HDFC Asset Management Co. Ltd (HDFC AMC) in its first quarter has given so many reasons to investors to justify the lofty valuation of its stocks command.HDFC reported a net profit growth of 25% for starters and this was backed by the strong 29% growth in operating revenue.
HDFC AMC is not only is efficient enough to grow the business but also knew how to extract the abundant gains out of its activities. Its operating profit as a percentage improves from 35 basis point to 32 basis point.
The second-largest AMC’s assets under management grew 22%, which underscores the strength of its past performance versus peers.
Its equity to debt AUM ratio is 50:50, unlike the industry average of 42:58. HDFC AMC has the potential on which assets it can acquire and how it manages them. HDFC AMC scores well.
Also, on a monthly average basis, its active customer base grew by 29% and over 60% of its AUM is from retail . Mutual funds are a popular product, and HDFC AMC seems to be a top choice among people.
HDFC AMC is in excel position in predicting future flows and hence it is successful in generating profit.SIP (Systematic investment plans)dominate the mode of investment and more than 75% of its SIPs are for a tenure exceeding 5 years and about 65% for tenures of more than a decade.
Looking all this summarize promising earnings outlook for the stock and hence, investors haven’t batted an eyelid over the large 65% premium to the issue price at which the stock got listed. The AMC is currently valued at over 12% of its average assets under management(AUM).
Some analysts view that HDFC AMC valuation is still richer, which explains the fact its share price has hardly gained since its listing premium.