Caveat: I am not applying in the IPO, nor in the quota for Hdfc shareholders. However, I may buy on listing, I have not made up my mind.

When you look at a business you should see the following things:

ability to grow well

ability to grow well WITHOUT ADDITIONAL CAPITAL

based on reputation and trust – which cannot be built overnight

ability to attract a good team

ability to retain the horses AND THE donkeys needed for the business

management’s ability to handle bad news

management’s ability to handle press during good and bad times

building a reputation which is impregnable.

Now based on all of this, Hdfc amc shares are a screaming buy. I would go to the extent of saying you should redeem your money from Hdfc scheme if you are short of cash, and use that to apply for these shares. There is no doubt that this juggernaut HDFC will be able to have one more horse in its stable with a good future. The advantage that this group has is that when a trader was caught with his hand in the cookie jar, the market said “so what, if Hdfc has a problem, I am sure all fund houses must be having worse problems”.

Hdfc built a major part of its aum when entry load was the norm, and today those funds are also growing at a good pace. The advantage in the mutual fund business is 99% of the people think that a fund is not doing well because the market is not doing well. Very rarely due people attribute poor performance to poor fund management skills. So star fund managers will continue to attract money far beyond the fund manager’s ‘best by’ date. Sure, the amc will say that they have an awesome system and they are fund manager indifferent, but that is something I do not know. I do know that PJ the current CIO has stayed with the fund – in fact Hdfc acquired him too!! – and has created an awesome array of funds. I daresay that if you are not worried about amc risk, this one fund house is enough.

Will people shift to a Mirae, Motilal Oswal, Dhfl in a hurry? I think not. It takes a lot of time for people to shift. Yes people will allocate some funds to the newer/smaller fund houses, but their primary fund houses will not change soon.

So when an adviser says please invest in Hdfc, there is rarely a murmur from the client. This makes it very easy for the new IFA or new banker to make inroads into a client. The other advantage they have is almost all banks sell Hdfc schemes aggressively.

Now coming to the question of why I will not apply.

Well exactly because of the fact that everybody will apply. I am likely to get some insignificant number of shares in an IPO. If I am serious about the numbers that I need to hold, I will have to buy it from the secondary market. I am not convinced that 40% ebidta is not sustainable, and I will not pay such a high pe. One day it will be cheaper, and I will buy it on that day, at a lesser price. Will I get it at a much cheaper price? Well if I get it, I will buy more. I am not fooling myself, no Hdfc brand share will be available at a huge discount, but yes one day when the markets are in a bad shape, these shares might be. On that day I will buy more. Today I may buy just a small token to satiate my appetite. I am a shareholder of Hdfc Ltd, Hdfc bank, and will be a shareholder of Hdfc amc, Hdfc life insurance, Hdb financial services (I am a shareholder, but remember the entity is still unlisted)…that is brand loyalty.

No. I have not made up my mind. I have too much bfsi anyway, and as a shareholder of Hdfc Ltd…I am participating by selling 🙂 If I buy, it is just an hedge!! Unless of course I sell shares of Hdfc Ltd or Hdfc bank to apply for the amc. That I will not do. QED.