Intiating Coverage Mutual Fund FY19 - 12th March: Jainam Share Consultant PVT LTD

Jainam Share Consultant Pvt Ltd Sector : Mutual Fund
Intiating Coverage | Mutual Fund
FY19 | 12th March
Riva Patel- Assistant Research Analyst (riva.patel@jainam.biz); 0261-6725518
Investors are advised to refer through important disclosures made at the last page of the
Research Report.
Jainam Share Consultant research is available on www.jainam.in
12-03-2019 1
Index
A. About the Company
1. About.………………………………………………………………………….3
2. Investment Rationale………………………………………………………….4
3. Risks……………………………………………………………………………6
B. Industry
1. Mutual Fund Industry in India…………….…………………………………...7
2. Growth Drivers…….…………………………………………………….…….10
3. Change in SEBI Regulations…………..…………………………………….…12
4. Impact of Demonetisation on Mutual Fund Industry…………………………13
C. Business of the Company

1. About the company……………………………………………………………………………………14
2. Schemes & Services……………………………….…………………………………………………..14
3. Performance…………………………………………………………………………………..…….……23
4. Financial Summary……………………………………………………………………………………..26
D. Financial Information
1. Balance Sheet……….……………………………………………………………………………………28
2. Profit & Loss……….…………………………………………………………………………………..…28
3. Cash Flow Statement…….……………………………………………………………………………29
4. Quarterly Update……………………………………………………………………………………….30
E. Analysis
1. Peer Analysis………………………………………………………………………………………………31
2. Valuation……………………………………………………………………………………………………33
F. Conclusion
1. Recommendation……………………………………………………………………………………….37
2. Sources……………………..……………………………………………………………………………….38
3. Full Form and Glossary…………….…………………………………………………………………39
4. Report Gallery……………………………………………………………………………………………40
5. Disclaimer……………………………………………………………………………………..………….41
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Company Overview
About
12st March
Latest Date
HDFC Asset 2019
Management Latest Price (Rs) 1509.15
Company Ltd 52 Week High (Rs) 1969.5
52 Week Low (Rs) 1248.30

HDFC Asset Management Company Ltd (HDFC
AMC) was incorporated on December 10, 1999 Face Value(Rs) 5.00
and was approved by SEBI to act as an Asset
Industry PE 36.83
Management Company for HDFC Mutual Fund
vide its letter on July 3, 2000. TTM PE 44.46
HDFC AMC operate as joint venture between TTM Period 201803

HDFC Ltd and Standard Life Investments Ltd
Price/BV(x) 10.39
with holding of 52.81% and 29.96%
respectively as of December’18. Standard Life EV/TTM EBIDTA(x) 29.87
Investments Ltd is part of Standard Life
Aberdeen. EV/TTM Sales(x) 18.23
HDFC AMC has currently AUM of Dividend Yield% 1.06

Rs329100crs in MF and Rs9160Crs AUM of MCap/TTM Sales(x) 18.23
PMS and SMA as on 31st December’18. It has
been the most profitable AMC in India in terms Market Cap (Rs in Cr. ) 32080.49
of net profit since FY13.
EV (Rs) 32078.42
HDFC AMC has 14.4% market share in MF AUM
Latest no. of shares (in Cr.) 21.26
as of 31st December,2018. Company manages
8.9Mn live accounts as of 31st December’18.
HDFC AMC has pan-india network with 75000
distributors and 210 branches.
Exchange: BSE BSE Code:541729 Current Market Price:1509.15 Date:12-03-19
12-03-2019 3
Investment Rationale
Market Leadership
HDFC AMC has been amongst top two asset management companies in terms of total average
AUM since the month of August 2008. It is also 2nd market leader in B30 cities with market share
of 11.8%. As of 31st December, 2018 company’s market share stand at 14.4% in MF AUM up from
13.8% in December’17.As of 31st December, 2017 company had the highest market share 16%
among individual investor assets followed by ICICI at 14.7% and Adtiya Birla Sunlife MF at 9.9%.As
of December’18, HDFC MF has 16% market share in actively managed equity oriented AUM.
Underpenetrated MF Industry
MF industry in India still under penetrated, MF AUM as % of GDP is at 11% which is amongst the
lowest comparing to countries like US, France, Canada etc. Companies in MF industry has still lot
of opportunities to grow and expand. Companies also create awareness among the investors and
educate them about importance of mutual fund. SEBI has directed to keep aside annually 2bps of
daily NAV for investor education and awareness. Such steps might create demand for investment
in mutual funds in future.
Robust Financials
 Revenue growing at CAGR of 19.11% in last 10 years and Investment management fee
growing at 21.05% CAGR in same period.
 HDFC AMC has operating efficiency in its business where its operating expense ratio came
down from 0.34% in FY13 to 0.29% in FY18 (operating expense as % of Average AUM). It has
lowest ratio comparing to its peers.
 PAT is growing at CAGR at 19.88% in last 10 years.
 AUM growing at CAGR of 34.5% since FY01 to December’17, and 24.7% CAGR from FY15-18.
Focus on Individual Customers
Customer base of HDFC AMC has larger proportion of individual AUM in comparison to mutual
fund industry. Individual customers contributed 61.8% of total MAAUM compared to 53.6% in the
mutual fund industry as of December’18. Individual customers is more likely to prefer
equity-oriented schemes, equity oriented schemes attract higher investment management fees
and investors stay invested for longer duration in equity schemes. Higher individual customer base
gives huge advantage to company in terms of revenue.
Expected Growth in Industry
Industry’s AUM is expected to grow from Rs17.5Tn (excluding ETF and FOF) in FY17 to 44.9Tn in
FY22, CAGR of 21%. Factors contribution in growth of AUM are with rise in economic growth,
growing investor base, rise in disposable income, government schemes on increasing awareness
etc. Revenue in MF industry is expected to grow at CAGR of 24.2% in next 2 years (from FY17)
reaching approx 181Bn by FY19, whereas net profit is expected to grow to around 45Bn CAGR of
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23.6% by FY19. HDFC AMC comes under top 5 asset management companies so with growth in MF
industry its likely to benefit the company with increase in investor base and rise in financial
savings.
Strong Brand and Parental Support
HDFC Ltd has its brand name for more than 40 years. HDFC AMC is part of HDFC group. HDFC AMC
gets advantage of its brand name, reputation so investors are more likely to trust the company.
HDFC AMC gets huge advantage by selling its products through its promoter that is HDFC Ltd,
which already has large number of customers across India. Investors who are aware about the
HDFC can trust and invest through AMC.
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Risks
De-Growth in PMS segment
PMS contributed 1.33% of total revenue in FY18, its share in revenue is declining from 16.14% in
FY16. PMS revenue has declined by 38.81% CAGR in last 3 years, -19.3% in last 5 years and -7.19%
in last 5 years. Continuous decline in PMS revenue, investors might be loosing trust in investment
in PMS or team managing PMS is not that efficient.
Adverse Market Fluctuation and adverse economic conditions
Company’s business depends on customer confidence or attitude towards financial savings,

financial savings rate, economic growth rate etc. Poor performance of equity/debt market will
have adverse and direct impact on company’s AUM, so AUM may decline. Decline AUM will lead
to decline in company’s revenue that is investment management fee and advisory fee. Adverse
economic or market conditions might lead to withdrawal of funds by investors and decrease in
inflows through systematic transaction.
Underperformance of company’s products
Underperformance of schemes of HDFC AMC comparing to competitors or benchmark could

adversely affect company’s AUM, revenue. Investors may loose trust on performance of schemes
of company which will company’s brand name and reputation. One of important risk is company
might be facing reduction of share of equity-oriented schemes in total AUM. As equity-oriented
schemes have higher investment management fee so decline in contribution from equity-oriented
schemes will adversely affect revenue.
Dependency on third party Distribution
After direct channel, IFA and national distributors contribute 28% and 21% respectively in
company’s total AUM as of December’18. So, company have dependency on IFA and distributors
for selling its products, if company is unable to maintain relation or increase its distribution
channel it could adversely affect its operations.
Rise in competition
Rise in competition will reduce AUM market share of company, which will reduce investment
management fee and hence adversely affect the revenue and profitability of business. Company
has to continuously respond effectively to competitors to sustain its position in market and not
loosing its market share.
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Industry
Mutual Fund Industry India

 Mutual Fund industry is growing at CAGR of 18% from FY00-18. AUM grew at a CAGR of 26.3%
from 7 Tn in FY13 to 21.3Tn in Dec’17, supported by strong investor inflows. Current AUM of
Industry has reached Rs21.3Tn.
 During FY13 to FY17, total net inflows was 9.2Tn, while 60% of 9.2Tn was in the year of FY17
and FY18, while equity attracted 57% of net inflows in FY17 and FY18.
 AUM of equity-oriented funds grew at CAGR of 40.1% from FY13 to Dec’17 faster than debt
segment growing at CAGR of 16.2% during same period.
 AUM of Liquid/Money Market grew at CAGR of 26.6% and Others (Gold ETF, Other ETF and
FOF) at 40.6% during FY13 to Dec’17.
 The SIP book size increased from 31.2Bn as of Apr’16 to 62.2Bn as of Dec’17. This is a huge
positive for the mutual fund industry, as SIPs aid in building a healthy long-term asset base.
Investor Profile of the Industry
 Share of Individual Investors in total AUM increased from 44% in FY13 to 51% as of Dec’17,
while institutional Investor’s share decreased from 50% in FY13 to 43% as of Dec’17.
 AUM of Individual investors is growing at faster pace of 30.59% CAGR from FY14 to as of
Dec’17 where as Institutional Investor’s AUM is growing at CAGR of 22.05% during same
period.
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AUM by Geography
Classification Location % of AUM

Top 5 Mumbai 31.52
Delhi 14.98
Bengaluru 6.68
Pune 4.31
Kolkata 4.24
Next 10 Ahemdabad 3.71

Chennai 3.31
Hydrebad 2.10
Vadodra 0.81
Jaipur 0.69
Surat 0.63
Lucknow 0.59
Kanpur 0.52
Udaipur 0.51
Nagpur 0.51
SIP Growth
 SIP book size has increased from Rs. 3120Crs as on April 2016 to Rs. 6220Crs as on
December’17. The total equity fund flows contributed 41% and 23% in FY17 and FY18 (up to
December) in total number of SIP.
 SIP has almost doubled which is a huge advantage for industry, as it will create huge asset
base in future.
Long-term Capital Gain Tax
Types of Mutual Fund Period of Tax Applicability

Scheme Holding
Equity STCGs LTCGs Dividends
Oriented/Arbitrage/Balance- 1 year NA 10% over 10%+12%
Aggressive/Equity Savings gain of (on 10%)
Rs 1 Lakh surcharge+
(Without 4%cess
Indexation) (on 10%) =
Less than 1 year 15% NA 11.648%
Debt Oriented Mutual Funds 3 years NA 20% after 25%+12%
which include liquid/money indexation (on 25%)
market and Less than 3 years As per tax NA surcharge+
balance(conservative) slab 4% cess
(on 25%) =
29.12%
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Difference between in Debt Mutual Funds vs Fixed Deposits
Particulars Debt Mutual Funds Fixed Deposits

Investment Option Lump sum or SIP Lump sum
Taxation 20% after indexation benefit 5%, 20% or 30%
(for long-term)
As per tax slab (short-term)
Liquidity High Low
Early Withdrawal With or without exit load Penalty if withdrew
depending on type of MF pre-maturely
scheme
Investment Expenditure 2.5% No management Costs
Risk Moderate Low
 So, we can conclude that investment in debt mutual funds is better comparing to fixed
deposits because investment in debt funds gives benefit of indexation, due to which taxable
income gets lower comparing to fixed deposits.
 If we assume FD and debt mutual funds gives same return from investment and invested for
same period, debt maturity funds give higher post tax return.
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Growth Drivers
Rising Income and Increase in Savings
India has witnessed steady growth in per-capita GDP from US$1237.3 in FY09 to 1963.55 in
FY17.The gross domestic savings rate (as % of GDP) is higher than those of major economies such
as the US,UK, France, Japan and Germany. As of 2016, India’s gross domestic savings rate stood
at 29%, compared with the global average of 25%. Household savings in India has witnessed a
growth from 20.7Tn in FY12 to 24.8Tn in FY17. Net Financial savings grew at a healthy growth of
9.9% CAGR between FY13 and FY17, compared with savings in physical assets, which grew at a
CAGR of 0.1%. Proportion of net financial assets in total households savings has increased from
31% in FY12 to 42% in FY17. Net financial savings stood at Rs10.3Tn in FY17.
Under penetration in Mutual Fund Industry
Mutual fund AUM as a % of GDP rose from 5.6% in FY00 to 11.6% in FY17, and further rose to
12.9% in the first half of FY18. Mutual Fund penetration in India is lower than the world of 62%
and lower than many other developed economies like US (101%), France(76%) and UK (57%) as of
Dec’17. AUM of Equity Mutual Fund to Market Cap ratio, India has 4% while Germany has 51%,
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US has 42% and 27% in UK. So, lower penetration indicates potential of growth in mutual fund
industry.
The top 15 cities held the majority of the mutual fund assets with a share of 81% as of Dec’17.
However, assets of beyond 15 cities have grown faster at 34.2% CAGR compared with 26.7% for
T-15 cities between Mar’14 to Dec’17. As of Dec’17, the assets pertaining to B-15 cities stood
at 4.2Tn. Total MAAUM contribution from T30 has increased from 83.6% as of 30th Sep 2018 to
85.7% as of 31st Dec, 2018.
Capital products gaining popularity
Traditionally deposits have been famous investment which use to be 62% of household gross
financial savings in FY17. In past 2 years investors have shifted there investments to share and
debentures which shows rise in proportion of financial savings from 2% in FY15 to 10% in FY17.
Reason behind shift was due to decline in interest rates and better performing equity markets. For
the period April 2015 to December 2017, the individual investors’ AUM grew at a CAGR of 33%
to 11.4Tn.
Expected growth in Industry in near future
Industry’s AUM (excluding gold ETF and FOF) is expected to grow at CAGR of 21% from Rs17.5Tn
in FY17 to 44.9Tn in FY22. Revenue is expected to grow at CAGR of 24.2% by FY19 reaching at
181Bn from 118Bn in FY17.Net profit is expected to grow at 23.6% CAGR by FY19 reaching at 45Bn
from 29Bn in FY17. Equity funds is going to be major driver in growth of AUM and strong inflow
from individual investors.
Awareness and Education among the Investors
To boost the awareness SEBI has directed to keep 2bps of daily net assets aside which has to be
used for awareness and education of investors. With the AUM from B15 cities reaching 19% of the
total AUM (as of December 2017), SEBI in February 2018, has permitted the additional 30 bps total
expense ratio to be charged in B30 cities instead of B-15 cities. These measures are expected to
enhance participation from smaller towns. Retirement planning has a huge potential for getting
tapped in India and, if channeled through mutual funds, can significantly improve penetration
among greater number of Indian households.
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Changes in SEBI Regulations

1. All expenses need to be paid from scheme and not from books of AMCs
Before companies use to give commission from its profits to distributors, very high commission
were given by company so this led to misselling and churning of mutual fund schemes. Now, with
change in SEBI regulations commission will be directly deducted from scheme account.
2. Expenses in Direct plans vs Regular plans
All fees and expenses charged in a direct plan (in % terms) under various heads including the
investment and advisory fee shall not exceed the fees and expenses charged under such heads in a
regular plan. Many companies narrowed the gap of expenses between regular and direct plan.
Overall expenses in direct plan must not be higher than regular plans.
3. Additional TER of 30 bps for penetration in B-30 cities
Companies can charge additional TER of 30bps in B30 cities on daily NAV depending on net inflows
from B30 cities applied with certain conditions. It has decided that additional TER will be charged
only from retail investors based on inflows. For now retail investor is defined as individual investor
later SEBI will define “Retail Investor”. Inflows from corporates and institutions from B30 will not
be considered as inflow from B30 for additional 30bps of TER. Institutions and corporates use to
misuse additional 30bps in TER by going through B30 which will lead to higher commission to
distributors which is shared with investor.
4. SEBI ban on Upfront Commission
SEBI has ban on all upfront commission except for a small cut out for the SIPs. High upfront
commission encourages sharp sales of mutual funds products. SEBI is trying to ban all ways for
making first sale.
5. Decrease in TER.
AUM(Rs in Crs) TER for equity-oriented TER for other schemes

schemes (Excluding ETF and FOF)
0-500 2.25% 2.00%
500-750 2.00% 1.75%
750-2000 1.75% 1.50%
2000-5000 1.60% 1.35%
5000-10000 1.50% 1.25%
10000-50000 TER reduction of 0.05% for TER reduction of 0.05% for
every increase of 5,000 crore every increase of 5,000
AUM or part thereof crore AUM or part thereof
> 50000 1.05% 0.80
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6. Categorization and Rationalization of Mutual Fund Schemes
According to circular of October’2017 schemes were classified as Equity, Debt, Hybrid, Solution
Oriented and Other Schemes. In Equity, schemes are classified as Multi-Cap in which 65% of total
assets must be invested in equity and equity related instruments, then comes Large-Cap in which
minimum investment in equity and equity related instruments of large cap companies is 80% of
total assets, then comes Large & Mid Cap in which minimum of 35% of total assets invested in
both large and Mid-cap companies in equity and equity related instruments, this way there are 10
schemes under equity schemes. Debt schemes is further classified into 16 schemes, hybrid into 6
schemes, solution oriented and other schemes into 2 each.
Impact of Post-Demonetization on Mutual Fund Industry

Post-demonetization, banks was in excess of liquidity as all cash started coming in banking system.
Banks reduced interest rates on fixed deposits due to poor demand for credit. So, banks has more
money to lend then demand from the people which made banks to slash the interest rates.
Dropping of interest rates made more people turn to mutual funds.
Demonetization was not the primary reason for people shifting towards mutual funds factors such
as falling interest rates, good returns from equity markets and poor performance from real estate
were also into play.
Equity mutual fund industry received net inflows of Rs1.23Lakh Crs between November’16 and
December’17. The amount is huge comparing to past 3 years there has been collective net inflow
of close to Rs1.67Lakh Crs in equity mutual funds. Industry AUM reached an all time high of
Rs21Lakh Crs as on September end with equity AUM touching a high of Rs5.6lakh Crs.
Current Update on Industry
 AAUM of MF industry stand at Rs24,52.085Crs as of January, 2019 and AUM was

Rs23,37,118Crs.
 AUM of the industry has grown 5 times in 10 years from 4.78Tn as on 31st Jan,2009 to 23.37Tn
as of 31st Jan,2019, grown by 2.5 times in last years from 9.03Tn as on 31st Jan,2014.
 The total number of accounts stood at 8.10Crs as on 31st January, 2019 where maximum
investment is from retail segment which stood at 6.82Crs.
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Business of the Company
About the Company
HDFC AMC operate as joint venture between HDFC Ltd and Standard Life Investments Ltd with
holding of 52.81% and 29.96% respectively as of December’18. Standard Life Investments Ltd is
part of Standard Life Aberdeen.
Operations of HDFC AMC can be classified into two, mutual fund operations (MFO) and portfolio
management service operations (PMSO) and they have also received SEBI approval to operate as a
Category II AIF and intend to seek approval to be recognized as Category III AIF.
Schemes
A. Diversified Product-Mix
HDFC AMC has diversified product-mix includes 27 equity-oriented schemes, 98 debt schemes
and 5 other schemes (ETF and fund of fund). (Below all the schemes and AUM is of year 2018)
Equity Schemes
 Equity funds constituted 48% of total AUM as of Dec’18 (all 27 equity oriented schemes).
 Company is medium to long term investors in equity and investments are driven by
fundamental research.
 Quantitative aspects: growth prospects of industry, company’s competitive position in
industry, analysis of company’s financials statements and performance.
 Qualitative aspects: management quality, corporate governance, understanding the business
and risks.
Scheme Categories Scheme Charateristics AUM (Rs in No of

Crs) Schemes
Multi-Cap Fund Minimum investment in 20353 1
equity & equity related
instruments 65% of total
assets
Mid Cap Fund Minimum investment 19992 1
in equity & equity
related instruments of
mid cap companies-65% of
total assets
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Large Cap Fund Minimum investment 14369 1

in equity & equity
large cap companies, 80% of
total assets
Equity Linked Savings Minimum investment 8148 2
Scheme in equity & equity
related instruments, 80% of
total assets (in
accordance with Equity
Linked Saving Scheme, 2005
notified by Ministry of
Finance)
Small Cap Fund Minimum investment 4144 1
in equity & equity
small cap companies, 65% of
total assets
Value Fund Scheme should follow 3282 1
a value investment
strategy.
Minimum investment
in equity & equity
related instruments, 65% of
total assets
Large and Mid cap Fund Minimum investment 1236 1
in equity & equity
large cap companies, 35% of
total assets Minimum
investment in equity
& equity related
instruments of mid cap
stocks -35% of total assets
Thematic Fund Minimum investment 948 1
in equity & equity
a particular sector/
particular theme, 80% of
total assets
Focused Fund A scheme focused on the 502 1
number of stocks (maximum
30) Minimum investment
in equity & equity related
instruments, 65% of total
assets
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Debt Schemes
 Objective is to deliver optimal risk adjusted returns, with focus on safety, liquidity and returns.
 Asset allocation debt depends upon outlook, spreads, yields for securities.
 Company has in-house quantitative model to arrive at credit score of each approved
investment, which determines exposure limit of portfolio for individual credits for all
portfolios is also specified.
 Quantitative aspects: leverage, profitability, solvency ratios etc.
 Qualitative aspects: parental company and track record.
 Pre-trade monitoring includes volume weighted average price (VWAP) analysis and trade
allocation review. Post-trade includes Value at risk (VaR), sector and stock concentration risks,
peer group analysis.
Scheme Categories Scheme Charateristics AUM No of

Schemes
Liquid Fund Investment in Debt and 42362 1
money market securities
with maturity of upto
91 days only
Credit Risk Fund Minimum investment in 18430 1
corporate bonds, 65% of
total assets
(investment in below
highest rated
instruments)
Floater Fund Minimum investment in 17083 1
floating rate Instruments,
65% of total assets
Corporate Bond Fund Minimum investment in 12401 1
corporate Bonds, 80% of
total assets (only in
highest rated instruments)
Low Duration Fund Investment in Debt & 10402 1
Money Market instruments
such that the maturity
duration of the
portfolio is between
6 months-12 month
Short Duration Fund Investment in Debt & 10615 1
such that the maturity
duration of the
1 year –3 years
Money Market Fund Investment in 4107 1
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having maturity upto

1 year
Banking & PSU Debt Fund Minimum investment 3214 1
in Debt instruments of
banks, Public Sector
Undertakings, Public
Financial Institutions, 80%
of total assets
Gilt Fund Minimum investment in 1623 1
Govt securities, 80% of total
assets (across maturity)
Medium Duration Fund Investment in Debt & 1459 1
such that the Macaulay
Dynamic Bond Fund Investment across duration 1310 1
Medium to Long Duration Investment in Debt & 1108 1
Fund Money Market instruments
such that the Macaulay
duration of the
4 –7 years
Overnight Fund Investment in overnight 112 1
securities having maturity
of 1 day
Hybrid Schemes
Scheme Categories Scheme Characteristics AUM No of

Schemes
Balanced Advantage Investment in equity/ 36417 1
Fund debt that is
managed dynamically
Aggressive Hybrid Equity & Equity related 21961 1
Fund instruments between 65%
and 80% of total
assets; Debt instruments,
between 20% to 35% of total
assets
Equity Savings Fund Minimum investment 7445 1
in equity &
equity related
instruments, 65%of total
assets and minimum
investment in debt, 10%
of total
assets, minimum hedged &
12-03-2019 17
unhedged to be stated in the

SID.
Arbitrage Fund Minimum investment 3770 1
in equity & equity related
instruments, 65% of total
assets
Conservative Hybrid Investment in equity & equity 3459 1
Fund related instruments between
10% and 25% of total assets;
Investment in Debt
instruments, between 75%
and 90% of total
assets
Mid Asset Allocation Invests in at least 154 1
three asset classes with
a minimum allocation
of at least 10% each in
all three asset classes
Solution Oriented
 It caters to specific goals of customers.

 It invests in both equity and debt with dominance in equities.
Scheme Categories AUM No of

Schemes
Children’s Fund Scheme having a lock in for at 2227 1
least 5 years or till the child
attains age of majority
whichever is earlier
Retirement Fund Scheme having a lock -in for 689 3
at least 5 years or till
retirement age whichever
is earlier
Other Schemes
 Other schemes include ETF and FoF:

(a) Exchange Traded Funds: ETF is a marketable security that tracks an index or a
commodity. Its suitable for those investors who prefer low-cost passive strategy.
(b) Funds of Funds: In FoF, company invests in other schemes.
12-03-2019 18
Scheme Categories AUM No of Schemes

Index Fund Minimum investment in 603 2
Exchange Traded Fund securities of a particular 506 3
index (which is being
replicated/ tracked), 95%
of total assets
Fund of Funds Minimum investment 233 2
in the underlying fund,
95% of total assets
Closed Ended Funds
Scheme Categories AUM No of Schemes

Closed Ended Funds 26429 83
Top Schemes on the basis of AUM
Launch AUM* Returns#

Scheme Fund Manager
Date (Rs in Crs) (Growth Option)
HDFC Balanced Advantage Fund Feb'1994 38405 Prashant Jain 18.46%
HDFC Credit Risk Debt Fund Mar'2014 16841 Shobhit Mehrotra 8.72%
HDFC Equity Fund Jan'1995 20856 Prashant Jain 18.75%
HDFC Hybrid Equity Fund Sep'2000 21700 Chirag Setalvad 15.70%
HDFC Liquid Fund Oct'2000 78020 Anupam Joshi 7.28%
HDFC Mid-Cap Opportunities
June'2007 20381 Chirag Setalvad 15.09%
Fund
HDFC Top 100 Fund Sep'1996 15398 Prashant Jain 19.84%
st
*AUM on aon 31 Jan’19
#Return since inception
 Prashant Jain manages total AUM of Rs77841.1Crs comibing four schemes HDFC Equity Fund,
HDFC Top 100 Fund, HDFC Balanced Advantage Fund and HDFC Hybrid Equity. Prashant Jain
has overall given higher return among top 7 schemes of 19.84%.
 Chirag Setalvad manages total AUM of Rs 50751.83Crs (excluding co-managed schemes and
HDFC Long-term Advantage Fund) comibining HDFC Mid-Cap Opportunities Fund HDFC Small
Cap Fund, HDFC Hybrid Equity Fund, HDFC Children’s Gift Fund.
12-03-2019 19
Profile of Fund Managers
1. Prashant Jain
Mr. Prashant Jain, CFA is the Chief Investment Officer, Executive Director, and Fund Manager at
HDFC Asset Management Company Ltd. and previously, from June 20, 2003 to June 30, 2004
served as the Head of Equities. Mr. Jain joined the firm on June 20, 2003. Before joining HDFC
AMC he was vhief investment officer, head of funds management and fund manager at Zurich
AMC (India) Pvt Ltd from July’1993 to June’19, 2003.He has also worked at SBI Mutual Fund as
fund in charge from 1991 to 1993.He received a PGDM from the Indian Institute of Management
Bangalore and a B. Tech degree from the Indian Institute of Technology, Kanpur.
2. Chirag Setalvad
He received a Bachelor in Science degree in Business Administration from University of North

Carolina, Chapel Hill. He is a Senior Fund Manager of Equities at HDFC Asset Management
Company Limited and previously served as Fund Manager from July 2000 to August 31, 2004. He
re-joined the firm on March 19, 2007. Previously, from October 2004 to February 28, 2007, he was
the Vice President at New Vernon Advisory Services Pvt. Ltd. He has an extensive experience in
fund management, equity research, and investment banking.
A. Important Functions in MF
Team of MFO is responsible for providing services to customers and segregated accounts. Their
primary function include:
1. Investment Administration Operations
Under this, team ensures that whatever investment decisions are made are executed. Assets
bought or liquidated for respective schemes are either received or delivered against
consideration.
2. Banking Operations
HDFC AMC maintain relationships with banks for smooth operations of investment in company’s
scheme by customers. Banks collect fund from customer for subscription of units and pay to
customers when redemption requested and dividends declared.
3. Fund Accounting Operations
Scheme accounting part is done by in-house company’s team. All assets in respective schemes
are valued on daily basis depending on valuation policy of schemes. Accounting includes units
subscribed or redeemed, valuation of securities, accrual of daily expenses and income on a daily
basis, trade executed etc.
12-03-2019 20
4. Unit Administration at CAMS
Company has appointed CAMS to be RTA for the unit management for all the schemes. CAMS
provides services like allotment of units, issuing account statements, acceptance of transactions
and payment of brokerage to distributors.
5. Anti Money Laundering
Company has put place processes, controls and checks to ensure that the provisions of Prevention
of Money Laundering Act, 2002 and Prevention of Money Laundering (Maintenance of Records)
Rules, 2005 are adhered to.
6. Investor service centers
A front office application is provided by the RTA to all ISC personnel to address most of the
customer service requirements.
7. MIS and regulatory reporting
RTA has all information relating to customer transactions, so they make a report which is
customised to provide sales related MIS to all the users including senior management and sales
personnel.
B. Portfolio Management Service Operations
Company provides PMS which consists of discretionary, non-discretionary and advisory services to
HNI, domestic corporates, family offices provident fun etc. Team of PMSO performs functions like
cash management, treasury and settlement functions, valuation of securities etc. As of 31st
December 2018, company managed total AUM of Rs91.6Bn as part of portfolio management and
segregated accounts business. Company is registered with SEBI as a portfolio manager under the
SEBI (Portfolio Managers Regulations), 1993.
12-03-2019 21
Services
A. Systematic Transactions
There product strategy also involves focusing on our systematic transaction offerings. They offer
three broad types of systematic transactions, systematic investment plans, systematic transfer
plans and systematic withdrawal advantage plans, which allow individual customers to
systematically invest, transfer and withdraw assets into and from there schemes
1. Systematic Investment Plans (SIP)- Customers have option to invest a fixed amount at
regular intervals. Benefit of SIP, (a) investor can purchase more units when NAVs are low
and less units when NAVs are high,(b) rupee cost averaging, buying a fixed amount on a
particular investment at regular intervals.
Amount: Customer can start with SIP of Rs500.
Frequency: Customers can pay daily, monthly, quarterly.
Top-up: Customer SIP amount can be increased by pre-determined amount.
2. Systematic Transfer Plans (STP)- STP allows customer to transfer funds or units from one
scheme to other at regular intervals. Types of STP:
(a) Fixed STP: Customers gets service of transferring pre-determined fixed amount from
one scheme to other. Customers can make transfers daily, weekly, monthly or
Quarterly basis.
(b) Flex STP: Target market value is set based on installment amount and number of
installments. Installment amount for any period depends on shortfall to the target
market value. So, installment amount and any shortfall to target market value is
transferred to transferee scheme. If there is no shortfall, determined installment is the
minimum which is transferred.
Investors can transfer through Flex STP on a daily, weekly and quarterly basis.
(c) Swing STP: Target market value of investor’s account is pre-defined by the number of
installments and amount of installment. Installment amount for any period depends on
shortfall or surplus to the target market value. If the difference is shortfall then amount
is transferred to transferee scheme while if it’s a surplus than target value is transferred
to transferor scheme.
3. Systematic Withdrawal Advantage Plan (SWAP)- Customers who want cash on

periodic
basis may choose for SWAP.
(a) Fixed SWAP: Fixed amount can be redeemed by customer on periodic basis of monthly,
quarterly, half-yearly and yearly.
(b) Variable SWAP: In variable SWAP only the capital appreciation portion or dividend of a
scheme will be withdrawn on a periodic basis. Quarterly, half-yearly and yearly
withdrawal is available under this facility.
4. Flex Index Plan: In this plan it allows customers to transfer investments from debt and
liquid schemes to equity-oriented schemes at predetermined closing S&P BSE SENSEX levels
in four installments.
12-03-2019 22
Performance
A. Assets Under Management
 Equity contributes 48% highest amongst all in total AUM of Mutual fund business, followed by
debt which contributes 28%. Where as in industry, equity contribution is lower at 44.4%.
Equity contribution has reduced compared to previous year (December 2017) from 53%.
 AUM is growing at CAGR of 24.70% during FY15-18. Recently, AUM reported 12.20% Y-o-Y
growth during Dec’17-18,
 Excellent growth in AUM is due to factors like better performing equity market and company
with good fund management team.
B. Distribution Network.
 Company served in 200 cities with 210 branches and various service centers of RTA. As of 31st
March,2018 company had 75000 distributors along with huge distribution from HDFC bank
contributing 7.8% of total AUM and 10.9% of equity-oriented AUM, as of December’18.
 Direct channel’s contribution has increased from 32.2% in December’17 to 39.7% in
December’18, whereas national distributors came down from 22.5% to 18% during the same
period.
 Highest distribution happens through direct channel, company offers services through online
portal, HDFC MF Online and mobile applications. Electronic transactions grew at CAGR of
24.4% from FY15-17. They have made there schemes available on 3rd party websites and on
platforms of distribution partners.
12-03-2019 23
C. Geographical Spread
 Total MAAUM contribution from T30 has increased from 83.6% as of 30th Sep 2018 to 85.7%
as of 31st Dec, 2018.
 HDFC AMC holds 2nd position in B30 market at 11.8% after SBI MF which is at 17.8%.
 Assets of B15 cities have grown faster at 34.2% CAGR compared with 26.7% for T15 cities
between March 2014 and December 2017. As of December 2017, the assets pertaining to B15
cities stood at 4.2Tn.
D. Brand and Parental Support
 Company gets advantage of reputation and brand name from both the promoters (HDFC Bank
and SLI).
 HDFC has presence in many financial products and services, it gives advantage of trusted
provider of financial services.
E. Systematic Transactions
 Strong growing SIP book, company with increase in number of live individual accounts from
7.56Mn Dec-17 to 8.86Mn Dec-18 showing 17% Y-o-Y growth.
 Growth in systematic transactions which reported growth of 34.4% from FY15-18 is due to
increase in large number of individual investors with the company.
12-03-2019 24
F. Revenue Contribution
Company has two sources of income one from mutual funds that is investment management fee
and other from portfolio management service. If we look at revenue contribution from each of the
sources investment management fee contributes highest which is in the range of 83-98%, whereas
PMS revenue contribution is declining from 16.14% in FY14 to 1.33% in FY18. Decline in PMS
revenue contribution is may be due to de-growth in PMS revenue, -38.81% CAGR in last 3 years
and -19.3% CAGR in last 5 years.
12-03-2019 25
Financial Summary
EARNINGS
CAGR Last 3yrs Last 5yrs Last 10yrs

Revenue 19.84% 19.71% 19.11%
Investment 23.54% 21.80% 21.05%
Management Fee
Portfolio -38.81% -19.30% -7.19%
Management Fee
and Other Advisory
Services
Operating Profit 19.50% 18.92% 19.64%
PAT 20.20% 17.75% 19.88%
EXPENSES
FY13 FY14 FY15 FY16 FY17 FY18

Employee benefit 0.102% 0.104% 0.087% 0.083% 0.073% 0.063%
expenses as % of
AAUM
Operating expense 0.34% 0.35% 0.30% 0.45% 0.36% 0.29%
as % of AAUM
Operating Expenses 47.10% 44.34% 43.20% 54.45% 53.25% 45.73%

as % of Revenue
 Rise in operating expenses from FY15 to FY16 due to higher expenses in brokerage, mutual
fund expenses and business promotion.
 Company is able to maintain its efficiency by reducing its operating expenses.
MARGINS

OP Margins 62.43% 60.85% 60.89% 49.09% 54.04% 60.4%
PAT Margin 44.53% 41.67% 40.64% 33.13% 37.18% 41%
 Margins were highest affected in FY16 due to rise in expenses, but margins revived in later
years as they were able to cut down the expenses.
12-03-2019 26
RATIOS
RoE-Du Pont

PATM(%) 44.53% 41.67% 40.64% 33.13% 37.18% 41%
Sales/Total 0.49 0.76 0.78 1.014 0.92 0.74
Assets(x)
Assets/Equity(x) 2.089 1.244 1.17 1.23 1.12 1.098
RoE 45.58% 39.39% 37.09% 41.32% 38.31% 33.31%

RoA 16.57% 18.60% 31.67% 33.59% 34.40% 30.44%
RoCE 44.45% 39.05% 36.61% 40.98% 38.64% 33.40%
12-03-2019 27
Financials
Balance Sheet
(Rs in Crs) FY14 FY15 FY16 FY17 FY18
EQUITY AND
LIABILITIES
Shareholders 25.24 25.24 25.16 25.17 105.28
Capital
Reserves and 876.02 1094.65 1126.06 1397.77 2054.69
Surplus
Non-Current 15 15 15 0.80 0.78
Liability
Current Liability 205.08 176.86 256.50 175.85 209.87
TOTAL 1121.34 1311.75 1422.72 1599.59 2370.62
ASSETS
Non-Current 291.11 384.05 315.99 280.77 749.70
Assets
Current Assets 830.23 927.70 1106.73 1318.82 1620.92
TOTAL 1121.34 1311.75 1422.72 1599.59 2370.62
Profit and Loss

Revenue from 858.55 1022.44 1442.54 1480.03 1759.75
Operations
Other Income 44.57 41.84 51.79 107.87 107.49
Total Revenue 903.12 1064.28 1494.34 1587.91 1867.24
Expenses
Employee benefit 111.55 127.51 143.19 157.55 174.95
Expenses
Depreciation and 8.44 10.14 11.06 11.96 11.44
Amortization
Expense
Other Expenses 260.66 304.03 631.84 618.59 618.34
Total Expenses 380.66 441.68 786.09 788.11 804.73
Profit Before Tax 522.45 622.6 708.25 799.80 1062.51
Tax 164.68 207.06 230.37 240.48 340.90
Profit after Tax 357.77 415.54 477.88 550.24 721.61
12-03-2019 28
Cash Flow Statement

Cash Flow from 209.47 94.82 742.02 454.86 620.14
Operating Activities
Cash Flow from (50.80) 103.57 (297.07) (176.03) (634.76)
Investing Activities
CAPEX 17.33 15.96 9.41 13.56 17.99
Free Cash Flow 158.67 78.86 732.61 441.3 602.15
Cash Flow from (158.51) (196.87) (446.55) (278.53) 15.41
Financing Activities
Net 0.16 1.52 (1.60) 0.30 0.79
Increase/Decrease in
cash and cash
equivalents
12-03-2019 29
Quarterly Update
Highlights Q3FY19
 Net profit grew by 18.14% Q-o-Q and 24.09% Y-o-Y.

 Revenue declined by 0.68% Q-o-Q and grew by 2.02% Y-o-Y.
 Market Share:
1. Market share in terms of AUM rises to 14.4% in Dec’18 from 13.3% in Sep’18.
2. Liquid Funds grew by Rs332Bn, for industry grew by Rs515Bn in this quarter. Market share
of 64% in liquid fund AUM.
 Equity as % of total AUM is 48% compared to 44.8% for the industry.
 AUM from individual investors is 61.8% higher than industry at 54%, Individual MAAUM of
total.
 Management says it will pass majority of decrease in TER in reducing the commission to
distributors, pass approx. 21-22bps out of 24bps.
 Company had exposure of Rs 40Crs to preference shares of the holding company IL&FS,
company already did provision of Rs21.2Crs, in this quarter provision of 9Crs is done.
Company is only left with approx. 9crs of exposure. There has been no default on preference
shares, as company did receive dividend in May’18.
 Upfront commission has stopped from the effect of 22nd October’18. Upfront commission is
replaced by slightly higher amount of trail commission. Upfront commission use to be
amortized over 12 month period. Trail commission has not increased by equivalent amount,
so additional trail commission will get amortized over a 36 month period.
12-03-2019 30
Analysis
Peer Analysis
(Rs in Crs) HDFC AMC ICICI AMC Reliance SBI Funds Adtiya Birla
Nippon Manageme Sunlife
nt Pvt Ltd AMC
(Standalon
e)
Revenue 1759.75 1818.64 1585.8 1237.79 1216.07
Investment 1736.48 1625.35 1546.59 1217.83 1112.35
Management
Fee
Portfolio 23.27 193.29 39.15 19.96 103.72
Management
Services and
Others
Average AUM 278016.87 305700 244904 217649* 267739*
(Mutual Funds)
PAT 721.62 625.55 521.94 330.99 322.00
Operating 60.4% 52.19% 45.76% 40.69% 39.83%
Profit Margin
PAT Margin 41% 34.39% 32.91% 26.74% 26.48%
RoA 30.44% 53.61% 37% 25.57% 23.65%
RoE 33.31% 76% 22.82% 32.42% 30.02%
RoCE 33.4% 71.63% 31.29% 29.94%
Free Cash Flow 602.15 480.8 15.08 152.46 286.11
No of Schemes 133# - 222 -

Distributors 75000# - 65300 -
*for year end quarter
#as of Dec’18
12-03-2019 31
Efficiency
Reliance Nippon Life AMC
Expenses as % of
Revenue
Operating Expenses 68% 59% 59% 67% 65% 71%
Brokerage 19% 9% 11% 26% 20% 23%
Business Promotion 5% 5% 7% 5% 9% 11%
HDFC AMC
Expenses as % of
Revenue
Operating Expenses 47.10% 44.34% 43.20% 54.45% 53.25% 45.73%
Brokerage 21% 18% 17% 32% 28% 21%
Aditya Birla Sun Life AMC Ltd (Standalone)
Expenses as % of
Revenue
Operating Expenses 79% 74% 74% 59% 70% 64%
Scheme Expenses 31% 32% 32% 19% 35% 27%
SBI Mutual Fund
Expenses as % of Revenue FY15 FY16 FY17 FY18

Operating Expenses 48% 56% 61% 61%
Brokerage 5% 14% 23% 34%
Business Promotion 4% 5% 6% 4%
 If we compare efficiency of all the companies, HDFC AMC has lowest ratio of operating
expenses as % revenue. If we look at current scenario (FY18) Reliance Nippon has highest ratio
of 71% followed by Aditya Birla Sun life of 64% followed by SBI mutual Fund at 61% followed
by HDFC AMC at 45.73%.
 With lower ratio, HDFC AMC is able to control its expenses hence higher efficiency. In future,
even if HDFC AMC experiences downfall in revenue it will be able to cover its expenses,
sustain its position in market and smooth continuation of operations.
12-03-2019 32
Valuation
SCENARIO-1 (P/E Approach)
(Rs in Crs) Q1 Q2 Q3 Q4 Total

FY18 390.42 430.01 467.66 471.66 1759.75
FY19 471.23 480.36 477.09 54.2409 1954.58
Y-o-Y Growth 21% 12% 2% 11.50% -
Growth PAT
FY19 FY20 FY21 PAT
Rate Margin
1954.58 0.12 2189.1296 2451.83 38.72% 949.35
1954.58 0.14 2228.22 2540.17 38.72% 983.55
1954.58 0.16 2267.31 2630.08 38.72% 1018.37
1954.58 0.18 2306.40 2721.56 38.72% 1053.79
1954.58 0.2 2345.50 2814.60 38.72% 1089.81
Mcap Matric
Mcap PAT FY21E

949.35 983.55 1018.37 1053.79 1089.81
30 28480.40 29506.64 30551.04 31613.61 32694.34
35 33227.13 34424.41 35642.88 36882.54 38143.39
P/E
37 35125.83 36391.52 37679.62 38990.12 40323.02
39 37024.52 38358.63 39716.36 41097.69 42502.64
41 38923.21 40325.74 41753.09 43205.26 44682.26
Expected Return Matric

Expected
12% 14% 16% 18% 20%
Return
30 -11% -8% -5% -1% 2%
35 4% 7% 11% 15% 19%
P/E 37 9% 13% 17% 22% 26%
39 15% 20% 24% 28% 32%
41 21% 26% 30% 35% 39%
 If we look at Y-o-Y growth of Q1,2,3 between FY18 and FY19 we get 21%, 12% and 2%
respectively. If we do average of this growth rate we get 11.5%. From Q3FY18 revenue we
12-03-2019 33
assumed 11.5% growth rate we get Rs525.9Crs for Q4FY19. So, total revenue comes up
1954.58Crs in FY19.
 Currently, company’s revenue is growing at CAGR of 19.71% in last 5 years. So, we have
expected range of 14% to 20% growth in revenue for next 2 years, so that we are able to take
good as well as bad scenario.
 Taking FY19 as base we take 5 situations one with 12% growth then with 14% 16%, 18% and
20% so we get expected revenue for FY21E.
 Multiplying revenue with PAT margin, PAT margin has been kept constant for all 5 situations
which is last 5 years average.
 Now we created a matric using PAT of FY21E in five situations and P/E in range from 30 to 41.
 Multiplying PAT with P/E in all ranges we get Mcap for FY21E.
 Comparing expected Mcap with current Mcap we get matric of expected returns in coming
two years.
 Amongst all appropriate returns can be one of 24% with 39 P/E and 16% revenue growth. If
revenue growth slow down may be due to uncertainity in elections or because market is not
performing well in past 1-2 years so we can be slightly conservative on growth side. Even if we
go little optimistic and then we can see growth at 18% with same P/E we get 28% return.
SCENARIO-2 (EV/EBITDA Approach)
Growth EBITDA
FY19 FY20 FY21 EBITDA
Rate Margin %
1954.58 0.12 2189.1296 2451.83 57.89% 1419.36
1954.58 0.14 2228.22 2540.17 57.89% 1470.51
1954.58 0.16 2267.31 2630.08 57.89% 1522.55
1954.58 0.18 2306.40 2721.56 57.89% 1575.51
1954.58 0.2 2345.50 2814.60 57.89% 1629.37
Mcap Matric
EBITDA for FY21E

1419.36 1470.51 1522.55 1575.51 1629.37
20 28387.23 29410.11 30451.10 31510.19 32587.38
EV/EBITDA 22 31225.95 32351.12 33496.21 34661.21 35846.12
24 34064.68 35292.14 36541.32 37812.23 39104.86
26 36903.40 38233.15 39586.43 40963.25 42363.60
28 39742.12 41174.16 42631.54 44114.26 45622.34
12-03-2019 34
Expected
12% 14% 16% 18% 20%
Return
20 -12% -8% -5% -2% 2%
22 -3% 1% 4% 8% 12%
EV/EBITDA 24 6% 10% 14% 18% 22%
26 15% 19% 23% 28% 32%
28 24% 28% 33% 38% 42%
 As in scenario-1, we found FY19 same has been used as base year with similar growth rate.
 EBITDA Margin has been assumed as 57.89% which is last 5 years average.
 Multiplying EBITDA margin with revenue we get expected EBITDA for five situations for FY21E.
 EV/EBITDA mutiplier has been in the range of 20 to 28 because 29.87 is the company’s current
EV/EBITDA, but if we see listed peers which is Reliance Nippon which has 14.62. So, if we take
average of this two companies it comes up to 22 (approx). So, range of 20 to 28 gives safety
and optimistic view.
 Now we get matric of Mcap by multiplying EBITDA of FY21E with EV/EBITDA.
 Hence, comparing expected Mcap with current Mcap we get expected returns.
 Appropriated returns might be 28% and 38% because company has current EV/EBITDA of
29.87, so we are taking maximum that is 26 and 28 EV/EBITDA with 18% growth slightly less
than company’s CAGR to be on conservative side.
SCENARIO-3
(Rs in Crs) Part-1 Part-2 Part-3

AUM as of
338260 338260 338260
December'18
Growth Rate 12% 12% 12%
AUM FY19E 378851 378851 378851
Expected AUM
18% 21% 24%
growth Rate
FY20 447044.18 458409.71 469775.24
FY21 527512.13 554675.75 582521.30
Revenue as % AUM
0.56% 0.56% 0.56%
FY18
Revenue 2954.07 3106.18 3262.12
Assumed Last 5 years
57.89% 57.89% 57.89%
avg EBITDA Margin
EBITDA 1710.11 1798.17 1888.44
12-03-2019 35
Market Cap Matric
EBITDA for FY21E

1710.11 1798.17 1888.44
20 34202.20 35963.40 37768.82
EV/EBITDA 22 37622.42 39559.74 41545.70
24 41042.64 43156.08 45322.58
26 44462.86 46752.42 49099.46
28 47883.08 50348.76 52876.34
Growth Rates (Expected)

Expected Return
18% 21% 24%
20 7% 12% 18%
22 17% 23% 30%
EV/EBITDA 24 28% 35% 41%
26 39% 46% 53%
28 49% 57% 65%
 Combine AUM of MF and PMS is 338260Crs as of Dec’18, AUM of MF had 12% Q-o-Q growth
(Sep-Dec’18).We have expected 12% growth in AUM which gives AUM as of March’19.
 We have assumed growth rate in range of 18% to 24% because company’s AUM CAGR rate is
25.5% (only of mutual fund), to be on conservative side we have taken this range.
 With AUM of FY19 and growth rate in range of 18% to 24% we get AUM for FY21E.
 Revenue as % AUM is 0.56% (TTM) so we assumed same for FY21. Multiplying 0.56% with
FY21E AUM we get revenue.
 Then we will use the same method of EV/EBITDA used in scenario-2.
 Appropriate returns would be 46% and 57% that is with growth of 21% which is lower than
company’s growth, due to possibility of slow down in market and declining equity proportion
of equity in AUM and keeping EV/EBITDA of 26 and 28.
12-03-2019 36
Conclusion
Recommendation
HDFC AMC comes under top two asset management companies in terms of revenue, revenue as %
of AAUM and profitability in the industry as of December’17. HDFC AMC has 8.86Mn individual
live accounts as of December’18 grew from 5.14Mn in March’15, SIP book growth in last 10 years
is 64.2% and 77.1% in last 5 years. Company currently has 75000 distribution partners, 210
branches and 1167 employees as of Dec’18.
If we look at financials of company, revenue growth is 19.11% and 19.88% CAGR in last 10 years.
HDFC AMC has 48% of equity oriented assets in total MF AUM which is higher than 44.8% of
industry, company has huge advantage with large number of individual investors and individual
investors are more likely to invest in equity-oriented schemes. Individual investors stay invested
for longer period of time and equity-oriented investments have higher investment management
fee so this gives company higher revenue. HDFC AMC is also cost efficient comparing to peers
where employee benefit expenses as % of AAUM. Company has best operating profit margins at
60.4% and PAT margins at 41% which is highest comparing to peers. MF industry is under
penetrated so this will give company growth opportunities and to expand.
Company’s performance is directly dependent on performance of capital market and economy.

This year there is going to be central elections which will create uncertainity and less preference of
individual investors to invest in capital market. So, this might be risk that company’s revenue
might be temporarily affected. Rise in competition and changes in SEBI regulation will affect
company’s revenue and profitability.
We recommend our investors this company at current P/E 44.46 and CMP Rs1509.15 as on 12th
Mar’19 to “BUY ON DIPS” with the potential upside of 35-47% in the horizon of 2-2.5 years.
12-03-2019 37
Source
 Investor Presentation
 DRHP
 Annual Report
 ICICI Report on HDFC AMC
Research Analyst Details:
Name Designation Email Id

Tejas Jariwala Research Head tejas.jariwala@jainam.in
Jimit Zaveri Sr. Research Analyst jimit.zaveri@jainam.biz
Vaishali Patel Sr. Research Analyst vaishalip.patel@jainam.biz
Karan Agarwal Assistant Research Analyst karan.agarwal@jainam.biz
Vandana Pareek Assistant Research Analyst vandana.pareek@jainam.biz
Riva Patel Assistant Research Analyst riva.patel@jainam.biz
Radhika Modi Assistant Research Analyst radhika.modi@jainam.biz
Shahrukh Nalbandh Sr. Research Executive shahrukh.nalbandh@jainam.biz
Drashti Patel Jr. Research Executive drashti.patel@jainam.biz
Dhruvish Bakshi Jr. Research Executive dhruvish.bakshi@jainam.biz
12-03-2019 38
Full Form and Glossary
Abbreviation Full Form

AMC Asset Management Company
PMS Portfolio Management Service
AUM Assets Under Management
SMA Separately managed accounts
B30 Beyond 30 cities
B15 Beyond 15 cities
MF Mutual Funds
CAGR Compounded Annual Growth Rate
MAAUM Monthly average assets under
management
ETF Exchange traded funds
FoF Fund of Funds
IFA Independent Financial Advisors
SIP Systematic Investment Plans
LTCG Long-term Capital gain
STCG Short-term capital gain
bps Basis points
TER Total Expense Ratio
CAMS Computer Age Management Services
RTA Registrar and transfer agent
ISC Investor Service centres
PMSO Portfolio Management Service
Operations
HNI High networth individual
STP Systematic Transfer Plans
SWAP Systematic Withdrawal Advantage Plans
SLI Standard Life Investments
PATM Profits after Tax margin
AAUM Average Assets under management
OP Operating Profit
EBITDA Earning before interest, tax, depreciation
and amortization
RoA Return on Assets
RoCE Return on Capital Employed
EV Enterprise Value
RoE Return on Equity
12-03-2019 39
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Disclaimer
Research Analyst Details
Name: Riva Patel Email Id: riva.patel@jainam.biz Ph: +91 0261-6725518
Analyst ownership of the stock: No
Details of Associates: Not Applicable
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12-03-2019 41

Intiating Coverage Mutual Fund FY19 - 12th March: Jainam Share Consultant PVT LTD

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Jainam Share Consultant Pvt Ltd Sector : Mutual Fund

Intiating Coverage | Mutual Fund

FY19 | 12th March

Riva Patel- Assistant Research Analyst (riva.patel@jainam.biz); 0261-6725518

C. Business of the Company

Company Ltd 52 Week High (Rs) 1969.5

52 Week Low (Rs) 1248.30

HDFC AMC operate as joint venture between TTM Period 201803

HDFC AMC has currently AUM of Dividend Yield% 1.06

Exchange: BSE BSE Code:541729 Current Market Price:1509.15 Date:12-03-19

Focus on Individual Customers

Expected Growth in Industry

Strong Brand and Parental Support

Adverse Market Fluctuation and adverse economic conditions

Company’s business depends on customer confidence or attitude towards financial savings,

Underperformance of company’s products

Underperformance of schemes of HDFC AMC comparing to competitors or benchmark could

Dependency on third party Distribution

Mutual Fund Industry India

Investor Profile of the Industry

Classification Location % of AUM

Next 10 Ahemdabad 3.71

Long-term Capital Gain Tax

Types of Mutual Fund Period of Tax Applicability

Difference between in Debt Mutual Funds vs Fixed Deposits

Particulars Debt Mutual Funds Fixed Deposits

Under penetration in Mutual Fund Industry

Capital products gaining popularity

Expected growth in Industry in near future

Awareness and Education among the Investors

Changes in SEBI Regulations

2. Expenses in Direct plans vs Regular plans

3. Additional TER of 30 bps for penetration in B-30 cities

4. SEBI ban on Upfront Commission

AUM(Rs in Crs) TER for equity-oriented TER for other schemes

> 50000 1.05% 0.80

6. Categorization and Rationalization of Mutual Fund Schemes

Impact of Post-Demonetization on Mutual Fund Industry

Current Update on Industry

 AAUM of MF industry stand at Rs24,52.085Crs as of January, 2019 and AUM was

Business of the Company

About the Company

Scheme Categories Scheme Charateristics AUM (Rs in No of

Large Cap Fund Minimum investment 14369 1

Scheme Categories Scheme Charateristics AUM No of

having maturity upto

Scheme Categories Scheme Characteristics AUM No of

unhedged to be stated in the

 It caters to specific goals of customers.

Scheme Categories AUM No of

 Other schemes include ETF and FoF:

Scheme Categories AUM No of Schemes

Closed Ended Funds

Scheme Categories AUM No of Schemes

Top Schemes on the basis of AUM

Launch AUM* Returns#

Profile of Fund Managers

He received a Bachelor in Science degree in Business Administration from University of North