Happened to BSE/NSE with STT in early 2000’s. Happened with disproportionate CTT to MCX in 2013. Happening to HDFC AMC in 2018. Really dont understand what the benefit of tinkering with free markets is???
This act by SEBI should be enough to rerate the Asset Management Industry. While the profits of AMC’s will continue to rise disproportionately as AMC’s continue to increase, the risk of constant regulation should definitely be accounted for in the valuation. Perhaps a year or 2 will pass and people will forget about it but this risk will hang over the company like a silent sword for perpetuity.
The company is in a sense a better version (a significantly better one at that) of a regulated utility. Im not saying it should be valued at 10-15 times like a utility (it still has high operating leverage and minimal capital requirement) but Im not even sure whether 40 times trailing earnings provides for enough margin of safety now. How do you account for the risk of a similar event such as this in the future in ones models? What will SEBI think is a “fair” profitability for the MF industry.