Aditya Birla Sun Life AMC IPO review (Apply)

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Review By Dilip Davda on September 25, 2021

•    ABSLAMC is the fourth largest AMC in India by QAAUM.
•    It has posted rising profits despite declining top lines.
•    Based on financial parameters, the issue is fully priced.
•    ABSLAMC is a dividend-paying company.
•    OFS is being done only for 13.5% of the total paid-up equity.
•    Investors may consider parking of funds with a long term perspective.

ABOUT COMPANY:
The Aditya Birla group is a multi-national conglomerate and, over the last seven decades, has grown to become one of India's largest and most respected corporate groups. ABSLAMC is from this group going public.

Aditya Birla Sun Life AMC Ltd. (ABSLAMC) is ranked as the largest non-bank affiliated AMC in India by QAAUM since March 31, 2018, and among the four largest AMCs in India by QAAUM since September 30, 2011, according to the CRISIL Report. ABSLAMC managed a total AUM of Rs. 2,936.42 billion under its suite of a mutual fund (excluding domestic FoFs), portfolio management services, offshore and real estate offerings, as of June 30, 2021. The company believes it has achieved this leadership position through a focus on consistent investment performance, extensive distribution network, brand, experienced management team and superior customer service.

Since its inception in 1994, it has established a geographically diversified Pan-India distribution presence covering 284 locations spread over 27 states and six union territories. The company's distribution network is extensive and multi-channelled with a significant physical as well as digital presence, and included over 66,000 KYD-compliant MFDs, over 240 national distributors and over 100 banks/financial intermediaries, as of June 30, 2021. It 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, as of June 30, 2021. 

ABSLAMC'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 under its management. The total QAAUM (excluding domestic FoFs) has grown over the years and was Rs. 2,754.54 billion, Rs. 2,692.78 billion, Rs. 2,475.22 billion and Rs. 2,464.80 billion as of June 30, 2021, and March 31, 2021, 2020 and 2019, respectively. In addition, it provides portfolio management services, offshore and real estate offerings and managed a total AUM of Rs. 115.15 billion as part of such services, as of June 30, 2021. 

ABSLAMC caters to a wide range of customers from individuals to institutions through this Pan-India network and offering of customer solutions, which positions it well to attract a large segment of the Indian mutual fund market across varying customer requirements and risk profiles and to develop a broad customer franchise with a strong retail customer base. Its MAAUM from institutional investors was Rs. 1,503.04 billion as of June 30, 2021, which was the fourth-largest among peers, according to the CRISIL Report. Similarly, ABSLAMC's MAAUM from individual investors was Rs. 1,333.53 billion as of June 30, 2021. The company's leadership position, product mix, cost base and scale has contributed to its strong financial performance. 

It has maintained a market-leading position in B-30 penetration over the years, which has further contributed to the growth of the individual investor base as well as improvement in profitability. Its systematic transactions have achieved similar growth, with number of outstanding SIPs more than tripling from 0.86 million as of March 31, 2016, to 2.80 million as of June 30, 2021.

ISSUE DETAILS/CAPITAL HISTORY:
To explore listing benefits and providing exit to some of its stakeholders, ABSLAMC is coming out with a maiden IPO by way of Offer for Sale (OFS) of 38880000 equity shares of Rs. 5 each with a price band of Rs. 695 - Rs. 712 per share. At the upper price band, the company mulls raising Rs. 2768.26 cr. The issue opens for subscription on September 29, 2021, and will close on October 01, 2021. Minimum application is to be made for 20 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 13.50% of the post issue paid-up capital of the company. 

ABSLAMC has reserved 1944000 shares for the shareholders of ABCL (Aditya Birla Capital Ltd.) and from the residual portion, it has allocated 50% for QIBs, 15% for HNIs and 35% for retail investors. 

Having issued initial equity at par, the company raised further equity at Rs. 9.405 per share (based on Rs. 5 paid-up value) in May 1999 and has also issued bonus shares in the ratio of 7 for 1 in April 2021. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 2.30 and Rs. 2.77 per share. 

This being a pure OFS, the post issue paid-up equity capital of ABSLAMC remains the same at Rs. 144.00 cr. At the upper cap of the offer price, the company is looking for a market cap of Rs. 20505.60 cr. 

The Book Running Lead Managers (BRLMs) to this issue are Kotak Mahindra Capital Co. Ltd., BoFA Securities India Ltd., Citigroup Global Markets India Pvt. Ltd., Axis Capital Ltd., HDFC Bank Ltd., ICICI Securities Ltd., IIFL Securities Ltd., JM Financial Ltd., Motilal Oswal Investment Advisors Ltd., SBI Capital Markets Ltd. and Yes Securities (India) Ltd. while KFin Technologies Pvt. Ltd. is the registrar to the issue.  

FINANCIAL PERFORMANCE:
On the financial performance front, ABSLAMC has posted a total income/net profits of Rs. 1407.25 cr. / Rs. 446.80 cr. (FY19), Rs. 1234.77 cr. / Rs. 494.40 cr. (FY20) and Rs. 1205.84 cr. / Rs. 526.28 cr. (FY21). For the Q1 of FY 22 ended on June 30, 2021, it has posted a net profit of Rs. 154.94 cr. on a total income of Rs. 336.25 cr. compared to Rs. 97.35 cr. / Rs. 260.75 cr. respectively for the corresponding previous period. Thus it has been reporting growth in bottom lines despite declining top lines. This surge in profits is attributed to declining fees and commission expenses from time to time. 

It has posted an average EPS of Rs. 17.44 and an average RoNW of 34.05% for the last three fiscals. The issue is priced at a P/BV of 11.38 based on its NAV of Rs. 62.57 as of June 30, 2021. If we attribute annualized FY22 earnings on the post issue paid-up equity capital, then the asking price is at a P/E of 33.09, making it a fully priced offer. 

MERCHANT BANKERS' TRACK RECORDS:
The eleven BRLMs associated with the offer have handled 60 public issues in the past three years, out of which 19 issues closed below the offer price on the listing dates.

DIVIDEND POLICY:
ABSLAMC has been a regular dividend-paying AMC. It has paid a dividend of 1667% (FY19), 1833% (FY20) and 777.80% (FY21) and has also paid a dividend of 49% in Q1 of FY22. It will continue its dividend policy post listing based on its financial performances and future prospects. 

COMPARISON WITH LISTED PEERS:
As per offer documents, ABSLAMC has shown HDFC AMC, Nippon Life AMC and UTI AMC as its listed peers. They are currently trading at a P/E of 49.97, 40.26 and 34.66 (as of September 24, 2021. However, they are not truly comparable on an apple to apple basis.

Aditya Birla Sun Life AMC IPO FAQs