HDFC AMC slips 4% as stock trades ex-dividend

The HDFC Asset Management Company (AMC) share slipped over 4 percent in early trade as the stock went ex-dividend on June 9. While reporting the March quarter earnings, the company also said that it approved a dividend payout of Rs 48, the record date for which was set as June 9.

Investors who held the stock before June 9 are eligible for the dividend. Ensured that their names will appear on the list of dividend payouts, investors exited the counter on its record date, triggering a fall in the stock. The dividend will be paid on July 26.

This is the only dividend paid by the company in FY23 and is higher than the Rs 42 paid in the previous fiscal.

At 10.09 am, shares of HDFC AMC were trading 3.07 percent down at Rs 1,932.50 on the National Stock Exchange after recovering from the day’s low of Rs 1,906.75.

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The stock has been in the news after global research and broking firm JP Morgan downgraded it to “underweight” from “neutral” and cut its target price by over 16 percent to Rs 1,580. The revised price target implies a potential downside of around 21 percent from the closing price on June 8.

JP Morgan’s report cited increasing uncertainty surrounding the company’s future profitability following the Securities and Exchange Board of India’s draft paper on expense ratios and fee structure in the asset management industry as reasons for the downgrade.

The market regulator aims to streamline the structure at the AMC level by incorporating several charges within the total expense ratio rather than at the scheme level.

The JP Morgan report said the exact impact of these proposed changes remains unclear, however, it could potentially result in a 10-15 percent reduction in earnings.

The tone of the discussion paper indicates that obtaining concessions may be challenging. This regulatory uncertainty raises concerns about the company’s profitability outlook and its ability to maintain its current long-cycle margin structure of 35 basis points, JP Morgan said.

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