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Aditya Birla Sun Life AMC Ltd (ABSLAMC), a joint venture between Aditya Birla Capital Limited and Sun Life AMC, is ranked as the largest non-bank affiliated AMC in India by Quarterly Average Assets Under Management (QAAUM) and among the four largest AMCs in India by QAAUM according to CRISIL. As of June 30, 2021, ABSLAMC managed total AUM of ₹2,936.4 billion under its suite of mutual fund, portfolio management services, offshore and real estate offerings. They managed 118 schemes comprising of 37 equity schemes, 68 debt schemes, two liquid schemes, five ETFs and six domestic FoFs, as of June 30, 2021. Since the inception in 1994, they have established distribution presence covering 284 locations spread over 27 states and six union territories.

* Average AUM of the Indian mutual fund industry grew at a CAGR of 16.4% between FY11 and Q1FY22 to ₹33.2 trillion and is expected to grow at 11-13% CAGR between June 2021 and March 2026, to reach ₹57 trillion.

* In addition to the mutual fund business, ABSLAMC also provides Portfolio Management Services (PMS), offshore and real estate offerings with an AUM of ₹115.15 billion.

* The total QAAUM (excluding domestic FoFs) has grown over the years and was ₹2,754.54 billion, as of June 30, 2021, compared to ₹1,365.03 billion as of March 31, 2016. However, market share declined from 10.09% to 8.32% during the same period.

* Of the total MAAUM, equity constitutes 38.09% while debt constitutes 41.16% as of June 2021. 20.42% of MAAUM is in the liquid/money market and 0.33% is in ETF.

* As a result of ABSLAMC’s focus on improving the equity-oriented scheme mix, equityoriented MAAUM grew at a CAGR of 24.9% from ₹323.4 billion in FY16 to ₹984.8 billion in FY21. Correspondingly, the share of equity-oriented MAAUM in total MAAUM increased from 23.7% to 38.1% during the same period.

* ABSLAMC’s investor folios more than doubled from 2.9 million in FY16 to 7.1 million in FY21 with an increased focus on B-30 cities. The company ranks second highest in terms of market share in B-30 cities.

* Number of outstanding SIPs more than tripled from 0.86 million as of March 31, 2016, to 2.80 million as of June 30, 2021. Equity oriented AUM mix from SIPs increased from 25.70% in FY16 to 41.70% in Q1FY22.

* ABSLAMC reported a 10% decline in revenue over FY19-21 due to declining AUM. However, with efficient cost control, the company was able to report 7% CAGR growth in net profit over the period.

* For Q1FY22, it has posted a net profit of Rs. 154.9cr on a total income of Rs. 333.2cr compared to Rs.97.4cr/Rs.256.6cr respectively for the corresponding previous period.

* At the upper price band of Rs.712, ABSLAMC is available at P/E of 39x (FY21) which appears reasonably priced. We assign a “Subscribe” rating for the issue on a long-term basis considering strong growth prospects in one of the fastest growing economies with a highly under penetrated MF industry.

Purpose of IPO

The offer comprises of only offer for sale. The objects of the Offer are to (i) achieve the benefits of listing the equity shares on the Stock Exchanges; and (ii) carry out the offer for sale of up to 38,880,000 equity shares by the selling shareholders.

Key Risks

* Competition from existing and new market participants offering investment products.

* A large portion of the AUM is concentrated in a few schemes. The top five schemes accounted for 40.3% of the total QAAUM.

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