New Delhi. Ever since ICICI Prudential AMC has launched its IPO in the market, it is getting a lot of support from both institutional and retail investors. Seeing the company’s reliable business and strong balance sheet, veteran investors from all over the world have invested money in it. The IPO started on 12th December and tomorrow i.e. 16th December is the last day to invest in it. Even now some retail investors are hesitant in placing bets in this and many questions must be arising in their minds. The company’s MD and CEO Nimesh Shah himself is answering all your questions and doubts.
IPO is completely an offer for sale. How should retail investors understand this?
This IPO does not bring any change in the way the company operates. Prudential Corporation has been an investor for almost 30 years and is selling some stake. ICICI will continue to be a part of the bank and will remain the major shareholder. Therefore, the business will continue with the same management, investment philosophy and governance structure. IPO provides liquidity and wider ownership. This is not a change in our company’s strategy.
How stable are SIP investors, especially during market fluctuations?
When SIPs are goal-based, such as retirement or children’s education, investors tend to stay invested during ups and downs. Short term volatility may impact a small portion of tactical or performance chasing investments, but the fundamentals of SIP remain stable. Over time, disciplined investing provides a better investor experience, which strengthens sustainability.
ICICI Prudential AMC is one of the most profitable AMCs. How sustainable are these gains amid regulatory changes?
Regulation has continuously strengthened the industry by keeping costs in line with investor interest. Telescopic expense rationalization improves affordability for investors, while higher volumes compensate for lower margins. This is a scale based business. Lower fees and more participation ultimately lead to higher profits over time.
Is Active Management at Risk With the Rise of Passive Funds and ETFs?
As long as active strategies continue to provide alpha, investors will continue to invest in them. Most of the investments in India still favor passive funds, as the performance has justified it to a great extent. The real risk for any AMC is not competition or regulation, but underperformance.
The size of your equity and hybrid funds is quite large. Does size affect performance?
Size does not weaken discipline if processes are strong. Our investment teams work across a variety of styles such as growth, value, contra and quality, while adopting a strong risk management framework. Our focus remains on beating the benchmark over time. The only real long-term difference is performance and risk management, not asset size.
You often emphasize on operating profit rather than PAT. Why is this important?
PAT balance sheet can be affected by investments. Operating profit reflects the actual income from wealth management. It is a more accurate measure of the strength of the core business. By this yardstick, we account for about 20% of the industry’s operating profit pool, which reflects both size and efficiency.
How does listing change accountability to investors and shareholders?
Listing does not change our responsibilities. Shareholders’ interests are aligned with shareholder results, because our revenues grow only when investors remain invested and their wealth grows. We see ourselves first and foremost as a risk-management company that manages money. This culture of ours does not change even after listing.
The mutual fund industry has grown rapidly in the last few years. What are the reasons behind this increase?
This growth is driven by two high-quality factors. First, there has been a significant expansion in systematic transactions, bringing long-term, stable wealth into the markets. Second, market price growth naturally increases asset values. The combination of these two has resulted in healthy, sustainable growth.
What are you confident about in the long-term outlook of the Indian stock market?
India has achieved near double-digit nominal GDP growth rates over several decades, supported by structural factors such as demography, formalization, digitalization and increased domestic savings in financial assets. Indian macroeconomic situation is extremely strong due to various reforms initiated by the government. With this strong base, economic activity is expected to gradually pick up. Based on all these factors, we believe that long-term investors who remain disciplined will benefit.
