Abrdn stake sale to boost passive flows in HDFC AMC, say analysts

Deal could add to asset manager's investability weight in MSCI and FTSE indices, lead to higher foreign inclusion factor, they say

The proposed sale of 10.21 per cent stake in HDFC Asset Management Company (AMC) by abrdn could result in the stock’s inclusion in the MSCI India Index during the quarterly rebalancing in February. Further, it could boost the asset manager’s investability weight in the MSCI and FTSE indices as it will lead to a higher foreign inclusion factor (FIF), said analysts.

Shares of HDFC AMC on Wednesday rose 3.7 per cent to close at Rs 2,273.5. HDFC AMC on Tuesday announced that co-promoter UK-based Abrdn is looking to sell its entire stake in the company.

Interestingly, abrdn is looking to sell 9.99 per cent to a single buyer and the remaining 0.31 per cent separately. At the last close, the stake will be valued at nearly Rs 5,000 crore.

Analyst Brian Freitas of Periscope Analytics, who publishes on Smartkarma, says a lot will depend on who Abrdn sells its stake to.

“If the stake sale is to a non-strategic buyer, there will be an increase in the investability weight in the FTSE indices and passive trackers will need to buy 806,000 shares (worth $21.4m),” he said.

“The stake sale could also result in an increased FIF in the MSCI Indices and result in the inclusion of the stock in the MSCI India Index at the February quarterly index review, where passive trackers will need to buy 6.82 million shares (worth $181m) at the close of trading on 28 February,” he added.

Currently, the promoter shareholding in HDFC AMC is 62.8 per cent. If abrdn sells its stake to a non-strategic investor, the free float in the asset manager will increase, with only 52.59 per cent stake held by HDFC will be considered as promoter holding.

Abrdn has been gradually pruning its holding in HDFC AMC. In September 2021, it sold shares worth Rs 3,061 crore and in August 2022, it had divested shares worth Rs 2,300 crore.

Shares of HDFC AMC are down 12 per cent in the past one year.

Analysts believe Abrdn’s exit from HDFC AMC will remove a key overhang from the stock

“While the transaction may take some time to consummate, identification of buyer may address share-supply overhang and aid re-rating,” said a note by Jefferies.  The brokerage has a buy rating on the stock with a price target of Rs 2,450.

Following Abrdn’s stake sale, it will no longer be the sponsor of HDFC Mutual Fund.

As per regulatory norms, HDFC AMC is seeking an approval of market regulator Sebi for stake sale by co-promoter.