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Crowny Pinto made post

Why has the stock of HDFC AMC managed to do so well in the markets in the last few months? Are there any more mutual funds likely to be listed?

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9 months ago

You are right that HDFC AMC along with Nippon AMC has literally created magic in the stock markets in terms of returns. The stock of HDFC AMC has nearly doubled in the last few months. The stock already had a very healthy listing and this has resulted in rich valuations. Consider the numbers. HDFC AMC has an AUM of close to Rs.380,000 crore. On that AUM it has garnered a market capitalization of Rs.79,000 crore. That is a market cap / AUM ratio of 21%. If you look at any of the AMC buyout deals in the recent past, the average money paid has been between 7% and 9%. In this light, HDFC AMC is already commanding a valuation that is 21% of the AUM. Even if we assume that the AUM will keep increasing in the near future, the Total Expense Ratio (TER), which is the core income of the AMC, has been trending lower. In that light, this appears to be the opportune time for mutual fund AMCs. Supply is short and valuations are at very generous levels.

There are two listed AMCs and SBI MF could be the next, though we do not have any time lines as of now. At a recent event, the SBI MF CEO announced that the SBI MF would also come out with an IPO in the next two years. The decision is hardly surprising considering the fancy run that stocks like HDFC AMC and Nippon AMC have had in the recent past. The demand for AMC stocks has far exceeded the supply of these stocks and this could be the opportune time for any mutual fund to list on the bourses. The only point is why 2 years; SBI should look to list its mutual funds business much sooner as the market is really robust.