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HDFC AMC and its deal with Essel by SAMCO Securities

HDFC AMC and its deal with Essel by Mr. Umesh Mehta, Head of Research, SAMCO Securities.

HDFC AMC fell over 6% intraday as it offered exit to some investors of FMPs by transferring their Rs 500 Crs exposure on to its own books. This was a sentimentally bold move by HDFC AMC as investors were worried about their investments in the midst of this liquidity crises. However, investors should be aware that this is a one-off deal inked with Essel and there is always an implied risk with investments where the fund cannot always be the white-knight.

However, HDFC AMC has taken a big risk as they have set a trend of assuming credit risks which could turn out to be dangerous in the long term, as this will set expectations for such bailouts in the future which is bad for the investors of HDFC AMC.

Whether this event becomes a trendsetter for others too, only time will tell but the debt implosion situation is spreading like wild fire. Investors can take this as a red signal in listed AMC businesses for the moment but later after a decent correction can consider investing.

HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475

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