Deepak Parekh rules out HDFC Ergo IPO for now, says firm needs to be bigger before it goes public
HDFC Ergo could tap the capital markets in late 2020
Deepak Parekh, the chairman of the HDFC Group, has reportedly ruled out a listing of general insurance arm HDFC Ergo in the medium term, saying the company needs to grow much bigger for a public float.
Parekh said it will take at least two years for a public offering from HDFC Ergo, a joint venture between HDFC Ltd and Germany's ERGO International AG, according to Moneycontrol.
Parekh, who was speaking at HDFC Asset Management Company's initial public offering (IPO) launch announcement, said the promoters of the second largest fund house will dilute a 12.01 percent stake through the Rs 2,800-crore offer that opens on 25 July at a price band of Rs 1,095-1,100 per share.
With the AMC listing, the HDFC group will have five publicly traded companies including HDFC, HDFC Bank, HDFC Life and Gruh Finance.
HDFC Mutual Fund has for long been the most profitable fund house in the country, in terms of net profit since fiscal 2013. As of March 2018, its assets under management (AUM) stood at Rs 2.92 trillion, of which 62 percent or Rs 1.5 trillion has been invested by retail investors, making it the largest in this category.
The chairman of the HDFC Group said that there is "immense growth potential" for mutual funds in India as households are shifting from physical savings to financial savings, The Hindu reported. Parekh also said that India is far behind when it comes to AUM of mutual funds as a percentage of the gross domestic product (GDP) of a country.
“In India, AUMs of mutual funds as a percentage of GDP is just 11 percent, while the world average is 62 percent. In the United States this ratio is 101 percent, 57 percent in the United Kingdom and 30 percent in Japan,” Parekh was quoted as saying by the newspaper.
With a 13 percent market pie, HDFC AMC trails ICICI Prudential AMC which has a 13.3 percent market share.
Last month, market regulator SEBI cleared the fund house's proposal to sell shares via an IPO after keeping that proposal in abeyance for examination of past violations.
With inputs from PTI.
The net outflow in February was, however, the lowest in eight months following a huge outflow of Rs 5,212 crore in January 2013, according to Sebi.
As per the latest data available with Sebi, there was a net inflow of Rs 1,50,675 crore during the 2013-14 fiscal (April-November) as against a net inflow of over Rs 76,000 in the preceding fiscal.
The regulator said funds performing poorly over long periods of time needed to answer not just to unit holders, but also to the regulator.