HDFC ASSET MANAGEMENT COMPANY IPO fair valued or ……?
The HDFC asset management company is coming with its IPO this is an offer for sale by the existing promoters shareholder. HDFC limited intents to sell 85,92,970 shares which are 4.08% of the total equity of HDFCAMC and standard life to sell 1.69 crores shares in this offering.
Earlier the price bands for this IPO was 1345-1360 but the price band has been revised to 1095-1100. reasons for this price revision may be best known to the management.
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Readers or investors should look at the following
- Quality of management: Undoubtedly excellent
- Sector: A new sector for markets and only one listed company in this space for relative valuation and peer comparison that is Reliance Nippon asset management company.
- Valuation: To evaluate a company or a sector of different valuation methodologies is applied. Since there is no long history of the sector on the stock market, it is difficult to evaluate this sector or the company.
But acquisitions in this sector is usually valued at asset under management basis. If I am not wrong few acquisitions at approx 8% of AUMs. The company HDFC Asset Management Company’s AUM is around 2.92 lakh crore. 8% of this works out at around 23000 crores and at the higher price bands of 1100 the total market cap of HDFC Asset Management Company’s would be around 23000 crores so the price bands are fairly valued. Investor’s return will only depend on how the AUM of the company grows in the future.
Investor should also conduct a relative valuation of Reliance Nippon asset management companies and HDFC Asset Management Companies on 8% of AUM valuation methodology.
Happy ending and prosperous future!