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HDFC AMC has blockbuster stock exchange debut with 65% jump

Company raised $408 million through India IPO

MUMBAI (NewsRise) -- Shares of HDFC Asset Management made a blockbuster debut on the stock exchanges, underscoring investor confidence in Indian stocks amid a record inflow into mutual funds.

HDFC Asset Management, India's second-largest mutual fund manager, opened trading as much as 65% higher than the issue price of 1,100 rupees on Monday, after its initial public offering to raise $408 million last month was subscribed 83 times.

The strong debut reflects the buoyancy in India's IPO markets amid expectations of more economic reforms from Prime Minister Narendra Modi's government. According to E&Y, India saw 90 IPOs between January and June, a 27% increase, as companies cashed in on the liquidity in the markets. In 2017, fundraising reached a record high of $11 billion.

The listing boom also comes amid robust stock market gains. India's stock indexes regularly scaled record highs in the past one week, as investors bet on the outlook for companies' earnings prospects. The Sensex has risen 11% so far this year, turning into Asia Pacific's best-performing equity gauge, according to Bloomberg.

Overseas investors sold $500 million worth local stocks year-to-date, while domestic mutual funds bought $11 billion, Goldman Sachs said in a report on Monday.

"With the growth of domestic institutional investors and retail investors, and funds with asset management companies and life insurance companies, now is the time for the deepening of Indian capital markets," Deepak Parekh, chairman of HDFC, told reporters at a news conference.

HDFC AMC, a joint venture between Housing Development Finance Corp. and the U.K.'s Standard Life Investments, is one of the most profitable asset management companies in India with more than 51% of its assets in equity-oriented products. HDFC held more than 57% stake in the asset manager, while Standard Life held the remaining.

HDFC AMC has been able to create a "favorable perception" among investors aided by a trusted brand name and strong parentage, brokerage Motilal Oswal said in a report last month.

At the upper end of the price band, HDFC AMC is valued at 32 times its fiscal year 2018 earnings. That is a 20% premium to the only other listed entity in the sector -- Reliance Nippon Asset Management -- which raised as much as 15.4 billion rupees ($225 million) last year through an IPO, the brokerage said.

HDFC group companies have been market favorites, as was reflected in the stellar performance of its life insurance unit HDFC Standard Life Insurance's $1.3 billion IPO last year.

HDFC AMC, which has 3.07 trillion rupees worth of assets under management, set the price of the issue between 1,095 rupees and 1,100 rupees apiece.

The IPO saw investors bid for 1.6 billion shares, or 83 times the 18.8 million shares on offer. Last month, the company raised 7.32 billion rupees from anchor investors, including Abu Dhabi Investment Authority, HSBC India Equity Mother Fund and SBI Large and Mid-cap Fund. The parent companies HDFC and Standard Life are selling a total 12% stake in the IPO.

Shares of HDFC AMC closed 4.4% higher at 1,815.15 rupees compared with its opening price on the bourse, while parent HDFC Ltd gained 0.1% in Mumbai trading on Monday. The benchmark S&P BSE Sensex closed 0.4% up.

--Dhanya Ann Thoppil

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