HDFC Asset Management Company

Read this and was really surprised to see them selling at rock bottom prices, for now.
I think its close to its IPO price currently or when they sold.

Not sure what must be their buy price and holding period…

Any idea did they come in cash or rotated this money in current fall?

Disc: Invested as small position. Added some recently. Their selling is a no event for me but a good to know information

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Of course, it is part of their profession, buy and sell as per their plan. They cannot hold on to an underperforming stock for too long, more so when you have ample opportunities available in the current falling market. But it does give an idea about, maybe the next few quarters’ performance, if the market fall is not completed and the rise will take long time too.

On a side note, I think if there is earnings visibility prices don’t fall steeply, they will correct if the entire market is falling, but not more. HDFC AMC has been falling since the fall of the market last year, may be the price has bottomed out, I don’t know.

Shared because it might be useful to someone, not invested.

IPO price was 1100. I am not a subscriber to their services, so I don’t know if they have utilized the proceeds to buy any other stock or not. They may have found many opportunities in the current falling market, and their investment may have been profitable for them if they have bought at the time of IPO.

Yes, their selling is a no event, as retail investors don’t have the constraints of fund managers, even something is available close its intrinsic value, if the waiting period is too long, funds don’t wait unless they are value oriented.

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Would be interesting to see if LIC is still buying shares in HDFC AMC…

It seems that, DII and LIC have continued buying HDFC AMC till March 2022.
Following is screener data for LIC.

Dec 2020 Mar 2021 Jun 2021 Sep 2021 Dec 2021 Mar 2022
3.51 3.90 4.07 5.15 6.04 7.00

In fact now HDFC AMC seems to be trading close to more realistic valuations from an Investor perpective. With increasing competition and reduction in Expense ratios, there could be pressure on margins but long term trend of mutual fund industry should remain intact.

Disc : Invested.

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The way SIP has been holding up and recent saga of Axis mf. Matter of time HDFC mutual fund such start performing well. Not much downside hopefully their funds perform.

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I would request experienced boarders and long time investors in HDFC AMC to share their thoughts on the changing dynamics of the MF industry.

-HDFC AMC is trading at 26 P/E after quite a long time that is below the average P/E (opportunity)
-HDFC AMC can continue to attract more investors through cross selling by leveraging HDFC bank (strength)
-Fintech companies like Navi and Zerodha are getting into this space with low cost offerings than can disrupt the MF industry (threat)
-Rise of ETFs and Passive funds (rose 13 times in last 5 years) with low expense ratio compared to Regular funds (threat)
-Large cap funds are consistently struggling to beat the larger index and hence more new age investors foray into direct equity investment or prefer passive funds (weakness)
-More new age investors are opting for instruments like passive/index funds where the (threat)
-Any recession or shift in the customer sentiment can result in a flat growth for the next few years. Huge FII holding can also have significant impact if they pull out of India when foreign markets become attractive (threat)

Considering the above factors, is there still a significant MOAT with HDFC AMC from a long term perspective?

Disc: tracking position

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Hello,

Some more Weaknesses:
(1) AUM growth may be moderate considering all the above points, leading to lower PAT growth hence lower ROE trends may emerge.
(2) We may need to re-evaluate realistic valuations going forward compared to past 5 year Median P/E.
(3) Shift of younger investors to Direct Plans will also have impact on magins.
(4) Shift of younger investors to Index Funds will impact AUM growth to some extent.

Some of the strengths:
(1) If HDFC AMC can avoid governance issues (like Franklin, Axis in recent past), it may lead to positive opinion about this AMC with HDFC brand. Though HDFC management quality is beyond doubt, but they need to be careful going forward.
(2) Since markets have corrected and NIFTY is trading close to long term average P/E, HDFC AMC should able to buy stocks and Increase their Equity exposure if not done already, which may increase returns from their Equity MF(s) to some extent as compared to 2019-2020-21 when markets were overvalued except March-April 2020, and HDFC AMC being predominantly value oriented MF house, may not have given returns on par with other Growth oriented MF houses. Now, their Equity MFs may perform marginally better than in past 3-4 years.
(I may be wrong in my analysis)

Disc : Invested.

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Shouldn’t the difference in TER between a regular plan and a direct plan go to the distributor? If this is the case, we shouldn’t see any impact from a regular to direct switch.

Or is it second order thinking that most regular funds are push products (via HDFCB) which is a strength to HDFC AMC while younger investors invest in direct funds via Groww/Coin/Kuvera etc and this might result in HDFC AMC lose out on new customers?

Can someone please throw some light into this?

Disc - Invested

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my understanding is that whether you go direct or regular, AMC earning both ways. point should be are new investors buying hdfc amc funds or not!!

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AUM size & growth is the most important factor for AMC business. HDFC has high margins but hardly any growth for past 2 years. This is the factor they need to address immediately. I am hoping that HDFC bank gives a real push to this post or during merger process with HDFC. Another option to grow is via acquisitions. Somehow HDFCAMC has been quite reluctant in this (perhaps due to concerns of lower margins of businesses that are available for sale)

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Growth depends on fund performance. HDFC as a fund house follows value investing strategy. Value investing doesn’t outperform in the bull market but works best in bear market. In the last 6 month, HDFC funds have returned to top 3 in most categories. AUMs will follow if such phase continues.

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Fund performance is obviously important. And so is the push by sales teams (own sales, promoter banks using their network, MFD etc). It would be interesting to see how the AUM moves in the next few months.

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