HDFC Asset Management Company’s listing on Monday has once again proved that good companies always do well in any market conditions. The stock gained 65 per cent at ₹1,815.95 on the NSE over the issue price

The company’s IPO had received overwhelming response with an overall subscription of 83 times.

The stock was listed with 57 per cent premium on the NSE and gained as high as 68 per cent intra-day at ₹1844, compared to its issue price of ₹1,100 — the best in 2018 so far and the best since Avenue Supermarts’ listing (debut of 102 per cent) in March 2017. However, the stock could face some resistance going ahead, as it was already highly priced during its IPO.

At the upper end of the price band (₹1,100), the issue was priced at 32 times its FY18 earnings and 7.8 per cent to FY18 assets under management, compared with 26 times and 5.6 per cent respectively, in the case of Reliance Nippon AMC.

Stretched valuation

“In our view, in the short to medium term, the valuation is highly stretched. At the current price, it trades at 53 times FY2018 earnings and 41 times FY2019E earnings, assuming 30 per cent year-on-year growth in profits, in line with the trend. The market cap is 12.8 per cent of its assets under management, which is quite a highly stretched valuation,” said G Chokkalingam, founder of Equinomics Research and Advisory.

The head of research at a broking firm, who did not wish to be named, has advised investors to hold the stock for at least two-three years. HDFC AMC will be one of the key beneficiaries of the structural shift to financialisation in India as it is the second-largest and most profitable MF house in the country. In other words, its long-term prospects are indeed bright.