 2018. The company had a monthly flow of over Rs.1,150 crore through approximately 3.16 million systematic transactions as of March 31, 2018.

•     As of March 31, 2018, they served customers in over 200 cities through their pan-India network of 209 branches (and a representative office in Dubai) and service centers 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%, 17.3% of their total AUM, respectively, while the remaining 34.1% was invested in direct plans

•     The company offers their products and services through their online portal, HDFC MFOnline and mobile applications, both of which have become increasingly relevant to their business in recent years.

•     The shares will be listed on BSE and NSE.

Company Details

HDFC Asset Management Company Limited (“HDFC AMC”) was incorporated on December 10, 1999. The Promoters of the company are HDFC Limited and Standard Life Investments. The company is a subsidiary of one of their promoters – HDFC Limited.

HDFC AMC operates as a joint venture between Housing Development Finance Corporation Limited (“HDFC”) and Standard Life Investments Limited (“SLI”).

HDFC is one of India’s leading housing finance companies. HDFC group has emerged as a recognized financial conglomerate in India, with presence in housing finance, banking, life and nonlife insurance, asset management, real estate funds and education finance. Listed companies of the HDFC group include HDFC Limited, HDFC Bank Limited, HDFC Standard Life Insurance Company Limited and GRUH Finance Limited, which had market capitalizations of US$4,687 crore (Rs.320,938 crore), US$8,019 crore (Rs.549,074 crore), US$1,341 crore (Rs.91,801 crore) and US$325 crore (Rs.22,247 crore), respectively, as of June 30, 2018. HDFC had over 2,500 employees across 474 outlets in India, as of March 31, 2018.

SLI is indirect subsidiary of Standard Life Aberdeen plc (“Standard Life Aberdeen”) which is one of the world’s largest investment companies, created in 2017 from the merger of Standard Life plc and Aberdeen Asset Management plc.  SLI operates within the brand Aberdeen Standard Investments, with its investment arm managing £57,570 crore (Rs.4,966,650 crore) of assets as of December 31, 2017, making it one of the largest active managers in Europe.  As a result of the merger, SLI had operations across approximately 50 countries, with global clients in over 80 countries as of March 31, 2018. Standard Life Aberdeen is listed on the London Stock Exchange and had a total market capitalization of £970 crore (Rs.87,672 crore) as of June 30, 2018.

Details of Shareholding pattern:

Entity	Pre-Issue Shareholding		Post-Issue Shareholding
	Number of shares held	Shareholding %	Number of shares held	Shareholding %
Promoters & Promoter  Group	201,288,000	94.95%	175,830,445	82.94%
−      HDFC Ltd	120,772,800	56.97%	112,179,830	52.92%
−      Standard Life Investments	82,515,200	37.98%	63,650,615	30.03%
Public	10,700,800	5.05%	36,158,355	17.06%
Total	211,988,800	100.00%	211,988,800	100.00%

Deepak Parekh is the Non-Executive Director and Chairman on the Board. He has been on the Board since July 4, 2000. He is also the Non-Executive Director and Chairman of the Promoters - HDFC Ltd. He has received Padma Bhushan conferred by Government of India in 2006.

Keki Mistry is the Non-Executive Director on the company Board. He has been a Director on the Board since December 24, 2007. He is also the Vice Chairman and Chief Executive Officer of one of the Promoters – HDFC Ltd.

Renu Karnad is the Non-Executive Director on the company Board. She has been on the board since July 4, 2000. She is also the managing director of one of the Promoters – HDFC Ltd.

Norman Keith Skeoch is the Non-Executive Director on the company Board and has been appointed as a nominee of Standard Life Investments. He has been on the Board since October 26, 2005. He has been on the board of Standard Life Aberdeen plc (formerly known as Standard Life plc) since 2006 and was appointed chief executive officer in 2015, having been the chief executive officer at Standard Life Investments Limited – one of the Company’s Promoters, since 2004.

James Baird Aird is the Non-Executive Director on the Board and has been appointed as a nominee of Standard Life Investments. He has been on the company Board since April 23, 2009.  In addition, he is Head of Corporate Development for Standard Life Aberdeen plc (formerly Standard Life plc) where he focuses on developing new international business, joint ventures and mergers and acquisitions and has responsibility for corporate finance.

Hoshang Billimoria, Humayun Dhanrajgir, P. M. Thampi, Deepak Phatak, Rajeshwar Bajaaj, Vijay Merchant are the independent Directors of the company.

Milind Barve is the Managing Director and an Executive Director of the company since July 4, 2000. He headed the treasury operations at HDFC Ltd for 14 years and was responsible for the management of HDFC’s treasury portfolio and for raising funds from financial institutions and capital markets. He was also the head of marketing for retail deposit products and responsible for investment advisory relationships for Commonwealth Equity Fund Mutual Fund and Invesco India Growth Fund.

Prashant Jain is the Chief Investment Officer of the Company. He has been associated with the company for over 14 years since June 20, 2003. Prior to joining the company, he was associated with Zurich Asset Management Company (India) Pvt. Ltd. and SBI Mutual Funds Management Pvt. Ltd.

Piyush Surana is the Chief Financial Officer of the company. He has been associated with the company for over 5 years. Prior to joining the company, he was associated with Daiwa Asset Management (India) Pvt. Ltd., Shinsei Corporate Advisory Services Pvt. Ltd. and Alliance CapitalAsset Management (India) Pvt. Ltd.

Business Overview

HDFC Asset Management Company Limited (“HDFC AMC”) is the largest Asset Management Company in India in terms of equity-oriented Asset under Management (“AUM”) since the last quarter of Fiscal 2011 and has consistently been among the top 2 Asset Management Companies in India in terms of total average AUM since the month of August 2008, according to CRISIL. HDFC AMC is the most profitable asset management company in India in terms of net profits since Fiscal 2013, according to CRISIL, with a total AUM of Rs.291,985 crore as of March 31, 2018. Their profits have grown every year since the first full year of operations in Fiscal 2002.

As of March 31, 2018, the equity-oriented AUM and non-equity-oriented AUM constituted Rs.149,713 crore (51%) and Rs.142,273 crore (49%), respectively, of their Total AUM.

The actively managed equity-oriented AUM (which excludes index linked and arbitrage schemes) constituted Rs.144,925 crore of the Total AUM as of March 31, 2018. Company’s AUM has grown at a compounded annual growth rate (“CAGR”) of 25.5% between March 31, 2013 and March 31, 2018. Their 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 equity-oriented schemes generally have a higher fee structure compared to non-equity-oriented schemes, according to CRISIL, their product mix helps them to achieve higher profits. As of March 31, 2018, their market share of total AUM was 13.7% and of actively managed equity-oriented AUM (which excludes index linked and arbitrage schemes) was 16.8% among all asset management companies in India, according to CRISIL.

HDFC AMC has received several awards for their operations, such as the Equity Fund House of the year award for 2017 at the Outlook Money Awards in 2018.

HDFC AMC offers a large suite of savings and investment products across asset classes, which provide income and wealth creation opportunities to their 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”)) 3 liquid schemes, and 5 other schemes (including exchange-traded schemes and funds of fund schemes).

HDFC AMC has a total number of Live Accounts of 8.10 million as of March 31, 2018, and the Monthly Average AUM (“MAAUM”) from individual customers accounted for 62.2% of their MAAUM, compared to the industry average of 51.4%, for the same period, according to CRISIL.

A key element of their strategy is to promote a customer-centric culture that spans across all aspects of their business. As of March 31, 2018, they served customers in over 200 cities through their 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%, 17.3% of their total AUM, respectively, while the remaining 34.1% was invested in direct plans. In terms of their 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.

Asset Under Management (“AUM”)                                                                                                                                                    (Rs. In Cr)

	As of June 30,		AUM as of March 31,
	2018	2018		2017	2016	2015	2014	2013
Mutual Funds	301,094	291,985		230,594	165,619	150,569	108,913	93,766
Portfolio Management and Segregated account services	6,491	6,474		5,864	4,560	2,363	3,925	5,376
Total AUM	307,585	298,459		236,458	170,179	152,932	112,838	99,142

The performance of the Top Equity-oriented Schemes as of March 31, 2018.

Fund	Years since Inception	CAGR since Inception	Benchmark CAGR*	AUM (Rs. in Cr)
HDFC Prudence Fund	24	18.68%	10.29%	36,595
HDFC Balanced Fund	17	16.49%	13.25%	20,401
HDFC Equity Fund	23	19.18%	11.70%	20,384
HDFC Mid-Cap Opportunities Fund	10	17.25%	12.95%	19,342
HDFC Top 200 Fund	21	20.24%	13.96%	14,345
HDFC Equity Saving Fund	13	9.59%	5.74%	7,395

Brief Financial Details*                                                                                       (Rs. In Cr)

Particulars	As at March 31,
	2018(12)	2017(12)	2016(12)	2015(12)
Share Capital	105.28	25.16	25.16	25.24
Reserves	2,054.69	1,397.77	1,126.06	1,094.65
Net Worth	2,159.97	1,422.94	1,151.22	1,119.89
Revenue from Operations	1,759.75	1,480.03	1,442.54	1,022.43
Revenue Growth (%)	-	2.60%	41.09%	-
Profit Before Tax	1,062.52	799.80	708.25	622.59
Profit after Tax	721.62	550.25	477.88	415.50
PAT as % to revenue	41.01%	37.18%	33.13%	40.64%
EPS (Rs.)	35.02	27.33	23.64	20.58
RoNW (%)	33.41%	38.67%	41.51%	37.10%
Net Asset Value (Rs.)	102.58	70.68	57.19	55.46

Source: RHP  *Restated Standalone