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Aditya Birla Sun Life AMC IPO review (Apply)

Review By Dilip Davda on Sep 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.


Conclusion / Investment Strategy

This offer was eagerly awaited by investors across the board. Though it has been posting the growth for bottom lines, based on financial parameters, the issue is fully priced. With the rising investments in stock markets and increasing numbers of Demat accounts, this company is poised for bright prospects ahead. Investors may park fund in this issue with a long term perspective.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Sep 25, 2021

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Aditya Birla Sun Life AMC IPO FAQs

  1. 1. Why Aditya Birla Sun Life AMC IPO?

    The initial public offer (IPO) of Aditya Birla Sun Life AMC Ltd offers an early investment opportunity in Aditya Birla Sun Life AMC Ltd. A stock market investor can buy Aditya Birla Sun Life AMC IPO shares by applying in IPO before Aditya Birla Sun Life AMC Ltd shares get listed at the stock exchanges. An investor could invest in Aditya Birla Sun Life AMC IPO for short term listing gain or a long term.

  2. 3. Aditya Birla Sun Life AMC IPO what should investors do?

    Aditya Birla Sun Life AMC IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Aditya Birla Sun Life AMC IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  3. 4. Is Aditya Birla Sun Life AMC IPO good?

    Our recommendation for Aditya Birla Sun Life AMC IPO is to subscribe.

  4. 5. Is Aditya Birla Sun Life AMC IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Aditya Birla Sun Life AMC IPO.

  5. 6. When will Aditya Birla Sun Life AMC IPO allotment status?

    The Aditya Birla Sun Life AMC IPO allotment status will be available on or around Oct 6, 2021. The allotted shares will be credited in demat account by Oct 8, 2021. Visit Aditya Birla Sun Life AMC IPO allotment status to check.

  6. 7. When will Aditya Birla Sun Life AMC IPO list?

    The Aditya Birla Sun Life AMC IPO will list on Monday, October 11, 2021, at BSE, NSE.

1 Comments

1. PBB  Oct 12, 2021 11:41:47 AM I Like It. | Report Abuse Reply
sir, app review doh but recommendation mat doh!