Aditya Birla Sun Life Asset Management Company (ABSL) is opened its initial public offering (IPO) on Wednesday. The company plans to close the issue after three subscription days on October 1, 2021. The non-bank affiliated asset management company has fixed its IPO price at Rs 695 to Rs 712 per equity share with a Rs 5 per equity share as the face value. The public issue is a complete offer for sale (OFS) of Rs 2,768.26 crore with a total of 38,880,000 equity shares by selling shareholders. The Object of the IPO is to use the net proceeds from the issue to achieve the benefits of listing the equity shares on the Stock Exchanges as well as carry out the OFS. As this issue is completely an OFS, the company will not directly receive any proceeds from the IPO. All proceeds will go to the selling shareholders. Speaking on the growth of the company, Anandrathi Broking said in a note, “The company is committed to growing its geographic reach by both expanding its distribution network and deepening its existing presence. It intends to continue to increase its footprint across India by focusing on growing its presence in B-30 cities and rural markets that remain underpenetrated and have less competition.”
Aditya Birla Sun Life AMC IPO: Company Strengths
The Aditya Birla Sun Life AMC is one of the largest non-bank affiliated asset management companies in India. It has maintained a position as the largest non-bank affiliated AMC in India according to its Quarterly Average Assets Under Management (QAAUM) since March of 2019. It was also ranked one of the four largest AMCs in India by QAAUM in September of 2011.
It is also a well-recognised and trusted brand with experienced promoters. Speaking of which, the promoters for the company in this IPO are Aditya Birla Capital Limited (ABCL) and Sun Life (India) AMC Investments Inc. Thanks to these trusted names and the experience that comes with it build a lot of trust with its customers in the long term. The company is also committed to growing its individual investor customer base through strong systematic flows and B-30 Penetration. It is also has a very diverse product portfolio with fund performance supported by a research-driven philosophy.
Aditya Birla Sun Life AMC IPO: Key Risks
The effects of the pandemic left the future of the company in a state of uncertainty in terms of the business. Any drastic changes in the Assets Under Management (AUM) may result in the decline of the overall revenue and profit of the company. Another concern is the underperformance of investment products, which could lead to a loss of investors and subsequently loss of AUM and impacted operations.
Aditya Birla Sun Life AMC IPO: Pricing
The company has a fixed price band of Rs 695 to Rs 712 per equity share with Rs 5 per equity share as the face value. “At the upper end of the IPO price band, Aditya Birla Sun Life AMC Ltd. is offered at P/E of 39x its FY21 earnings, with a market capitalization of Rs 205,056 million,” said Anandrathi Broking.
Aditya Birla Sun Life AMC IPO: GMP
The issue showed as having a grey market premium of Rs 45 on September 29, according to information on IPO Watch. This indicated that the shares were trading at a premium of Rs 740 to Rs 757 per equity share on the unlisted grey market.
Should you Subscribe to Aditya Birla Sun Life AMC IPO?
Established in 1994, the company is a joint venture between some of the most trusted names in the industry, i.e., Aditya Birla Capital Limited (ABCL) and Sun Life (India). It is also considered for its innovative and customer forward approach as it dedicates its resources to aggressive expansion.
Broking companies are recommending a ‘Subscribe’ rating for the issue on the back of strong growth prospects of the AMC and due to factors of its large company size, growing individual investor customer base, buoyant capital market and so on.
Speaking on this, Jyoti Roy – DVP- Equity Strategist of Angel One Ltd said, “Aditya Birla AMC has witnessed a steady growth in AUM since 2016 and has also been constantly increasing the share of Individual AUM within the mix. Moreover, the share of high margin Equity AUM has normalized to 36.5% of AUM in Q1FY2022 as compared to 30.5% of AUM from 30.5% of AUM at the end of FY2020. At the higher end of the price band the AMC will be trading at Market/AUM of 7.3xQ1FY22 Avg. AUM which is at a discount to Nippon Life AMC and at a similar level to that of UTI AMC. Given the discount to Nippon AMC and strong growth prospects of the AMC due to a buoyant capital market we would recommend to SUBSCRIBE to the IPO.”
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