'Employee attrition a concern' flags ICICI Pru AMC in DRHP ahead of IPO

Employee attrition remains a key concern for ICICI Prudential Asset Management Company (AMC), flagged the company in its Draft Red Herring Prospectus (DRHP) as it gears up for its initial public offering (IPO).

 

The IPO is expected to hit the market in the second half of December and will comprise a complete offer for sale by promoter Prudential Corporation Holdings, which currently holds a 49 per cent stake in the AMC. The promoter plans to divest up to 17,652,090 equity shares to raise nearly ₹10,000 crore.

 

If launched, this will be the fifth public offering by an asset management company in India. ICICI Prudential AMC’s listed peers include HDFC Asset Management Company, Nippon Life India Asset Management, UTI Asset Management Company, and Aditya Birla Sun Life AMC. 

 

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Attrition a concern

The AMC has highlighted employee attrition as a major risk factor in the DRHP. The company reported attrition rates of 26.0 per cent, 31.1 per cent, and 33.0 per cent for FY25, FY24, and FY23, respectively.

 

“Our business depends substantially on the efforts of our employees, particularly, our Key Managerial Personnel, Senior Management, and failure to attract or retain such persons could adversely affect our business, results of operations, financial condition and cash flows,” the company said in the DRHP.

 

The AMC underscored its reliance on the skills and expertise of its key executives and investment teams, adding that its success hinges on its ability to retain them. “Our business and performance depends on the efforts and abilities of our Key Managerial Personnel and Senior Management,” it noted.

 

The company also cautioned that it cannot assure the continued services of employees across levels. The departure of key personnel, without timely replacements, could impair operations, impact business performance, damage its reputation, and reduce the attractiveness of its products for investors. 

Source: DRHP

   

ICICI Prudential AMC pointed to intense competition in the asset management industry, noting that hiring qualified personnel during expansion could prove challenging. The company may also need to increase compensation to retain existing employees and attract new ones. “Any of these factors may result in an increase in our operating costs and may adversely affect our business, results of operations, financial condition and cash flows,” the DRHP stated.

 

The filing also highlighted the risk of outgoing investment professionals and sales personnel soliciting investors or employees after leaving the company. “If such personnel were to leave, they may seek to solicit our investors and other employees after termination of their employment, and therefore the loss of these personnel could also create a risk that we lose certain of our AUM,” the AMC said.

Other risks identified

Beyond employee-related challenges, ICICI Prudential AMC has listed several other risks in the DRHP.

 

The company cautioned that external factors, such as adverse market movements or economic downturns, could negatively affect business performance, reducing the value of assets under management (AUM) and impacting management fees earned from mutual fund operations, portfolio management services, alternative investment funds, and advisory mandates.

 

It also noted that underperformance of its investment products could lead to a decline in AUM across categories. “If our investment products underperform, our assets under management, including our portfolio management services assets under management, alternative investment funds assets under management and advisory assets could decline,” the DRHP stated. 

 

Competition from existing and new industry participants was highlighted as another key risk. Increased competition could reduce market share, hinder growth, or exert pressure on fees, affecting business performance.

 

The AMC said it depends on the reputation and brand strength of its promoters and the broader ICICI and Prudential groups, noting that any reputational harm to either entity could have adverse implications for its operations.

 

ICICI Prudential AMC also highlighted that its investment management agreements and advisory commitments can be terminated by counterparties, exposing the company to unpredictable revenues. 

 

The DRHP further drew attention to the highly regulated nature of the asset management business, warning that any breach of regulations or adverse changes in the legal and regulatory framework could affect operations. “Changing laws, rules and regulations as well as legal uncertainties in India may adversely affect our business, results of operations, financial condition and cash flows,” it said.

 

The AMC flagged its reliance on third-party service providers, including distributors, adding that any deficiency or disruption in such services could impact operations and reputation.

 

Additionally, ICICI Prudential AMC highlighted the growing threat from online fraud and cyberattacks, which could disrupt services or compromise sensitive data, potentially affecting business operations, financial performance, and investor confidence.