Aditya Birla Sun Life AMC (ABSLAMC), the 4th largest AMC overall and the largest non-bank AMC in India, is hitting the IPO market with its maiden public issue on September 29. It plans to raise over ₹2,700 crore by offering 38,880,000 shares at ₹695 to ₹712 in a market lot of 20 shares. This will be the 4th AMC to be listed in Indian markets after HDFC AMC, Nippon AMC and UTI AMC. Should you bet big? Here are key details that may help you decide.
Established AMC
Aditya Birla Sun Life AMC has a total assets under management of ₹2.94 trillion (June’21). Like many other top AMCs, ABSLAMC has used the low penetration of mutual funds and equity as an asset class in India to build a solid business. This, coupled with a strong parentage (Aditya Birla Group), has aided AUM growth for the company.
Despite the presence of multiple players in the AMC industry, the market is highly consolidated with top 10 players (top 3 being such as SBI MF, HDFC AMC, ICICI Pru AMC) accounting for about 80% of the industry AUM.
With higher scale, ABSLAMC should benefit from operating leverage (opex/AUM higher than peers). Unlike most banks and insurers, the AMC business is a capital-light business model. While ABSLAMC has a lower-than-industry share of equity in overall product mix, the same can improve going forward, which should lead to higher earnings.
The management appears to be focussed on growing the B-30 AUM along with scaling up the alternatives business.
Here are the IPO basic facts:
| IPO factbox | |
| Company | Aditya Birla Sun Life AMC |
| Open date | Sep. 29 |
| Close date | Oct. 1 |
| Allotment date | Oct. 6 |
| Listing date | Oct. 11 |
| IPO band | ₹695 to ₹712 per share |
| Share face value | ₹5 per share |
| Bid lot | 20 shares |
| IPO registrar | KFintech |
Operations
ABSL AMC, since inception in 1994, has established a strong geographical presence comprising 194 branches (covering 284 locations) spread over 27 states and 6 union territories. Aditya Birla Capital Limited (ABCL) and Sun Life (India) AMC Investments Inc. are the company promoters.
ABSL AMC has an extensive & multi-channel distribution network with over 66,000 mutual fund distributors, over 240 national distributors and over 100 banks/financial intermediaries.
The company manages 118 MF schemes. Apart from mutual fund business, ABSL also offers PMS, offshore and real estate offerings which comprises AUM ₹11,515 crore.
In FY21, the AMC revenue stood at ₹1,191 crore, i.e ~39 bps of AAUM. PAT came at ₹526 crore (~19 bps of AAUM), with RoE at 33.7%.
ABSLAMC currently has a revenue yield of 43 bps (FY21) compared to 57 bps for HDFC AMC and 55 bps for ICICI Pru AMC. Further, the company’s opex ratio (% of AUM) is at par with the average for the top 10 players. ABSLAMC’s current PAT/AAUM is 22 bps compared to 33bps for HDFC AMC, 30 bps for Nippon AMC and 33 bps for UTI AMC.
What brokers say
Nirmal Bang Institutional Equities: Compared to the listed peers and given the earnings potential of the business, ABSL AMC’s IPO valuation seems reasonable at 39x FY21 EPS. Our rough-cut numbers suggest ABSL AMC can deliver 15% EPS CAGR over FY21-24E. At the upper end of the price band (Rs712), the company is being valued at ₹20,500 crore. We recommend subscribing to the issue.
ICICI Direct: At ₹712, the stock is available at ~7.4% Q1FY22 QAAUM and at ~33.1x Q1FY22 PAT (annualised basis). The company continues to focus on an equity-oriented scheme mix which proves to be a significant factor in enhancing the profitability, as equity oriented schemes generate higher management fees compared to other schemes.
