Mumbai: ICICI Prudential Asset Management is likely to make a firm market debut on Friday as the bidding rush in its recent initial public offering (IPO) points to strong investor appetite for the stock.
"Looking at the phenomenal response to the IPO, there is a likelihood of listing gains to the tune of 10-20%," said Sunny Agrawal, head of fundamental research at SBI Securities. The company sold shares at ₹2,165 apiece in the issue.
The ₹10,602.65-crore issue was subscribed 39.17 times.
The grey market premium (GMP) - the extra price investors are willing to pay over the IPO price in the unofficial market before listing - for ICICI Prudential's shares was up to ₹375, or 17.3%, on Thursday evening, according to ipowatch.in. This suggests the stock could list at above ₹2,500.
Brokerage PL Capital assigned a 'Buy' rating with a price target of ₹3,000 on the stock, implying an upside of 38.6% from the issue price
The brokerage note said ICICI Prudential AMC may eventually command a premium to HDFC AMC due to better distribution and diversification while maintaining similar profitability.
At the upper price band, ICICI Prudential AMC, the second largest fund house in the country, is trading at a price-to-earnings (P/E) multiple of 33 times, compared with 41 times for HDFC AMC and 39 times for Nippon Life India Asset Management, Agrawal said. HDFC is India's third-largest mutual fund by assets with a market cap of ₹1.17 lakh crore, while Nippon is the fourth in this list with a market cap of ₹56,000 crore. The IPO priced ICICI Prudential AMC at ₹1.07 lakh crore.
"The issue is fully priced at its post-issue price-to-earnings multiple of 33 times FY25 earnings," said Vaqarjaved Khan, senior fundamental analyst at Angel One. "However, the company's leadership across active and individual assets under management (AUM), strong profitability and return ratios, a debt-free balance sheet, and supportive industry tailwinds provide healthy visibility for compounding."
Khan said investors, who received allotment in the IPO, must hold the shares for the long term, while fresh investors could wait for a minor dip or invest in a staggered manner if the post-listing run-up is sharp.
Agrawal also said the regulatory overhang from changes in the mutual fund fee structure is now behind the industry, and there is clarity on the impact of the regulatory changes. "The impact is likely to be minuscule on earnings. Long-term growth prospects are healthy in the backdrop of strong fresh inflows and likely long-term capital appreciation of 9-12%, aiding AUM growth," he said.
