Issue dates: September 29 – October 1, 2021
Issue price: Rs 695 – 712
Issue Size: Upto Rs 2,768.3 crore
Lot size: 20 shares
Aditya Birla Sun Life AMC, the country’s fourth largest asset management company (AMC) by assets under management (AUM), plans to raise upto Rs 2,768.3 crore through an offer for sale by the two promoters, Aditya Birla Capital and Sun Life AMC. After the issue, the promoter stake will fall to 86.5 per cent. Investors may consider the issue given its wide distribution network, rising retail franchise, better return on equity, and reasonable valuation.
The company had a market share of 8.3 per cent in the country’s mutual fund industry as of June 2021 with an AUM of Rs 2.9 lakh crore. It has over 66,000 distributors covering more than 280 locations with a presence in tier-II and tier-III cities. Its total folio count (accounts) at the end of June 2021 was 7.2 million. The folio growth between March 2016 and March 2021 was 19 per cent annually compared with the 15 per cent growth in the total folio count of the industry. It has a strong retail franchise. The proportion of the systematic investment plan (SIP) increased to 41.7 per cent of its total equity assets in June 2021 from 25.7 per cent in March 2016.
Mutual fund is a highly regulated business with intense competition among the top five AMCs. Most of the top companies are affiliated with banks which gives them access to the banking network. While presence of banks helps AMCs secure new business, Aditya Birla Sun Life AMC has created a space for itself over 25 years without the support of a bank.
In the past few years, mutual funds has emerged as a strong investment option due to low returns of fixed deposits. This augurs well for Aditya Birla Sun Life.
The company’s revenue fell to Rs 1,191 crore in FY21 from Rs 1,407 crore in FY19. However, net profit grew by Rs 526 crore from Rs 446 crore during the period due to lower expenses. The company’s return on net worth was superior at 30.9 per cent in FY21 compared with 15-28 per cent for the listed peers.
Based on FY21 earnings, the company’s price-earnings multiple works out to be 38 compared with 39-51 for the peers including HDFC AMC, UTI AMC, and Nippon Life India Asset Management. Given the reasonable valuation, stellar growth in the past, and increasing popularity of mutual fund investment, long term investors may consider the IPO.
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