HDFC AMC – Share Analysis

By Rohit Malik

December 6, 2019

hdfc, hdfc amc, hdfc mutual fund

HDFC AMC Logo Share Price

Post updated November 2020

HDFC AMC debuted on 10th August 2018. The price that it closed was ₹ 1748. The current CMP (November 2020) is ~₹ 2450 (BSE Price).

Even in September 2020, the prices are in range of 2400+ (and rising again).

That was a growth of more than 100%, from a large cap, zero debt company.

Yes, 100% growth within 1 year of IPO, large-cap zero debt company. A very rare occurrence in the stock market, with regards to growth in the stock market.

On top of that, as you will read in this post about HDFC AMC share analysis, this company is a good investment candidate.

HDFC AMC – Quick Introduction

HDFC AMC is HDFC Asset Management Company that owns and operates the mutual fund business of HDFC group.

Here is the quick screenshot of HDFC AMC company and financials:

HDFC AMC stock analysis

Now, let’s dive deep into these financials to understand why, apart from being listed on top of our top debt free companies in India list, HDFC AMC is also a valid contender for top growth stocks in India.

HDFC AMC – stock analysis

I shared the quick financial data about HDFC AMC at the top of this article, now let me share something interesting about this gem of a company:

HDFC AMC shareholding ROCE

Here we can see that promoters hold 73%+ shares of the company. That shows the confidence of promoters in the company.

In near future, there is no planned change in the management structure or business model of HDFC AMC.

And then there is ROCE. The average of the last 3 years is above 50% with the current year (2020), it’s 47%.

Right now, internally there is no factor which is going to effect the operating margin or cash flow of the company in near future.

Which means the factors which can affect the growth is mainly going to be external. In this case, it is the growth of the mutual fund industry on whole.

Why HDFC AMC is a good long term investment?

Overall HDFC Asset Management Co. ticks all the right boxes when it comes to investment analysis of any company.

The company showed consistent growth and above average operating margins.

Let’s look into these reasons in depth to validate the reasons of current growth:

Reason 1 – Consistent growth

Even before the IPO last year, HDFC AMC showed consistent growth in its mutual fund business.

As per this news report published last year, the growth rate was consistently near 20% Y-o-Y.

Reason 2 – Above average Operating Margins

Not only does HDFC AMC managed to gather most market share and have a healthy debt:equity ratio of 50-50, it also knows how to extract maximum profit.

Operating Margin stands more than 74% – one of the highest in industry.

HDFC AMC - Share analysis

Reason 3 – Popular choice among retail market – Brand Value

This is one of the most important reasons of growth in market share. HDFC Mutual Funds are one of top choices for retails investors.

Fund Management team has managed to prove their mettle by showing regularly showing better results than market.

Reason 4 – Overall growth in the Mutual Fund industry

Though above mentioned factors are strongly in favour of HDFC AMC as long term investment, this current price rise is also mainly due to increase in cash inflow into mutual fund industry.

Right now and also since last couple of years, mutual fund industry is high growth industry.

With rise in market, more and more people have started their investments in mutual funds. And those already invested have increased their monthly SIP commitments.

Thus, this leads to the question – Will this growth sustain?

Future of HDFC AMC & Mutual Funds industry

Now, as far as the mutual fund industry is concerned, it is still a high-growth industry. Apart from a few hiccups here and there, market conditions are positive.

More and more people are willing to invest in good mutual funds to get the benefit of the growing Indian stock market.

A very detailed news article was recently published by Economic Times with regards to Growth in Mutual Fund Industry in India in the next decade.

Here is the search clipping about the low penetration of mutual funds in India:

Low penetration of mutual funds in India screenshot

Right now mutual penetration in India is around 4% which is very low as compared to world average of 55%.

In recent pandemic induced hiccups to the overall economy, more and more people have become aware about investing in long term assets.

Thus, mutual funds industry will grow – at least for next 10-15 year.

Thus, HDFC AMC holds a good market share in a growing sector and within that, it is a growing company.

Management Quality

HDFC Group on whole is known for one their professional management quality and strong operational efficiency.

Thus in one line I can say, HDFC AMC is a good quality long term investment.

They have a strong research team(operational efficiency), proven management, and growing industry.

HDFC AMC Share price – Technical Analysis

HDFC AMC - Share price analysis - technical analysis

This is the daily chart of HDFC AMC from tradingview.

As you can see, since last few weeks, the price is within a base range and now slowly making higher highs.

On top of that we have the recent formation of cup and handle pattern along with trendline support.

This is one of the most effective trade setup and thus has highest probability of success. Thus, technically HDFC AMC is now in good buy zone with immediate target of 3800 and more in coming time.

Final Thoughts on HDFC AMC for investing purposes

Indian market is going through a phase of adjusting to new challenges in overall economy.

Index is making new high, whereas several companies are still lagging behind.

Such phases always leads to new companies and sectors creating new highs in their own bull runs.

This means the Indian market has yet to cover a lot of growth. Any fund which is investing in such a market with a diligent approach is going to have amazing results.

With the previous record of funds performance that HDFC AMC handles, it can be easily deduced that they will keep on delivering great results in time to come.

About the author

Rohit Malik

A yogi who like Finance and Technology. I have been in Indian Stock market for over 12 years now as financial analyst, portfolio manager, trader. Now, I focus on Yoga, Financial Education & Long term investing. 

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