Chatting with ET Now, Aditya Kondawar of Full Circle Capital identified that ICICI Prudential AMC is at present buying and selling at a premium of round 20–22%, a spot that turns into extra attention-grabbing given the rising similarity between the 2 trade leaders. He famous that each ICICI Prudential AMC and HDFC AMC now handle belongings near ₹9 lakh crore, with market capitalisations additionally converging. With the itemizing, ICICI Prudential AMC is marginally forward at round ₹1.3 lakh crore in contrast with HDFC AMC’s ₹1.25 lakh crore.
In keeping with Kondawar, the true differentiator lies within the high quality of belongings and operational efficiency. He highlighted that ICICI Prudential AMC generates considerably stronger working earnings, supported by an asset combine that’s skewed extra in direction of fairness and alternate investments. This, he defined, has boosted margins lately, particularly as alternate belongings embrace profit-booking fashions and markets carried out strongly within the post-Covid interval.
Whereas institutional curiosity within the IPO remained wholesome, retail participation was comparatively muted, prompting questions round pricing, provide construction and whether or not worth nonetheless exists for particular person buyers. Responding to those considerations, Kondawar pressured that retail buyers usually don’t get sufficient credit score for his or her judgment. He acknowledged that pricing could have acted as a deterrent however cautioned in opposition to equating the next share value with overvaluation, arguing that earnings and enterprise fundamentals matter way more.
He additionally noticed that retail sentiment in direction of IPOs has cooled over the previous 12 months amid market volatility, which he believes is a wholesome pattern. In his view, IPOs shouldn’t be handled as lottery tickets, and a extra measured strategy from retail buyers is in the end constructive for the market.
Wanting past the IPO dynamics, Kondawar was emphatic concerning the long-term runway for asset administration firms in India. Drawing a worldwide comparability, he highlighted how within the US, the biggest fund managers handle belongings far bigger than the stability sheets of the largest banks, whereas in India the scenario continues to be reversed. He believes India may progressively transfer in direction of an identical construction, with fund managers enjoying a a lot greater function within the monetary ecosystem.
He additionally underscored the structural strengths of the AMC enterprise mannequin, pointing to exceptionally excessive returns on belongings, minimal capital necessities and robust scalability. With very restricted fairness infusion over three a long time because the three way partnership’s formation in 1993, the present IPO being a suggestion on the market was, in his view, a pure final result reasonably than a damaging sign. Kondawar added that the shift in investor behaviour will additional assist the sector’s development. As youthful buyers transfer away from conventional financial savings avenues like mounted deposits and financial savings accounts, demand for market-linked merchandise providing the potential for double-digit returns is prone to rise, creating an extended development runway for AMCs and wealth administration firms.
The dialog additionally touched upon considerations round declining expense ratios following regulatory modifications. Kondawar welcomed SEBI’s transfer, calling it investor-friendly and mandatory for the subsequent part of financialisation in India. He identified that the mutual fund trade has grown from round ₹10 lakh crore 15 years in the past to just about ₹70 lakh crore as we speak and sees no purpose why it can’t broaden to ₹150–300 lakh crore over time.
Whereas the near-term impression of decrease expense ratios stays a subject of debate, Kondawar believes the long-term advantages will outweigh the considerations. Decrease prices, in his view, will appeal to a wider investor base, support trade growth and in the end strengthen giant, scalable gamers. How valuations between the 2 listed AMCs evolve over the subsequent one to 2 years will likely be intently watched, however the broader sector outlook, he believes, stays firmly constructive.
