HDFC Asset Management Company

valueinvesting101 · February 18, 2024, 6:40am

I think that’s number I heard in the previous AMC acquisitions in India in last few years. May be you can add numbers about AMC transactions done by IDFC MF and L&T in the recent past.

If fund is generating 25 bps net profit per year, then 5% rate gives PE ratio of 20 for such a business. That might be rough calculation driving that number. (AUM:10,000, Profit:25, Stock price:500)

As you have rightly said valuation will depend on the product mix which drives profit margin to AUM ratio. That ratio will also depend on growing competition in the MF sector, regulator imposing limits on fees, rise of passive funds and general rising awareness and savvy from investors. I have seen index funds with expense ratio of 6-30 bps for essentially same product such as NIFTY 50 Index fund. Not sure if such difference will continue in the future but HDFC MF is charging on the higher end of such ratio. With new fund houses such as Zerodha and Reliance Jio there will definitely pressure on index fund TER. There are some new active fund managers as well. Parag Parikh Fund house has garnered good AUM with lower TER and better performance than HDFC MF.

Then as the equity market gets more efficient active funds might start generating lesser alpha to justify higher fees so product mix could change more towards passive/index funds. There could only be 2-4 viable player if large part of the AUM will starts going passive route.

So there are many ways how AMC business will pan out over next 5-10 years. So in that light HDFC MF valuation seems stretched.

RajAnalyst · February 19, 2024, 7:22am

The growth in the AMC business is likely to be very high given the rising awareness about MF investing. HDFC MF is a top brand and has good performance. Thus they are most likely to gain market share.

Also, the delta in this business is likely to be very high. If the AUMs grow by 100% (a very likely scenario with market gains+ inflows) in the next five years, the profits will grow at a much faster rate as most expenses are fixed. The industry already has an SIP book of over 20k Cr pm, this itself can bring in decent growth

newone · February 19, 2024, 11:36am

To add:
Hdfc Amc also declares most of it’s profits as dividends which is a good thing. MF industry has a long way to go and probably why many new companies are entering. So, the question really is why should Hdfc Amc deserve a premium / high valuation. They already lost market share. Moved to 3rd position from being no. 1 till early 2020 in total AUM and I don’t see them catch up with SBI anytime soon in terms of AUM, however lesser profitable ETF AUM is for SBI

gsapte · February 19, 2024, 5:55pm

Another point which is the most important is the Saving rate of large population, which has dropped from 23% to about 19% in the past decade. It is one of the lowest in 30+ years which gives an impression that, people at large are not earning enough to save & invest.
If this issue is addressed, people will start saving more and also investing more in Mutual Funds.
India can grow at more than 8% to 9% in terms of Real GDP, and that should enhance people’s income, savings and huge money will flow into Equity MF(s).

I do not see this happening in near future, which is a negative for any AMC not only HDFC AMC.

SBI AMC is growing because large portion of EPF (About 10% to 15% every year) is being invested in Nifty based ETFs, through SBI MF if I know correctly. This does not reflect their efficiency or fund management excellece.

I am also concerned about restricted growth of HDFC AMC AUM and PAT, but just highlighting other parts which also need to fall into place for AUM and AMC growth in India.

I may be biased as invested in HDFC AMC, but my expectations are moderate.

newone · May 22, 2024, 9:59pm

If true, it’s a good news for HDFC AMC

newone · May 31, 2024, 6:05pm

Does anyone understand what this means? In the last board meeting, company declared a final dividend of Rs. 70 per share as the final dividend for the completed year FY 24. Now they want to meet next week and re-declare it as an interim dividend for FY24. If the intention is to declare multiple dividends in one fiscal year, that is good news (especially if they also anticipate much higher profit growth). But why would declare it as interim dividend for FY24. Would make sense calling it so for current year

ChaitanyaC · May 31, 2024, 6:15pm

They have declared a new interim dividend, instead of the final dividend. They have not said anything about the final dividend in the above notice. Maybe as they are declaring a new interim dividend of same amount, maybe there won’t be the final dividend. Or, they will give both.

Not invested.

newone · May 31, 2024, 6:28pm

I get that. But if they call it as interim dividend, shouldn’t it be for FY25 and not FY24?

ChaitanyaC · May 31, 2024, 7:10pm

There must be no such rule that states that an interim dividend should not be declared in a FY, for the FY that has finished. So the interim dividend is for FY 24, and as FY 25 is going on, such interim dividends will be announced in the future.

Chandragupta · June 1, 2024, 6:51am

Logically, I think @newone is correct. Calling it interim dividend for FY24 does not make sense but calling it interim dividend for FY25 would mean skipping dividend for FY24 which also looks bad. The purpose of this seems to be to prepone the date of payment to June instead of waiting for the AGM to be completed. Some big shareholder must have demanded money immediately, I guess.

newone · June 5, 2024, 5:37am

HDFC Manufacturing fund has indeed garnered 10000 crores in the NFO

https://www.hdfcfund.com/product-solutions/overview/hdfc-manufacturing-fund/direct

newone · June 17, 2024, 9:39am

More potential entrants to AMC business

sam11owen · July 16, 2024, 9:33am

HDFC AMC concall Q1 FY25: 15 July 2024, Monday

Q1 FY 25 HDFC AMC PPT.pdf (1.8 MB)

Q1 FY 25 HDFC AMC Results.pdf (2.0 MB)

General comments from management

Industry continues its upward journey, experienced a 7-fold increase in AUM in the last 10 years. Industry at INR 8 trillion in 2014, but now industry has added 10 trillion in last 6 months itself. Monthly SIPs continue upward trend. HDFC AMC has surpassed INR 7 trillion in AUM.

Explanations on employee benefit variable expenses

This was a function of headcount (280 employees added), annual increments, 1 big employee engagement event, training and development. Management suggested that it is better to look at it on annual basis.

Other expenses: NFO, KYC related expenses.

Branch expansion and NFO plans

24 new branches were added in 1st week of January 2024 after a long time. No plans to add any branches in coming weeks and months. The 24 new branches added were based on AUM of areas, these are relatively low cost (in terms of rents/lease) and are 2-3 people branches in B30 cities. Management keeping in mind presence of HDFC bank branches.

No new NFOs planned. Management believes that the current product bouquet is complete, don’t see new offering anytime soon. Total 100 products available including active and passive. Added 57 products over last 3 years.

Next phase of growth and investment for HDFC AMC

Employee addition: creating a dedicated channel for HDFC bank, most of the 280 new employees are hired in the core sales and client services roles. Need few more employees in the technology and digital team.

Non-core offering: focus also on building the non-traditional MF business, looking to build an alternative offering. 5 employees already onboarded in the alternatives space; this is still at an early stage.

Partnership with HDFC bank: management recognises that this is a very large opportunity. Some very senior level employees have been assigned to take forward this partnership.

Client service to client delight: large benchmarking exercise was conducted to improve on all fronts like turnaround times, digital offering etc. Also, management sees an opportunity to be number 1 in many mutual fund categories.

Yield details

Equity: 59 bps, Debt: 28 bps, Liquid: 12-13 bps

Percentage of pure equity AUM went from 39% to 50% (64% all equity-oriented assets). Mark to market gain has pushed equity higher and SIP flows (bulk into equity). Management made its intention to grow all segments clear, and not just equity.

aditya14920251 · July 16, 2024, 9:56am

“Bank-backed AMCs have seen an incredible recovery in their equity market shares. This is when there has been a large increase in new MFs and PMSes. Big getting bigger?” - Harsh

https://x.com/theHarshFolio/status/1813100502592418083

ranvir · July 16, 2024, 4:57pm

HDFC AMC -

Q1 Concall and results highlights -

Industry highlights -

AUM of MF industry @ 61 lakh cr on 30 Jun 24 vs 44 lakh cr on 30 Jun 23. Out of the total 61 lakh cr, 38 lakh cr is contributed by retail and rest by Institutional clients. WRT geography, 50 lakh cr have come from T-30 cities and only 11 lakh cr from B-30 places ( Beyond top 30 cities )

It was only 8 lakh cr on 31 Mar 14. In the last six months alone, the Industry has added AUMs worth 10 lakh cr !!!

Even Debt and Liquid Funds saw a healthy inflows ( 70k cr and 51k cr respectively ) in Q1 FY 25 after 3 consecutive Qtrs of outflows. Equity schemes saw an inflow of 1.2 lakh cr in Q1 !!!

Total MF folios in India @ 18.9 cr vs 14.8 cr YoY

83 pc of Individual / Retail money is in Equity MFs. Only 17 pc is in Liquid / Debt MFs / ETFs and Others

Monthly SIP flow @ 21.3k cr vs 14.7k cr in Jun 23

SIP AUM @ 12 lakh cr. SIP accounts @ 89 vs 66 lakh accounts in Jun 23

HDFC AMC highlights -

Overall Mkt share - 11.4 pc ( third largest in the Industry ). Closing AUM of 6.9 lakh cr. Company’s retail Mkt share @ 13.3 pc

Mkt share in Equity funds - 12.9 pc. AUM @ 4.4 lakh cr

Mkt share in Debt funds - 13.3 pc. Debt AUM @ 1.4 lakh cr

Mkt share in Liquid funds - 12 pc. Liquid AUM @ 0.6 lakh cr

Company’s mkt share in ETFs and others categories is in low single digits

Company’s SIP book @ 3200 cr vs 1890 cr in June 23

19 pc of company’s AUM come from B-30 cities. Company is a distant 2nd in the B-30 business

Q1 Financial outcomes -

Revenues - 775 vs 574 cr, up 35 pc
Other Income - 173 vs 158 cr, up 10 pc
Total expenses - 195 vs 161 cr, up 22 pc
( employee expenses are up 20 pc. other expenses up 28 pc )
PAT - 600 vs 475 cr, up 26 pc

**Company is holding investments of 6400 cr. **
85 pc of this is parked in Liquid and Debt funds. Rest are in equity and arbitrage funds

Company’s operating margins { Gross margins (46 bps ) minus Operating expenses ( 12 bps ) } as a percentage of AUMs stand at 34 Bps vs 35 Bps YoY. Margins in FY 22 were also 35 Bps

Company is hiring and expanding aggressively. Added 280 employees and opened 24 new branches LY ( total branches now @ 250 + ). Most of the employee addition has been on the sales and client service side.

Equity based AUM forms 64 pc of company’s AUM vs 56 pc for the Industry. One good trend that’s emerging in this Bull mkt is that its driven more by consistent SIP flows vs the previous bull mkts when the flows were more lump-some in nature

Company has started investing behind building their AIF business. The company is also open to M&A opportunities in order to utilise the 6000 cr + that they are holding in Liquid / Debt funds

Disc: bought recently, I know I m late here. However the growth tailwinds here are impressive, not SEBI registered, biased, not a buy / sell recommendation

Sudhakar_Subramanian · July 17, 2024, 3:11am

Numbers are not tallying.
Debt and liquid funds added 1.21 lakh cr
Equity funds added 2.4 lakh cr (extrapolating q1 to 6 months)
Total is 3.6 lakh cr. Where did the rest 6.4 lakh cr go in?

ranvir · July 17, 2024, 6:43am

That must be the gain in Mkt value of already held equity schemes

Here, they were only talking about the fresh inflows

newone · July 17, 2024, 8:50am

I am quite interested to see how they fare on the below mentioned three areas.

Ramping up business from parent HDFC Bank - This hasn’t kicked off yet even after an year since merger. Looks like they have been setting things up with some dedicated & senior level team exclusive for the HDFC bank channel. The contribution from parent can be really big due their sheer network size
Acquisitions - I didn’t listen to the con-call but I did see a note where they seemed to have mentioned about actively looking at M&A. If true, this should be interesting as the AUM size can grow much faster (also have to see the cost of any such acquisitions as it may not be cheap given the buoyancy in the market)
AIF - They keep mentioning this regularly. I don’t have much idea about the business size. Perhaps someone knowledgeable can given an idea about the potential size & profitability?

akacker · July 17, 2024, 11:34am

Some additional metrics / information that I track to comments already provided by other investors. Most metrics are moving in the approprate direction - the only metric (could just be a one quarter blip) is SIP AUM to track for future quarters (SIM AUM is now 20% of the market and 23% of HDFC AMCs AUM - an increase of 5% absolute from FY22). This is possibly just nit-picking at this stage

a. SIP AUM growth QoQ is marginally lower than the market (for the first time in 5 quarters).
b. As a result SIP AUM market share is flat (marginally down if one looks at the second decimal place) and this is despite an increase in the share of SIP accounts.
c. Seems to be a result of slightly lower share in SIP Flows and a reduction in SIP amount / transaction. Of course this is an aggregated metric as there can be SIP cancellation / transfers etc.

Every other metric is in the right direction - which is an excellent performance

Metrics dashboard	Q1 FY24	Q2 FY24	Q3 FY24	Q4 FY24	Q1 FY25
Growth metrics
AUM Growth
Market AUM growth QoQ	12.7%	4.9%	8.8%	4.9%	14.8%
HDFC Closing AUM growth QoQ	14.3%	4.7%	10.0%	5.6%	16.2%

Individual share of total
% Individual AUM of Market AUM	57.2%	58.8%	60.1%	60.5%	61.1%
% Individual AUM of HDFC AUM	68.5%	70.1%	73.8%	72.0%	74.4%

Individual AUM growth
% Market Individual AUM growth QoQ	10.3%	9.3%	9.3%	8.5%	12.6%
% HDFC Individual AUM growth QoQ	11.2%	10.6%	10.6%	8.5%	13.2%

SIP AUM Growth
Market SIP AUM growth QoQ	15.6%	10.2%	14.4%	7.6%	16.1%
HDFC SIP AUM growth QoQ	16.6%	10.9%	15.9%	8.5%	15.4%

SIP Flow Growth
Market SIP growth QoQ	2.8%	9.1%	9.8%	9.6%	10.2%
HDFC SIP growth QoQ	10.5%	18.5%	17.4%	11.4%	9.6%

SIP Account Growth
Market SIP growth QoQ				10.0%	7.0%
HDFC SIP growth QoQ				13.7%	13.2%

SIP INR / Account / Month
Market SIP / Account	2,209	2,250	2,306	2,298	2,366
HDFC SIP / Account	3,757	3,823	3,862	3,786	3,664

B-30 Growth
B30 Market AUM Growth QoQ	11.8%	10.5%	8.3%	7.7%	13.3%
B-30 HDFC growth	4.3%	14.3%	8.6%	12.9%	11.3%

Market share metrics
% Equity AUM share
Total Market Equity AUM	51.0%	53.1%	55.5%	57.0%	58.2%
HDFC Equity AUM	54.2%	57.6%	60.6%	63.0%	64.3%

HDFC AUM
Qtry close AUM market share	11.2%	11.2%	11.3%	11.4%	11.5%
Qtry close Active Equity AUM market share	12.5%	12.8%	13.0%	13.1%	13.3%
Qtry close Non Equity AUM market share	9.9%	9.4%	9.2%	9.2%	9.1%

Individual
% Individual accounts / market folios	8.1%	8.6%	9.0%	9.2%	9.8%
% Market share Individual AUM	12.9%	13.1%	13.3%	13.3%	13.3%

% HDFC Unique Investors / market unique investors	18.5%	19.6%	20.7%	21.5%	22.8%
% Market share participation of new unqiue investors	83.3%	38.1%	50.0%	34.6%	47.8%

SIP
% Market share SIP AUM	12.7%	12.8%	12.9%	13.0%	13.0%
% Market share SIP flows	12.9%	14.0%	14.9%	15.2%	15.1%

% Market share SIP accounts	7.6%	8.2%	8.9%	9.2%	9.7%

B-30
Market share in B-30 Markets	11.0%	11.4%	11.4%	11.9%	11.7%



Annualised Revenue yield (revenue / AAUM)	0.473%	0.490%	0.487%	0.454%	0.462%
Annualised PAT/AAUM	0.393%	0.33%	0.35%	0.35%	0.36%

Would be interested to hear views on how to measure fund performance at an aggregate level - if any one does this. This is because market share improvement should be based on

a. Market share of total flows +
b. Outperformance of funds vs market

Market share of flows has many levers and can be tracked relatively easily (share of folios, revenue / folio, etc) - but not sure how to track fund performance (other than on a fund by fund basis - which is quite cumbersome)

Disc: Invested and likely to be biased

newone · July 20, 2024, 3:24am

Parent bank’s contribution to SBI MF AUM is 21%, whereas it’s in single digit for HDFC & ICICI. I really hope they ramp up the business from the HDFC bank channel while also growing other avenues