How will UTI AMC IPO impact the other listed mutual funds? Do you see valuations of these AMCs coming down to more reasonable levels?

Very clearly, UTI AMC is trying to ride the AMC euphoria in the market right now. The two listed AMCs in India; HDFC AMC and Nippon AMC, have given more than 100% returns in the last one year. Despite quoting at a steep ratio of market cap / AUM, the AMC stocks have continued to attract buying at dips. Stocks like HDFC AMC have been quoting at rich valuations due to the scarcity factor. It commands 20% market cap / AUM; a valuation more than twice the price of similar AMC deals happened in India. UTI AMC is not alone in the queue. ICICI Pru AMC, SBI Mutual Fund, Birla Mutual Fund, Kotak MF, Axis MF and even L&T Mutual Fund are planning an IPO. What would be the outcome of so many listed AMC shares?

Let us not forget that India is soon likely to seen an overcrowding by the AMC stocks. That is the big risk. The AMC market could soon become overcrowded with a large number of listed entities. That would take away the scarcity factor in AMC stocks. The relentless inflows into SIPs at Rs.8300 crore per month has been instrumental in making AMCs look attractive. If the economic weakness persists, the SIPs may find it harder to sustain. With TERs trending lower, that would be the first sign of risk for AMC valuations. But any valuation shift needs a trigger. The glut of AMCs getting listed could just be the trigger for AMC stocks to normalize, which will be for good!