How to Evaluate an Initial Public Offering (IPO)
If India is successful in becoming a $5 trillion economy in the next five years, amongst many other things, even capital markets and asset management industry could see a positive tectonic shift in the next decade.
There has been a lot of noise that the world is moving “out” of active management and “into” passive management. This may hold true for a developed market nation like the US. However, everything that holds true for a developed market nation may not hold true for an emerging market nation like India.
India’s asset management industry is at a very nascent stage when we compare to a mature market like the US.
In this paper, we have discussed an overview of asset management companies (AMCs), top AMCs in India, trends and events which led to a recent listing in India and methods to value such businesses along with current valuation and financial performance of Indian AMCs and a comparison with US-listed asset managers.
We note that “a lot has to happen” in the Indian asset management industry in decades to come before active portfolio management hits “upper circuit” in any kind of proportions near to what we are currently seeing in the US.
One trend in times to come could be more asset managers taking the IPO route in India to provide liquidity to existing investors and create a more prominent and visible brand name for their asset management company.