IPO Note - Aditya Birla Sun Life AMC Limited By Angel One
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Aditya Birla Sun Life AMC Limited (“ABSLAMC”) is ranked as the largest non-bank affiliated AMC in India by Quarterly Average Assets Under Management (“QAAUM”) since March 31, 2018, and among the four largest AMCs in India. Company managed total AUM of ₹2,93,642 crores under the suite of mutual fund (excluding our domestic FoFs), portfolio management services, offshore and real estate offerings, as of June 30, 2021. It established a geographically diversified Pan-India distribution presence covering 284 locations spread over 27 states and six union territories.
Positives: (a) Largest Non-Bank Affiliated Asset Manager in India (b) WellRecognized Brand with Experienced Promoters (c) Growing Individual Investor Customer Base Driven by Strong Systematic Flows and B-30 Penetration (d) Diverse Product Portfolio with Fund Performance supported by Research Driven Investment Philosophy.
Investment concerns: (a) The effect of pandemic is uncertain and unpredictable to the business. (b) Any adverse change in AUM may result in a decline in overall revenue and profit. (c) Underperformance of investment products could lead to loss of investors and subsequently loss of AUM & adverse impact on operation. (d) Credit risks related to the debt portfolio of managed funds may expose the funds to losses.
Outlook & Valuation: 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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