Canara Robeco Asset Management Company (AMC) is gearing up for its Initial Public Offering (IPO), scheduled to open for subscriptions on Thursday. The company has set a price band between ₹253 and ₹266 per share. In an exclusive interview, Rajnish Narula, the Managing Director and Chief Executive Officer, discussed the IPO and future plans.
Concerns over Clashing IPOs
When asked about potential concerns regarding the timing of the IPO amidst other large issuances—such as those from Tata Capital, LG Electronics, and WeWork—Narula emphasized the importance of focusing on Canara Robeco’s specific offerings. He noted that while those companies may have their own strategies and market needs, Canara Robeco operates within the asset management sector, which has shown resilience, particularly post-Covid. “We are in a different space compared to them. The asset management business has thrived, even during Covid, unlike other sectors,” he said. He expressed confidence in the company’s long-established business model and the strengths of its unique joint venture partnership.
Valuation Comfort Amid Market Uncertainty
Regarding market uncertainty and the valuation of the IPO, Narula explained the process involved. “The valuation is a result of a book-building process facilitated by industry experts,” he stated. He highlighted that lead managers gather insights from anchor investors during roadshows, and the price band is determined by the company’s shareholders and independent directors. Narula, who has been with the company since its joint venture inception, views this IPO as a unique opportunity for employees to invest in a well-structured organization.
Growth Capital Considerations
Narula acknowledged that the IPO primarily serves as an offer for sale, with existing shareholders diluting 25% of their stake. The proceeds will exclusively benefit them, as the asset management business typically requires less capital to operate. “We have a robust balance sheet with over ₹650 crore in net worth, and sufficient resources to fund growth over the next 5 to 10 years,” he explained.
Position among Industry Leaders
Discussing Canara Robeco’s current standing in the mutual fund industry, Narula recounted the firm’s evolution from being predominantly debt-focused to an equity-centric model. “When we began, our portfolio was over 80% in debt, but a strategic pivot following market challenges transformed our approach. Today, we have shifted to 91% equity and expanded our retail focus,” he noted. The company now serves over 5 million customer folios, which helps to mitigate risks.
Outlook on Equity Markets
Narula maintained an optimistic outlook for the Indian equity market, stating, “I firmly believe in the India story. Structurally, India is well-positioned and learning to assert itself against global brands.” While acknowledging macroeconomic challenges, he praised governmental strategies aimed at positioning India favorably.
Retail Investor Perspective
Addressing whether retail investors should continue to hold stocks for the long term, Narula expressed confidence. “I feel more comfortable now compared to periods when foreign portfolio investors (FPIs) dominated the market. Indian markets should ideally be in the hands of domestic investors,” he said. He opined that FPIs cannot afford to overlook India’s potential for long and will likely return to the market sooner rather than later.
