While Reliance Nippon Life AMC became the first fund house to go public in two decades, other fund houses such as HDFC and UTI have been reportedly launching their IPOs soon. In fact, Deepak Parekh, Chairman, HDFC has been quoted in a newspaper interview saying that the HDFC AMC will go public next year.
We spoke to a few experts to understand the reason for this interest of fund houses in going public.
Sundeep Sikka, CEO, Reliance Nippon Life AMC says that it is an organic movement from a private to the listed space. “When an industry matures and the outlook for the industry is positive, some serious players of considerable profit and size will look forward to go public. It is the responsibility of the company to share this growth and opportunity with retail shareholders,” says Sikka.
Many believe that the current market rally has acted as a catalyst for the fund houses to go public. However, a few experts have a different opinion. Sikka says that market rally does not play a significant role in going for an IPO. “The industry and company fundamentals plays a greater role in deciding whether the company needs to go public or not,” says Sikka.
Listing of an asset management has many advantages for both investors and companies. “Listing of an AMC provides retail investors access to a new sector. It makes the AMC business transparent for investors and attracts global investors,” says Sikka.
Seconding Sikka’s view, Swarup Mohanty, CEO, Mirae Asset Mutual Fund says that listing of an AMC increases the accountability of the asset management company. Another possible reason could be retention of talent. Swarup adds that globally many companies use ESOP route to retain key employees.
Will the listing of the fund houses lead to change in the industry practices? Sundeep says that listings will make fund houses shift their focus to profitability. “Going forward, the focus of the industry will move towards more profitable growth. Mergers and acquisition will take place based on profitability of the fund house instead of AUM. Investors will look at track record of profits,” says Sundeep.
Swarup says that public companies will have to focus on profitability to live up to the investor expectations.