Last updated: 27 Sep, 2021 | 02:30 pm
Aditya Birla Sun Life (ABSL) AMC Limited IPO opens for subscription on 29th September. The company is looking to raise Rs Rs 2,770 crore through the public issue. Here are the details:
About the IPO
Aditya Birla Sun Life AMC IPO Date: 29 September - 1 October 2021
Aditya Birla Sun Life AMC IPO Price band: Rs 695 - Rs 712
Issue Size: Rs 2700 - 2770 Cr (Fresh Issue of ₹ 2,768.26 Crore and Offer for sale of up to 38,880,000 Equity Shares)
Post Issue Implied Market Cap: Rs 20,505.6 Cr
Reservation: QIB 50%, Retail - 35%, NII 15%
Bid lot: 20 shares, and in multiples of 20 shares
Objective of the issue
About Aditya Birla Sun Life AMC
The listed peers of the company are HDFC AMC, Nippon Life AMC, and UTI AMC. SBI Life AMC and ICICI Prudential AMC MF are other large unlisted peers. Below is the comparison among listed peers:
Well Recognized Brand and experienced promoters - ABCL, one of the company’s promoters and shareholders, is the listed non-operating holding company of the Aditya Birla group’s financial services businesses. Sun Life is a leading international financial services organization providing insurance, wealth, and asset management solutions to individual and corporate clients.
Growing Individual customer base - The company has been successful in growing individual investors MAAUM at a CAGR of 18.38% from March 2016 to June 2021. The company manages a portfolio of close to 30 lakh customers which represents 6.14% of the market share.
Diversified product portfolio and research-driven investment philosophy - The company has many schemes, and several of them are performing better than the industry average. The company consistently demonstrates strength in its variety of product offerings and has a long history and track record of innovation in schemes, with certain of its schemes being the first of their kind in India.
Use of Technology - The company has a history of innovation in the mutual fund area. It uses technology to service its investors. AMC's online engagement has shown excellent growth in recent years. Its digital transactions represented 89.10%, 87.75%, 77.01%, and 70.92% of its total transactions (excluding SIP and STP installments) for the three months ended June 30, 2021, and FY21, FY20, and FY19, respectively. Despite the pandemic, through FY21, the company onboarded over 122,000 investors through its video KYC facility.
Value and composition of AUM - The revenue and profit of the company largely depend on the value and composition of the AUM of the schemes it manages. Most of the revenue comes from the management fees charged by the company on the assets they manage. If there are any adverse changes in the AUM, it may result in a decline in the profit of the company. Factors that could cause AUM decline include the overall decline in the Indian equity market, change in interest rates, redemptions, etc.
The underperformance of investment products - If the products of the company are not performing well, it could lead to a loss of investors, reduction in AUM, and adversely affect the results of operations and reputation of the company.
Dependency on channels - The company depends on third-party distribution channels and other intermediaries, and problems with these distribution channels and intermediaries or failure to continue to expand the current third-party distribution channels and intermediaries could adversely affect the business and financial performance of the company.
Aditya Birla Sun Life AMC’s revenue declined over the last two years, on the back of a drop in AAUM over the last 2 years. However, the company’s revenue has shown a good rebound in Q1FY22, growing by 30% over the previous year. Despite a drop in Revenue, the company was able to grow its margins and return ratios, due to a decline in expenses.
The company’s bottomline has also increased consistently over the last 3 years. The company has reported better return ratios than its listed peers UTI, HDFC AMC and Nippon India.
At the higher end of the price band, Aditya Birla Sun Life AMC IPO is priced at a P/E ratio of 33 times FY22 EPS (annualised on a fully diluted basis). This is lower than industry peers HDFC AMC (50 times), Nippon Life India (41 times), UTI AMC (35 times).
Given factors such as strong growth in bottomline, growing margins, healthy return ratios, good runway for growth, and reasonable valuations, we remain positive on the prospects of the issue.