Standard Life to offload 5.64% HDFC AMC stake via OFS

The share price of HDFC Asset Management Company (HDFC AMC) slumped another 2% this morning, its second straight day of decline, following the promoter entity Standard Life Investments decision to sell 5.64% stake in the HDFC group’s asset management arm via an offer for sale (OFS).

The move will help the promoter group comply with Sebi norms that mandate that the promoter group should not have more than 75% holding in a company.

The floor price for the sale has been fixed as Rs 2,362 per share. Currently, the stock quotes at Rs 2,485 apiece.

The base deal size stands at Rs 1,417.2 crore. Oversubscription option will entail sale of an additional 2.82% stake, which would take the total deal size to Rs 2,834.40 crore.

Standard Life Investments and HDFC held 26.89% and 52.72% stake, respectively, as of March 31.

Standard Life has been monetizing its investments in India as part of its plans at the parent level to shore up capital reserves in its home markets.

Standard Life Investments will sell up to 60,00,000 equity shares (representing approximately 2.82% of the total issued and paid-up equity share capital of HDFC AMC) through an offer for sale issue on June 17-18.
It also proposed an option to sell another 60,00,000 equity shares (in the event the oversubscription option is exercised).

In total, Standard Life plans to sell 1.2 crore equity shares of HDFC AMC (representing 5.64% of total paid-up equity capital of the company).

Non-retail investors can participate in the issue on June 17. On June 18, the issue will remain open for non-retail as well as retail investors.

Standard Life will sell these shares through a separate, designated window on the BSE and National Stock Exchange of India. The offer for sale will be conducted during normal exchange trading hours (9:15 am to 3:30 pm).

Non-retail investors who have placed their bids on T day (June 17) and have chosen to carry forward their unallotted bids to T+1 day (June 18), shall be allowed to revise their bids on T+1 day. HDFC AMC manages assets of nearly Rs 3.2 lakh crore.

On the operatrional front AUM growth slumped 7.2% YoY to Rs 3.2 lakh crs, led by broad based market correction. A sharp correction in equity markets, higher AUM in midcap, small cap schemes led to a 29% QoQ fall to Rs 1.2 lakh crs in equity AUM.

However, HDFC AMC fared well on debt AUM remaining steady at Rs 1.9 lakh crs despite industry witnessing outflows. This led to a decline in proportion of equity AUM at 38.3% in Q4FY20 vs. 48.1% in Q4FY19.

Post the Franklin Templeton incident, there has been a visible movement of money in debt funds to safer categories, of which the company has been a beneficiary

Going ahead the potential for higher growth in equity funds and the consequent positive economies of scale is immense as and when the markets stabilize and rise in the longer term ahead.

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