Aditya Birla Sun Life AMC Limited IPO Review

Aditya Birla Sun Life AMC Limited incorporated in 1994, is set up as a joint venture between ABCL and Sun Life AMC. It is ranked as the largest non-bank affiliated AMC in India by QAAUM (quarterly average asset under management) since March 31, 2018, and among the four largest AMCs in India by QAAUM since September 30, 2011. ABSL AMC managed a total AUM of INR.2,936.42 billion under its suite of mutual funds (excluding domestic FoFs), portfolio management services, offshore and real estate offerings, as of June 30, 2021.

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As of June 30, 2021, it has managed 118 schemes comprising 37 equity schemes (including, among others, diversified, tax saving, hybrid and sector schemes), 68 debt schemes (including, among others, ultra short-duration, short-duration and fixed-maturity schemes), two liquid schemes, five ETFs and six domestic FoFs. Its flagship schemes include Aditya Birla Sun Life Frontline Equity Fund and Aditya Birla Sun Life Corporate Bond Fund, both of which have grown to become leading funds in India under its management. It has also established a geographically diversified pan-India distribution presence covering 284 locations spread over 27 states and six union territories.

Promoters & Shareholding:

Aditya Birla Capital Limited (ABCL) and Sun Life (India) AMC Investments Inc. are the company promoters.

Pre Issue Promoter Holding100%
Post Issue Promoter Holding86.50%

Also read : https://www.mymoneysage.in/blog/reits-real-estate-investment-trusts/

Public Issue Details:

Offer for sale: OFS of approx. 38,880,000 equity shares of INR. 5 aggregating up to INR. 2,768.26 Cr.

Total IPO Size: INR. 2,768.26 Cr.

Price band: INR. 695 – INR. 712

Objective: To carry out the Offer for Sale and to achieve the benefits of listing the Equity Shares on the Stock Exchanges.

Bid qty: minimum of 20 shares (1 lot) for INR. 14,240 and a maximum of 14 lots.

Offer period: 29th Sep 2021 – 1st Oct 2021.

Date of listing: 11th Oct 2021.

Pros:

  • The largest Non-bank Affiliated Asset management company of India.
  • The company’s distribution network is extensive and multi-channelled with a significant physical as well as a digital presence.
  • Professional and experienced management team.
  • Maintained a market-leading position in B-30 penetration over the years.
  • Company Return on Net Worth (RoNW) is highest among the listed AMCs in India. Its RoNW is 30.87% compared to HDFC AMC (27.7%), Nippon Life India AMC (21.9%) and UTI AMC (15.2%)
  • Diverse Product Portfolio with Fund Performance supported by Research Driven Investment Philosophy.

Cons:

  • The revenue growth for ABSL AMC has slightly declined but the good part is profit has slightly increased.
  • Credit risks related to the debt portfolio of the funds may have an adverse effect on its business.
  • There are new AMC companies that are lined up in India. This can pose stiff competition to company mutual fund business.
  • Any underperformance of investment products in respect of which they provide asset management services can lead to loss of investors and it can affect the business.

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To Subscribe or avoid?

Sectoral outlook – The aggregate AUM of the Indian mutual fund industry has grown at a healthy pace over the past 10 years, against the backdrop of an expanding domestic economy, robust inflows and rising investor participation, particularly from individual investors. Average AUM grew at 16.4% CAGR to ₹33.18 trillion as of June 2021 from ₹7.01 trillion as of 2011. Even during the pandemic, the aggregate industry AUM grew 39.2% post-COVID-19 to ₹33.7 trillion as of June 2021 from ₹22.3 trillion as of March 2020. The penetration of the mutual fund industry has increased drastically mainly driven by recovery post the COVID-19 pandemic, the rising popularity of SIPs as an investment vehicle and various government regulations to make the industry more transparent and convenient to the investors, hence this is expected to have a positive impact on the company and its business.

The financials (revenue and net profit) are shown in the table below

Valuation – For the last 3 years average EPS of INR. 17.44, P/E ratio is around 41x. On the upper price band of INR. 712 and EPS of INR. 18.27 for FY21, the P/E ratio works out to be 39x. There are listed peers like HDFC AMC trading at P/E of 51x (Highest) and UTI AMC at P/E of 30x (Lowest) and the industry average P/E is 39.8x. The company is asking P/E in the range of 39x to 41x. Hence, the IPO appears fully priced.

MMS Recommendation – Considering the current bull run, huge demand for IPOs and the above factors, Investors with moderate to high-risk appetite can “SUBSCRIBE” to this IPO with a possibility of moderate listing gains and Investors with a conservative appetite can skip this IPO as there many IPO opportunities in next two months.

Disclaimer:

This article should not be construed as investment advise, please consult your Investment Adviser before making any sound investment decision. If you do not have one visit mymoneysage.in now.

Also read: https://www.mymoneysage.in/blog/should-you-invest-in-market-linked-debentures-mlds/

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