HDFC chairman Deepak Parekh is of the view that it is the perfect time to launch the initial public offering for country’s second-largest mutual fund firm by assets HDFC Asset Management Company (AMC). In an interview with Anurag Shah of Zee Business, he said that people are looking forward to investing their savings in the stock market in the absence of alternative investment opportunities. HDFC AMC, priced at Rs 1,095 to 1,100 per share, opens today.
The year has been volatile for the market. What made you launch the IPO at this juncture?
Several things are there to boost the confidence. In addition, I feel it is a perfect time to launch it. In absence of alternate investment opportunities, people are looking forward to investing their savings, which have gone up due to an increase in disposable income. Earlier, gold was the preferred area of investment but it is no longer an option because in the last five years, returns from the metal have gone down and have seen a growth of just 1% per year. This lack of returns on the investments has forced them to move away and look forward to other areas of investment. Currently, gold is being brought by the actual users. Real estate was the second option but the sector has also seen appreciation and the rental yields have come down. The returns have also gone down from 10% to 2%. Bank deposit rates have come down and post-demonetisation, we saw the movement of money towards the mutual fund industry, which helped in establishing a mutual fund vehicle. Secondly, the mutual fund penetration in India stands at 13%, which is too low when compared to the global numbers that stand near 62%. Thus, there is scope for growth in the Indian mutual fund industry.
Don’t you feel that there is a risk in the market for investors, especially in the backdrop of the momentum of 2017 and volatility prevailing now?
Risk factor always lies in the equity market. So people should have a long-term view while investing and not of a year or two.
What are the short term risks if we talk about the domestic market?
In the case of India, the short-term risks are out of its control at present due to crude prices and strengthening of the dollar. The first risk is related to crude prices, which are not controlled by India. Variation in prices will have an impact on the short-term market of the country. The second risk is related to the strengthening of the value of the dollar, which has depreciated the value of the rupee by 7% in the past six months. In addition, US interest rates, which are on a rise, are also a matter of concern.
Can you share the future plans of the HDFC group and also the succession plan? Also, which other group firms will be listed in near future?
There are two companies that will be listed in near future and they are HDFC Ergo and HDFC Credila. HDFC Ergo is a non-life company, while Credila is an education loan company of HDFC. They will be listed after their assets are increased to a level where they can be listed. We believe that every company should be listed as it helps in making it transparent and inform investors about the value of the company. All the five companies are aware that we are getting old and have to find a replacement and work on the same is on.
