Mutual profit

HDFC AMC, the market leader in the asset management space, listed with much fanfare last year. Investors flocked to the stock, which listed 59% higher than its issue price of Rs 1,100. Since then, the stock has continued to move higher, hitting an all-time high of Rs 3,140 in October with a strong Q2FY20 performance.

AUM growth of 25% outstripped the industry, led by non-equity (debt and liquid funds) inflow this quarter. Revenue from operations also rose 4% to Rs 4.98 billion and a shift to low tax regime helped profit soar 79% to Rs 3.68 billion.

As the stock maintained its upward trajectory, Rajat Malhotra, zonal business head – North, HDFC AMC, sold shares worth Rs. 59 million on October 30. He had also offloaded shares worth Rs 21 million in November 2018. After the latest sell off, his holding has fallen to 0.02%. But it’s not just Malhotra shedding his stake; top management and employees have sold shares worth Rs 2.67 billion since the listing.

Malhotra’s disposal comes at a time when analysts believe the upside is capped. “A recent price spike appears to factor in all the positives,” note analysts at ICICI Direct. Given the company’s strong positioning and superior earnings profile, they feel the current premium valuation is justified. HDFC AMC trades at P/B of 18.1x FY20 earnings.

Mutual funds also booked profit, cutting their stake to 0.90% from 1.04% in September 2018. Nippon India and DSP MF have reduced their stake from 0.15% and 0.08% to 0.07% and 0.05%, respectively. The only fund that has raised its stake is Motilal Oswal MF — from 0.11% to 0.55%. As the price has run up 10% in October, an increase in MF/FII holding cannot be ruled out.

Meanwhile, foreign investors have increased their stake from 3.75% to 5.78% over the past four quarters. Currently, the largest FII in the stock, Smallcap World Fund holds 1.45% stake.