Aditya Birla Sun Life AMC IPO Note

5paisa Research Team 5paisa Research Team 10th December 2022 - 07:22 pm

Aditya Birla Sun Life AMC Ltd, is the fourth largest asset management company in India in terms of assets under management (AUM) and the largest non-bank mutual fund. It has total assets under management of Rs.275,454 crore as of the end of June quarter. More than 50% of its AUM comes from institutional customers, which is one of the reasons why the AMC is very strong in terms of non-equity AUM.

Aditya Birla Sun Life AMC Ltd currently offers a total of 135 mutual fund schemes consisting of 35 equity schemes, 93 debt schemes, 2 liquid schemes and 5 ETFs. In addition, it also offers 5 domestic fund of funds (FOF). Apart from a strong customer base and aggressive agent network, Aditya Birla Sun Life AMC Ltd also has the advantage of the Birla brand name, which has been in existence in India for over 100 years.

Below are the terms which you should know about Aditya Birla Sun Life AMC IPO:

Key terms of the IPO issue of Aditya Birla Sun Life AMC Ltd

Key IPO Details	Particulars	Key IPO Dates	Particulars
Nature of issue	Book Building	Issue Opens on	29-Sep-2021
Face value of share	Rs.5 per share	Issue Closes on	01-Oct-2021
IPO Price Band	Rs.695 - Rs.712	Basis of Allotment date	06-Oct-2021
Market Lot	20 shares	Refund Initiation date	07-Oct-2021
Retail Investment limit	14 Lots (280 shares)	Credit to Demat	08-Oct-2021
Retail limit - Value	Rs.199,360	IPO Listing date	11-Oct-2021
Fresh Issue Size	Nil	Pre issue promoter stake	100.00%
Offer for Sale Size	Rs.2,768.26 crore	Post issue promoters	86.50%
Total IPO Size	Rs.2,768.26 crore	Indicative valuation	Rs.20,505 crore
Listing on	BSE, NSE	HNI Quota	15%
QIB Quota	50%	Retail Quota	35%

_{Data Source: IPO Filings}

Here are some of the key merits of the Aditya Birla Sun Life AMC business model

i) Trusted brand with over 100 years of brand existence.

ii) Largest non-bank mutual fund in India in terms of AUM.

iii) Good mix of retail and institutional clients as well as equity and debt schemes.

iv) Strong network of brick-and-click with 66,000 MFD and 240 national distributors.

v) Quarterly AUM grew at 14.55% CAGR between 2016 and 2021.

Also Check: Aditya Birla Sun Life AMC IPO : 7 Things to Know About

How is the IPO being structured?

Currently, Aditya Birla Sun Life AMC Ltd is 51% owned by Aditya Birla Capital and 48% by Sun Life PLC. The entire issue of 388.80 lakh shares (including 28.51 lakh shares by Aditya Birla Capital and 360.29 lakh share by Sun Life AMC) will be an offer for sale in which both the promoters viz. Aditya Birla Capital and Sun Life AMC will offer shares in the OFS. Here is how the shareholding will look like before and after the IPO.

Particulars	Pre-IPO Holding	Pre-IPO (%)	Post-IPO Holding	Post-IPO (%)
Aditya Birla Capital	146,879,680	51%	144,028,800	50.01%
Sun Life PLC	141,120,000	49%	105,090,880	36.49%
Public	-	-	38,880,000	13.50%
Total Shareholding	287,999,680	100%	287,999,680	100.00%

_{Data Source: Company RHP}

Thus post the offer for sale completion, the stake of ABCL will go down marginally, but the stake of Sun Life PLC comes down sharply from 49% to 36.49%. The public will be holding the divested 13.50% stake.

Financials of Aditya Birla Sun Life AMC Ltd Finance

Financial Parameters	Fiscal 2020-21	Fiscal 2019-20	Fiscal 2018-19
Total Income	Rs.1,205.84 cr	Rs.1,234.77 cr	Rs.1,407.25 cr
Net Profit	Rs.526.28 cr	Rs.494.40 cr	Rs.446.80 cr
Net Worth	Rs.1,704.61 cr	Rs.1,316.87 cr	Rs.1,220.57 cr
Net Profit Margins	43.64%	40.04%	31.75%
RONW (%)	30.87%	34.54%	36.61%

_{Data Source: Company RHP}

The revenues overall are down over the last 3 years but that is due to the lower expense ratio insisted upon by SEBI. That has been partially compensated by the higher equity flows, but the shortfall still remains. However, the profits have been boosted through leaner operations, digital initiatives and lower asset impairment requirements.

Investment Perspective for Aditya Birla Sun Life AMC Ltd

This will only be the fourth AMC to be listed and here are some investment arguments.

a) In terms of relative valuations, it is cheaper than HDFC AMC and Nippon Mutual Fund but more expensive than UTI Mutual Fund. Lower equity AUM will be an issue.

b) The indicative market cap of Birla AMC at Rs.20,505 crore is about 7.5% of the total assets under management. This is at par with the rate at which most sale deals have happened, so the headroom may be limited.

c) In the last few months, there has been a distinct shift towards hybrids, gold funds and passive funds. That is likely to maintain the pressure on the top line growth of the mutual fund industry in general.

At the current market cap of Rs.20,505 crore the IPO does appear fully valued. It may not be a value enhancer in the short term, but over the long term it still remains a veritable play on the big financial savings shift happening in India.