Why India’s AMC business could be entering a long growth phase? Aditya Kondawar explains

The listing of ICICI Prudential Asset Management Company has reignited discussions around valuation premiums in the AMC space, especially when compared with the country’s only other listed heavyweight, HDFC AMC. The stock price is clearly hinting at a meaningful premium, but market participants are increasingly looking beyond headline numbers to assess whether the valuation is justified by scale, asset quality and long-term growth prospects.

Speaking to ET Now, Aditya Kondawar of Complete Circle Capital pointed out that ICICI Prudential AMC is currently trading at a premium of around 20–22%, a gap that becomes more interesting given the growing similarity between the two industry leaders. He noted that both ICICI Prudential AMC and HDFC AMC now manage assets close to ₹9 lakh crore, with market capitalisations also converging. With the listing, ICICI Prudential AMC is marginally ahead at around ₹1.3 lakh crore compared with HDFC AMC’s ₹1.25 lakh crore.

According to Kondawar, the real differentiator lies in the quality of assets and operational performance. He highlighted that ICICI Prudential AMC generates significantly stronger operating profits, supported by an asset mix that is skewed more towards equity and alternate investments. This, he explained, has boosted margins in recent years, especially as alternate assets include profit-booking models and markets performed strongly in the post-Covid period.

While institutional interest in the IPO remained healthy, retail participation was relatively muted, prompting questions around pricing, offer structure and whether value still exists for individual investors. Responding to these concerns, Kondawar stressed that retail investors often do not get enough credit for their judgment. He acknowledged that pricing may have acted as a deterrent but cautioned against equating a higher share price with overvaluation, arguing that earnings and business fundamentals matter far more.

He also observed that retail sentiment towards IPOs has cooled over the past year amid market volatility, which he believes is a healthy trend. In his view, IPOs should not be treated as lottery tickets, and a more measured approach from retail investors is ultimately positive for the market.

Looking beyond the IPO dynamics, Kondawar was emphatic about the long-term runway for asset management companies in India. Drawing a global comparison, he highlighted how in the US, the largest fund managers manage assets far larger than the balance sheets of the biggest banks, whereas in India the situation is still reversed. He believes India could gradually move towards a similar structure, with fund managers playing a much bigger role in the financial ecosystem. He also underscored the structural strengths of the AMC business model, pointing to exceptionally high returns on assets, minimal capital requirements and strong scalability. With very limited equity infusion over three decades since the joint venture’s formation in 1993, the current IPO being an offer for sale was, in his view, a natural outcome rather than a negative signal. Kondawar added that the shift in investor behaviour will further support the sector’s growth. As younger investors move away from traditional savings avenues like fixed deposits and savings accounts, demand for market-linked products offering the potential for double-digit returns is likely to rise, creating a long growth runway for AMCs and wealth management companies.

The conversation also touched upon concerns around declining expense ratios following regulatory changes. Kondawar welcomed SEBI’s move, calling it investor-friendly and necessary for the next phase of financialisation in India. He pointed out that the mutual fund industry has grown from around ₹10 lakh crore 15 years ago to nearly ₹70 lakh crore today and sees no reason why it cannot expand to ₹150–300 lakh crore over time.

While the near-term impact of lower expense ratios remains a topic of debate, Kondawar believes the long-term benefits will outweigh the concerns. Lower costs, in his view, will attract a much broader investor base, aid industry expansion and ultimately strengthen large, scalable players. How valuations between the two listed AMCs evolve over the next one to two years will be closely watched, but the broader sector outlook, he believes, remains firmly positive.