Standard Life Sells 5% Stake in HDFC AMC for over Rs.3,000 cr

One of the reasons, the stock of HDFC Asset Management Company was down 5.51% on 29th September was the sale of 5% stake by Standard Life UK. The sharp fall in price was specifically because the seller had set the floor price for the sale at a discount of nearly 6.65% to the closing price on the previous day. But first a look at the deal.

Standard Life, the foreign partner in the HDFC Asset Management Company, plans to sell a total 5% stake at a floor price of Rs.2,870 per share. The closing price of Rs.2,904 on 29th September was quite close to the floor price of the proposed sale. The plan is to sell a total of 1.06 crore equity shares in HDFC AMC representing 5% of the capital.

Currently, Standard Life owns 4.52 crore shares in HDFC AMC representing 21.23% of the outstanding capital of the company. The current sale of shares entails a total of 1.06 crore shares representing 5% of the total capital base of HDFC AMC. The total value of the sale is estimated at Rs.3,042 crore. Normally, large blocks are sold at a discount to market price.

Standard Life has been gradually paring its stake in the insurance venture, HDFC Standard Life, too. The AMC stock is up sharply in the last 1 year on the back of solid traction in the form of a big boost to systematic investment flows into mutual funds. However, the AMCs have also been under pressure due to falling revenues as expense ratios moved lower.

HDFC AMC was the second AMC to list on the Indian bourses after Nippon India AMC. Subsequently, UTI AMC also listed on the bourses and currently the Aditya Birla Sun Life AMC IPO is on and that stock is also likely to be listed in the next 10 days. That would make it four listed AMC stocks traded on the Indian markets.

The supply of HDFC AMC is likely to be easily absorbed considered the expected demand.