HDFC to pare 4% stake in mutual fund arm via IPO
Photo Credit: Satyakam Banerjee/VCCircle

Housing Development Finance Corporation Ltd, India’s largest mortgage lender, will divest a 4% stake in its mutual fund arm through the unit’s proposed initial public offering.

The company’s board has approved the sale of 8.59 million shares in HDFC Asset Management Co Ltd, representing 4.08% of its current paid-up capital, HDFC told the stock exchanges on Tuesday.

Last November, the mortgage lender had said it would divest a part of its stake in the unit through the proposed public float but would retain a minimum of 50.01% stake in the company and that joint venture partner Standard Life would hold at least 24.99%.

HDFC owned a 57.36% stake in HDFC AMC, the country’s second-largest mutual fund company, as of September 2017. UK’s Standard Life Investments Ltd held most of the remaining stake.

VCCircle reported last month that HDFC AMC had selected merchant bankers as it prepares to go public.

HDFC AMC will be India’s second mutual fund company to go public after Reliance Nippon Life Asset Management Ltd floated its IPO in October last year. The Rs 1,542-crore ($238 million) share sale of India’s third-largest mutual fund company was subscribed 81 times.

HDFC AMC aims to raise as much as Rs 2,500 crore through the IPO. The company had Rs 2.9 lakh crore worth of assets under management at the end of December 2017, right behind ICICI Prudential Asset Management Co. Ltd with Rs 2.93 lakh crore, according to industry body Association of Mutual Funds of India.

HDFC AMC’s plan to go public follows a growing trend where banks and financial services are looking to unlock value in group businesses after the rapid rise in stock markets in 2017.

Private-sector lender ICICI Bank offloaded its stakes in units ICICI Prudential Life Insurance Co Ltd and ICICI Lombard General Insurance Co Ltd in 2016 and 2017, respectively. It is now preparing to list its stock brokerage unit ICICI Securities.

The benchmark BSE Sensex had risen 28% in 2017 and about three dozen companies floated IPOs last year that cumulatively raised Rs 67,000 crore. The boom was driven by a liquidity rush as a record Rs 1.3 lakh crore was pumped into equity mutual funds last year, AMFI data show.

HDFC AMC will be the fourth firm under the Deepak Parekh-led HDFC group to go public.

Mortgage lender HDFC got listed in 1978, a year after it began operations, according to its website. HDFC Bank went public in March 1995 with a Rs 50 crore IPO that was subscribed 55 times. Its shares listed at Rs 40 apiece, four times the issue price.

HDFC Standard Life Insurance Co. floated its IPO in November 2017. The Rs 8,695-crore IPO was subscribed a little more than five times and the insurer gained on its trading debut.

*This article has been modified to correct the listing year of HDFC Ltd.

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