HDFC MF IPO oversubscribed on day 1, receives bids for 19.4 million shares

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The Rs 28-billion initial public offering (IPO) of HDFC Mutual Fund (MF) has garnered full subscription. The offering on Wednesday received bids for 19.4 million shares as against 18.8 million on offer. A day earlier, the country’s most profitable asset manager allotted 6.6 million shares to anchor investors.

Besides applying in anchor category, institutional investors are scrambling to buy the shares in the IPO, with the qualified institutional buyer (QIB) segment already seeing 1.2 times subscription. Even the retail portion of the IPO has seen 1.34 times subscription. Meanwhile, the high net-worth individual (HNI), employee and shareholder portions have seen more than 50 per cent subscription. HDFC MF’s three-day IPO closes on Friday.

The IPO is entirely an offer for sale of 25.5 million shares by parent HDFC and Standard Life Investment. HDFC and Standard Life are paring 4.05 per cent and 7.96 per cent stake respectively in the IPO. The price band for the IPO is Rs 1,095 to Rs 1,100 per share.

The IPO values HDFC MF, which manages assets worth over Rs 3 trillion, is valued at Rs 233 billion. Reliance Nippon MF, which manages assets worth Rs 2.4 trillion, is valued at Rs 144 billion.

“Considering that HDFC MF is the second-largest fund house coupled with huge potential of MF industry growth, strong return ratios, asset light business, higher dividend payout ratio and track record of superior investment performance, we are positive on this IPO,” says a note by Angel Broking recommending its clients to subscribe.

At Rs 1,100, HDFC MF is valued at 32 times its 2017-18 earnings and 11 times its 2017-18 book value. The fund house’s market value works out to 7.6 per cent of its assets under management (AUM).

HDFC MF is the second IPO from the HDFC group after HDFC Standard Life’s maiden offering in November 2017. It is also the second IPO from a mutual fund house after Reliance Nippon Life Asset Management, which went public in October 2017.

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