Mutual Funds Research

HDFC AMC: Retaining the Top Position

HDFC AMC detailed research article

HDFC Asset Management Company Limited (HDFC AMC) is the Investment Manager to HDFC Mutual Fund. It is one of the leading asset management companies in the country.

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(A) Introduction

HDFC AMC is a part of HDFC Group which is a leading financial services conglomerate in India, with presence in housing finance, banking, life insurance, non-life insurance, asset management, real estate funds and education finance.

‘Housing Development Finance Corporation Limited’ (HDFC) and United Kingdom-based global investment company ‘Standard Life Investments Limited’ (“SLI”) are the promoters of company.

The Company also provides portfolio management services and advisory services to high net worth individuals ('HNIs'), family offices, domestic corporates, trusts, provident funds and domestic and global institutions.

(B) Top Events: HDFC AMC History


HDFC Asset Management Company Limited incorporated as a public limited company on 10th December 1999.


On 3 July 2000, SEBI gave approval to act as an Asset Management Company for HDFC Mutual Fund. Then, in September 2000, the company's Assets under Management (AUM) reached Rs. 6.5 billion.


UK based Standard Life Investments, i.e. the current promoter, became a shareholder of the company. Standard Life Investments Ltd is an indirect subsidiary of Standard Life Aberdeen plc., which is one of the world's largest investment companies.


By September 2002, assets under management (AUM) of the company crossed Rs. 100 billion.


In June 2003, HDFC AMC acquired Zurich Asset Management Company Limited (ZAMC) having an AUM of Rs. 34 billion. Thus, combined AUM of HDFC AMC reached Rs. 118 billion. Consequently the company managed to increase its equity assets.


In June, 2004 the company made its maiden issue of bonus units under the Investment Plan and Savings Plan of HDFC Children's Gift Fund.


As HDFC garnered good reputation, HDFC AMC also formed good image. Also the company performed well with having five-star funds and three four-star funds.


AUM of the company crossed Rs. 1 trillion.


Launched HDFC Debt Fund for Cancer Cure. Second CSR oriented fund launched in India.


The Company acquired Morgan Stanley Mutual Fund schemes, having an AUM of Rs.19 billion. Morgan was the first global fund to launch a mutual fund in India in 1994 but did not receive much success in India.


AUM of HDFC AMC crossed Rs. 2 trillion in May 2016.


Equity oriented AUM crossed Rs. 1 trillion in April and overall AUM crossed Rs. 3 trillion in December.


The company’s IPO opened from 25 July 2018 to 27 July 2018 by way of Offer for sale. HDFC offloaded 85.92 lakh shares and Standard Life Investments Limited offloaded 1.68 crore equity shares through the IPO. Thus, promoters offloaded a total of 2.54 crore shares. The IPO priced at Rs 1100 per share. The company's shares listed on the stock market on 6 August 2018.


Equity oriented AUM crossed Rs. 1.7 trillion and overall AUM crossed Rs. 3.5 trillion.

(C) Market Share

Market share of top 20 asset management companies in India

HDFC AMC's market share in actively managed equity oriented funds of industry is ~16%.

(D) Competitive Advantage

  • HDFC AMC is a part of HDFC group which provides various financial services; is a leading finance house in India; is one of the top private banks in India and a trusted brand.
  • HDFC AMC has 147 schemes for different needs of different investors. Thus, with this portfolio of products HDFC AMC can render services to a wide number of investors.
  • Moreover, high Equity oriented AUM provides the opportunity of higher return because there is higher margin in these schemes. HDFC AMC has been the largest asset management company in India in terms of equity-oriented AUM since the last quarter of Fiscal 2011.
  • The company has consistently been among the top two asset management companies in India in terms of total average AUM since the month of August 2008 according to CRISIL.
  • It is also the most profitable asset management company in India in terms of net profits since Fiscal 2013 according to CRISIL.
  • HDFC AMC is 2nd player after SBI in Beyond Top 30 (B30) markets in India. This shows the strong position in less developed cities.

(E) Shareholding Pattern

The company's major shareholding is with the promoters i.e. 82.71%. In institutional shareholding, foreign portfolio investors hold 4.73%.

shareholding pattern of hdfc amc
shareholding pattern of hdfc amc
major shareholders in hdfc amc
major shareholders in hdfc amc

(F) Executive Management of HDFC AMC

1. Deepak S. Parekh - Chairman

Mr. Deepak Parekh is a Non-Executive Director and Chairman on the Company’s Board. Also he is also the Chairman of HDFC. He qualified as a chartered accountant from ICAEW. Moreover, completed his articles with Whinney, Smith and Whinney (which later became Ernst & Young) in London. 

He joined HDFC in 1978. Prior to this, he worked at Ernst & Young, Grindlays Bank, and Chase Manhattan Bank.

2. Milind Barve - Managing Director

He graduated in Commerce from University of Poona. Also, he is a fellow of the Institute of Chartered Accountants of India (ICAI). He has been the MD of company Since July 4, 2000.

He has been associated with HDFC in the capacity of General Manager –Treasury where he headed the treasury operations at HDFC for 14 years. Also, he was responsible for the management of HDFC’s treasury portfolio and for raising funds from financial institutions and capital markets.
Moreover, he was the head of marketing for retail deposit products and responsible for investment advisory relationships for Commonwealth Equity Fund Mutual Fund and Invesco India Growth Fund.

His remuneration for FY19 is Rs. 7.20 crore, an increase of 6.54% over FY18.

(G) Schemes Managed by HDFC AMC

1. Equity Oriented Schemes

The major amount is invested in equities. Funds in these schemes, are invested in different types of shares. There 22 schemes under this category.

Main Schemes are: HDFC Housing Opportunities Fund Series 1; (a) HDFC Equity Fund; (b) HDFC Index Fund - SENSEX Plan; (c) HDFC Index Fund-NIFTY 50 Plan; (d) HDFC Top 100 Fund; (e) HDFC Mid-cap Opportunities Fund and (f) HDFC Taxsaver Fund.

2. Debt Oriented Schemes

Debt schemes are for regular income. Funds of these schemes are invested in bonds issued by corporates and government securities. There are 115 schemes in debt category. Fixed maturity plans ('FMPs') are also included in this category.

Main Schemes are: (a) HDFC Credit Risk Debt Fund; (b) HDFC Corporate Bond Fund; (c) HDFC Short Term Debt Fund; (d) HDFC Money Market Fund and (e) HDFC Medium Term Debt Fund.

3. Liquid/Money Market Schemes

These are highly liquid funds. Most corporates invest their excess money in these schemes. There are 3 schemes in this category. HDFC Liquid Fund and HDFC Money Market Fund are the schemes offered by HDFC in this category.

4. Others

There are others schemes which cannot be included in above categories like exchange-traded schemes and funds of fund schemes. There are 7 schemes in this category.

(H) Assets Under Management (AUM)

(i) Segment wise AUM Mix - HDFC AMC and Industry Classification

The total assets under management (AUM) of the company are Rs. 3,567 billion (i.e. Rs. 3,56,700 crores) as on 30 June 2019. The major portion is Equity Oriented assets i.e. Rs. 1,701.46 billion. Debt Funds amount to Rs. 966.66 billion. Liquid Funds are Rs. 848.95 billion.

The total AUM of the Mutual Funds Industry as on 30 June 2019 is Rs. 24,274.65 billion or Rs. 24,27,465.41 crore. Thus, as on 30 June 2019, market share of HDFC AMC of the overall industry AUM is ~15%.

schemes classification of HDFC AMC
schemes classification of HDFC AMC
schemes classification of mutual funds industry
schemes classification of mutual funds industry

(ii) Growth of AUM of HDFC AMC

growth of assets under management of hdfc amc from 2014 till 2020
growth of assets under management of hdfc amc from 2014 till 2020

(iii) Geography Wise AUM Breakup

On the basis of geography, Mutual Funds Industry segregates the AUM into T30 assets and B30 assets. T30 refers to the top 30 geographical locations i.e. cities in India (in terms of AUM) and B30 refers to the locations beyond the top 30.
As per the mutual fund industry, during period July, August 2019, ~85% of the industry AUM is from T30 cities and ~15% from B30 cities.
The AUM classification of HDFC AMC, June 2019:

AUM breakup of HDFC AMC as per Geography

(iv) Investor Base Breakup

HDFC AMC’s Individual AUM is more than Non-Individual AUM. Individual Investors’ share in total AUM of the company is 59% (June-19) and balance is of Non-Individual Investors.

Most recently, as per mutual funds industry data, Individual investors hold a higher share of the industry assets, i.e. 52.6% in August 2019. Institutional investors account for 47.4% of the assets, of which corporates are 90%.

AUM of HDFC AMC on the basis of Individual investors and non-individual investors
AUM of HDFC AMC on the basis of Individual investors and non-individual investors

(I) Revenue Breakup

Revenue breakup of HDFC AMC is on two basis:

(i) On the basis of Source of Revenue:

HDFC AMC earns revenue from investment management fee for managing the mutual funds; the other from portfolio management fee & advisory fee.

In FY19 revenue from investment management fee is Rs. 1895.39 crore. Portfolio management fee & advisory fee is Rs.19.79 crore. The major portion of revenue is from investment management fee which is the main business of company.

HDFC AMC revenue breakup into investment management fee and advisory fee
HDFC AMC revenue breakup into investment management fee and advisory fee

(ii) On the basis of Geographical Distribution:

HDFC AMC earns some revenue from abroad for advisory and other services provided to investors. But it contributes small portion in total revenue of the company; Rs. 13.23 crore in FY19.

Revenue from within India is Rs. 1,901.95 crore (99%) and from outside India is Rs. 13.23 crore (1%).

(J) Cost Breakup

With new SEBI guidelines now all the scheme related expenses are not to be borne by the AMC. These expenses should be included in that particular scheme.
Major expenses breakup FY19 (i.e cost structure):

HDFC AMC cost breakup for all major expenses

(K) Live Accounts

HDFC AMC has 92 lakh live accounts(folios) on 30th June 2019. Live Accounts grew by 10% YOY.

Count of live accounts managed by HDFC AMC
Count of live accounts managed by HDFC AMC

(L) Unique Investors

Count of Unique Investors of Mutual Fund Industry is 19.6 million and of HDFC AMC is 5.4 million. Thus the HDFC AMC has 27.55% market share in terms of number of unique investors.

Count of Unique investors of HDFC AMC
Count of Unique investors of HDFC AMC

(M) Systematic Transactions

The number of transactions is 3.43 million. Value of transactions is Rs. 12,697 million (increased by 9% YOY) in June 2019.

Industry' SIP inflows were Rs. 81,220 million for June 2019.

SIP count and SIP value of HDFC AMC Fy19-20

Based on tenure at the time of registration of all live SIPs during June-19:

(N) Distribution Channels

HDFC AMC distributes products through Banks (including HDFC Bank), Independent Financial Advisors (IFA) and National Distributors. The company offers mutual fund schemes through its own branches as well as through its digital media.

HDFC bank’s share in distribution is 7.9% of overall AUM and 10.3% in Equity oriented AUM.

HDFC AMC distribution channels breakup on the basis of overall assets under management
HDFC AMC distribution channels breakup for equity oriented assets under management
HDFC AMC distribution channels breakup for equity oriented assets under management

(O) Branches

HDFC AMC has 210 branches in 200+ cities. HDFC AMC has 148 ISC (Investor Service Centers) and 61 business centers. There is a one representative office in Dubai for attracting international investment.

HDFC AMC has 76 Branches in top 30 cities of India and 134 branches beyond top 30 cities of India. Some transactions can be done at CAMS also. CAMS (Computer Age Management Services) is a SEBI-registered Registrar & Transfer (R&T) Agency.

region wise branches of HDFC AMC

There are more than 75000 distributors registered with HDFC AMC.

(P) Concall Highlights

HDFC AMC's Concall for Quarter 1, FY20 held on July 19, 2019. Milind Barve  (MD), Piyush Surana (CFO) and Simal Kanuga (Chief Investor Relations Officer) were present to answer the questions.

  • Company refused to comment on the Essel NCD which stood at Rs. 450 crore at quarter end and only mentioned that it is valued at fair value.
  • The margin improved because of increase in AUM and savings on account of upfront commission.
  • With increase in size of AUM of each product, the total expense ratio (TER) shall come down and help in sustaining the margins.
  • Company does not have any plan to launch product in international equities. And Industry has AUM in this category for only Rs. 300 crore out of Rs. 24 lakh crores.
  • Commission amount in P&L reduced from Rs. 30 crore to Rs. 11 crore is on account of old upfront commission. This will further reduce in future.
  • Impairment on IL&FS is fully done in last year.
  • Adoption of Ind AS 116 leads to increase in depreciation cost in this quarter. Earlier, cost of leases of HDFC AMC branch offices & other all the offices included in other expenses as rent. Now it becomes part of Depreciation cost. The effect was of Rs. 40 lakh in June 2019 quarter as compared to March 2019 quarter.

(Q) HDFC AMC Controversy

HDFC AMC made a pre-IPO placement to large distributors and advisors. SEBI asked HDFC AMC to return the collected amount to distributors at 12% interest. Only then HDFC AMC could get approval for IPO.

According to reports, HDFC AMC offered shares to 190 distributors. Of these, 140 subscribed. Expectedly the shares were worth Rs. 150 crore and issue price was Rs. 1,050 per share. This was the first time a mutual fund offered its shares to distributors. However, the ones who could not subscribe went on to file a complaint with SEBI.

(R) HDFC AMC Recent Action

In June 2019, HDFC Asset Management Company Ltd announced that it will provide a liquidity arrangement of up to Rs 500 crore to certain fixed maturity plans (FMPs) of the fund house to deal with the illiquidity faced by such scheme. This is due to such FMPs' exposure to non-convertible debentures (NCDs) issued by Essel group entities.

This will allow the FMP investors to withdraw their money. This was only for schemes maturing in April or before 30th September 2019. In September 2019, with partial repayment from Essel group the aggregate market value of the outstanding exposure reduced to Rs. 383 crore.

(S) Opportunities & Risks/Concerns


(i) Increase in Mutual Funds Investments:

From past some years the mutual funds industry is growing at a fast rate. The AUM of the Indian mutual funds industry has grown from Rs. 7.57 trillion as on 31st August, 2009 to Rs. 25.48 trillion as on 31st August, 2019, about 3 ½ fold increase in a span of 10 years. It increased by 2.5 times in a period of five years from Rs. 10.13 trillion as on 31st August, 2014 to Rs. 25.48 trillion as on 31st August, 2019.

(ii) Increase in Per-Capita Income:

The per-capita income at current prices during 2018-19 is estimated to be Rs. 1,26,406 ( Rs.10,533.83 monthly) as compared to the estimated for the year 2017-18 of Rs.1,14,958 ( Rs.9579.83 a month), showing a rise of 10%. With increase in income, more and more people are expected to save and invest their money.


(i) Regulations impact:

With application of new rules by SEBI, now AMC cannot pay any upfront commission to the distributors. Only trail commission is allowed to be paid to the distributors. Mutual Funds are regulated by SEBI. SEBI is trying to create a healthy environment for the investors to invest money and for this new rules are made. TER expenses are also fixed.

This may lead to shift of brokers from mutual funds to insurance products where upfront commission is available.

(ii) Competition:

There are 44 asset management companies in India. This leads to strong competition in mutual funds industry. Every AMC launches a number of schemes to attract investors. There is stiff competition between top 3 asset management companies. ICICI and SBI are the other big players in this industry.

(iii) Liquidity Crises:

A series of events as, default by IL&FS group companies; DHFL; ADAG Group and deadlock over resolution of mutual funds industry’s exposure to Essel Group firms, continues to hurt investor sentiment and negatively impact flows.

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References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry's Publications, Mutual Funds Industry Data:

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. The report & references mentioned are only for the information of the readers about the industry stated.

0 Responses

  1. Hi..Nice analysis.
    However I would not jump to buy blindly. As AMC, most of their funds are underperforming than Axis, Mirae fund houses.
    Also, Nippon AMC after exiting ADAG, could surprise well, with relative lower valuation.
    There are funds offering better returns. So, accordingly,

    1. We know, as per the current valuations HDFC AMC is expensive than Nippon AMC and because of lower investor confidence in the later company. HDFC AMC will always demand higher valuation than Nippon AMC due to the various factors like management pedigree, sales touch points and bank branch network.

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