With more Indians investing in mutual funds, India's asset management industry has seen strong growth over the last few years. But, with the market still under penetrated compared with more developed markets, Deepak Parekh, veteran banker and HDFC chairman believes there is still immense scope to grow in the years ahead.
“When one is asked whether the tempo of mutual funds growth will sustain, one needs to look at some basic parameters. In India, mutual funds as a percentage of GDP is just 11 per cent, while the world average is 62 per cent. We are optimistic that over the years the mutual fund industry is set to grow exponentially,” said Parekh.
He was speaking on the occasion of the launch of the initial public offering of HDFC Asset Management Company. It is the second largest mutual fund house in India and has a higher share of equity assets under management. It was also the most profitable fund house in the country, with a net profit of Rs 721 crore in the last financial year.
The IPO price band has been fixed at Rs 1,095-1,100 a share and it is expected to garner around Rs 2,800 crore. It is essentially an offer for share, whereby parent HDFC is selling around 4.08 per cent stake and partner Standard Life will be selling around 8 per cent. The AMC as such is not raising any fresh funds through the IPO. The issue will open for subscription on July 25 and close on July 27.
“HDFC along with Standard Life Investments has nurtured HDFC AMC for 18 long years and is based on the way we envisaged India's future, we thought this time was right, this was the apt time to get our AMC listed. The few structural changes in the Indian economy that are taking place, which essentially reflects our optimism about India's future and the financialisation of savings,” said Parekh.
The HDFC AMC IPO will be the fifth company going public from the HDFC Group. Apart from the mortage lender itself, the other listed companies include HDFC Bank, HDFC Life Insurance and HDFC's subsidiary Gruh Finance.
HDFC shares hit a 52-week high of Rs 2,023.90 on Wednesday, before closing at Rs 2,008.25, up 0.9 per cent on the BSE, even as the benchmark Sensex ended 147 points or 0.40 per cent lower at 36,373.44 points.
As of June 2018, HDFC AMC had assets under management of Rs 3.06 lakh crore with around 51 per cent of the assets in more equity funds. The total assets under management of the mutual fund industry stood at Rs 23.40 lakh crore.
Milind Barve, MD of HDFC AMC said the fund house currently has 8.1 million customers and it is adding around 80,000-85,000 new customers measured by new pan numbers. On a net basis, 3,000-4,000 new SIPs (systematic investment plans) were being signed by HDFC AMC every month, he added.
In the past, Indians tended to invest more in assets like real estate and gold but in recent years there have been more structural changes as financial savings have grown.
“The fact that the industry would depend on how markets do, that is undeniable. But, the fact that the flows are consistently coming in the industry of the order of Rs 8,000-9,000 crore every month, gives this industry a more secular nature of growth. The flows have now made the industry more structural in nature,” said Barve.