After Vijaya Diagnostic Centre Ltd (BO:
), AMI Organics Ltd (BO:
), Sansera Engineering Ltd (NS:
), Paras Defence & Space Technologies’ initial public offer, another company will hit primary markets this month. It is Aditya Birla Sun Life Asset Management Company (or AMC). Let’s go through it in detail.
Aditya Birla Sun Life AMC IPO Details
Aditya Birla Sun Life AMC’s public issue will open on September 29 and close on October 1. The company intends to offload 38.8 million equity shares of Rs 5 each through an offer for sale. With a price band of Rs 695 to Rs 712 per equity share, it expects to mop up Rs 2,768.26 crore from the markets. The company’s IPO market lot size is 20 equity shares. A retail-individual investor can apply for a minimum of one lot of 20 shares and a maximum of up to 14 lots (280 shares of Rs 199,360). Post the public issue, Aditya Birla Sun Life AMC promoters’ holding will reduce to 86.5%. As the issue is an OFS, the net proceeds will go to the selling shareholders and not the company.
Aditya Birla Sun Life AMC Business
Established in 1994, Aditya Birla Sun Life AMC is a joint venture between Aditya Birla Capital Ltd and Sun Life AMC. The company’s total assets under management were Rs 2,736.43 billion as of December 31, 2020. These assets are under mutual fund schemes, portfolio management services, and offshore & real estate offerings. As of December 31, 2020, the company managed 135 schemes comprising 93 debt, 35 equity, two liquid plans, 5 ETFs, and six domestics funds of funds.
Aditya Birla Sun Life has digitized and automated various online payments, customer onboarding, fund management, data analytics, and other transactions. It is the largest non-bank affiliated asset management company in India. Rapidly growing customers, well-diversified product portfolio & innovative product offering, and experienced promoters are major competitive strengths of the AMC.
Aditya Birla Sun Life AMC Financials
After going through the below table, you will realize that the AMC’s total revenue was highest at Rs 1,407.25 crore in FY2019 in the last three fiscals. The revenue declined 12.3% in FY2020 to Rs 1,234.76 crore which further dwindled 2.3% in FY2021 to Rs 1,205.84 crore. However, the company managed to grow its profit after tax year-on-year. Its PAT grew a little over 6% to Rs 526.28 crore in FY2021 from Rs 494.4 crore in FY2020. Notably, its PAT margin displayed a continuous uptrend over three years. From 31.7% in fiscal 2018, the PAT margin expanded 11.9% to 43.6% in fiscal 2021.
In Q1FY2022, Aditya Birla Sun Life’s PAT was Rs 155 crore, up 59% compared to Rs 97 crore in the corresponding quarter of fiscal 2021. The AMC’s 6.5% growth in individual investors from March 2016 to December 2020 was the second-highest increase among the top five AMCs. In Q1FY2022, the company’s 7.2 million folios and Rs 1.33 trillion of retail AUM were up 30% year on year from the levels in Q1FY2021.
Aditya Birla Sun Life AMC Valuation
Aditya Birla Sun Life AMC’s price-earnings (PE ratio), based on FY2021’s EPS considering a higher price band of Rs 712, turns out to be 39x. Its peer UTI AMC has a PE of 25.4x, whereas HDFC (NS: HDFC ) AMC has a PE of 50x. Nippon Life India Asset Management’s PE stands at 40.1x. Based on the peer group's PE, the IPO appears to be reasonably priced. The fund house’s grey market premium as of September 25 was Rs 60. The market expects the AMC’s equity share to list at Rs 772, 8.4% higher than its upper price band of Rs 712.
Aditya Birla Sun Life AMC Investment Rationale
Aditya Birla Sun Life AMC is India’s fourth-largest fund house, and it has retained its fourth position since September 2011 in terms of average quarterly AUM. According to the Association of Mutual Funds in India, the AMC had an average AUM of Rs 2.75 trillion for the April-June 2021 quarter. Notably, the fund house’s AUM breached the Rs 3 trillion mark in July 2021. Sixteen of Aditya Birla Sun Life AMC’s top open-ended schemes, forming 79.20% of its QAAUM (average quarterly assets under management), have outperformed peers under the 10-year return horizon as of December 31, 2020, according to CRISIL (NS: CRSL ).
Regarding folio growth, the company’s total number of individual investor folios more than doubled from 2.93 million as of March 31, 2016, to 7.19 million as of March 31, 2020. Aditya Birla Sun Life’s folio growth was more significant than the industry’s 17.35% increase over the same period. The company’s folio growth was also the second-highest increase among the five largest AMCs in India by MAAUM (average monthly assets under management) at the end of December 2020.
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