IPO Analysis: Aditya Birla Sun Life AMC Ltd
IPO rating: Invest for long-term
About the issue:
Aditya Birla Sun Life AMC Ltd is one of the biggest players in the financial services industry which offers mutual fund, portfolio management services, and offshore and real estate offerings. The company is coming out with its Initial Public Offering (IPO) of equity shares with a face value of Rs 5 per equity share. The issue size of the company is Rs 2,768.26 crore, with no fresh issue while the sale of shares worth Rs 2,768.26 crore by existing investors, according to its red herring prospectus. The price band of the issue has been fixed at Rs 695 to Rs 712 per equity share. The IPO opening date is September 29, 2021, while it will close on October 1, 2021. It will be listed on the Exchanges on October 11, 2021. The IPO market lot size is 20 shares. A retail-individual investor can apply up to a maximum of 14 lots (280 shares or Rs 1,99,360). The net proceeds generated from the IPO will be utilized to achieve the benefits of listing the equity shares on the stock exchanges and carry out the offer for sale of up to 38,880,000 equity shares by the selling shareholders.
Aditya Birla Sun Life AMC IPO Details:
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IPO Opening Date
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Sep 29, 2021
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IPO Closing Date
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Oct 1, 2021
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Issue Type
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Book Built Issue IPO
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Face Value
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₹5 per equity share
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IPO Price
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₹695 to ₹712 per equity share
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Market Lot
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20 Shares
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Min Order Quantity
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20 Shares
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Listing At
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BSE, NSE
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Issue Size
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38,880,000 Eq Shares of ₹5
(aggregating up to ₹2,768.26 Cr)
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Offer for Sale
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38,880,000 Eq Shares of ₹5
(aggregating up to ₹2,768.26 Cr)
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About the Company:
Incorporated in 1994, Aditya Birla Sun Life AMC is set up as a joint venture between ABCL and Sun Life AMC. The company managed a total AUM of Rs 2,73,643 crore under mutual funds (excluding domestic FoFs), portfolio management services, offshore and real estate offerings, as of December 31, 2020. The company managed 135 schemes comprising 35 equity, 93 debt, 2 liquid schemes, 5 ETFs, and 6 domestics FoFs as of December 31, 2020. The company’s Monthly average assets under management (MAAUM) from institutional investors was Rs 1,41,243 crore as of December 31, 2020, which was the fourth-largest among its peers, according to CRISIL.
The company has automated and digitized several aspects of its operations including in relation to customer onboarding, online payments and other transactions, fund management, dealing, accounting, customer service, data analytics, and other functions.
Competitive strengths:
Largest Non-bank Affiliated Asset management company of India.
Well recognized and trusted brand with experienced promoters.
Rapidly growing customer base.
Well-diversified product portfolio and innovative schemes.
Company Financials:
The top line has seen a declining trend in the past years partially because of the lower expense ratio guidelines led down by SEBI. But the company has seen high inflows in equity funds and has been focused on digitization leading to attractive profit numbers.
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Particulars
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FY2018
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FY2019
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FY2020
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FY2021
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Q1 FY2022
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Revenue
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1,323.70
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1,407.20
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1,234.80
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1,205.80
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336.2
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Expenses
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802.2
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761.5
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574
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510
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130.4
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Net income
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349.1
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447.9
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494.2
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527.7
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156.4
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Net Profit Margin (%)
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26.4
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31.8
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40
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42.4
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46.5
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Recommendation:
The company’s 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. As for portfolio management services, offshore and real estate offerings, it manages a total AUM of Rs 11,515 crore as of June 30, 2021. It caters to retail as well institutional customers through a pan-India presence in 27 states and six union territories. Its retail base which includes both individual investors and HNIs is pretty strong and ranks fifth largest in India.
The company has focused on equity-oriented schemes since they generate higher management fees. The equity-based MAAUM has grown with a CAGR of 24.94 per cent since 2016 reaching Rs 1,08,044 crore as of June 30, 2021. Its contribution to the total MAAUM is 38.09 per cent. The SIP AUM contributes 41.7 per cent of total equity-oriented mutual fund AUM, as against 25.7 per cent in 2016. The company’s attractive equity mix, strong individual and institutional customer base, widespread distribution network, consistent performance of the schemes, focus on digitization and emerging markets have led it to be a leading player in the industry.
Going ahead, the inflows in stock markets are trending upwards. There has been a pent-up demand from the retail as seen by increased Demat account openings. Surely being a dominant player in the market, the company is poised for growth in the long term. Considering all such factors, we recommend investing in the company for the long-term.