IPO Note - Aditya Birla Sun Life AMC Ltd By Nirmal Bang
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BACKGROUND
ABSL (Aditya Birla Sun Life) is the largest non-bank affiliated AMC in India since FY18, and among the four largest AMCs in India since FY12. ABSL managed a total AUM of Rs. 2,936.42 billion as on 30 June 2021. ABSL has demonstrated its abilities by successfully tilting its revenue mix towards higher margin segments like equities, individuals and B-30 cities which has helped the company achieve a robust PAT CAGR of 21% over the last 5 years.
Details and Objects of the Issue
The public issue consists of an OFS (offer for sale) of Rs. 2,768 Cr by both the promoters viz. – Aditya Birla Capital selling 1% stake and Sun Life selling 12.5% stake. There is no fresh issue of shares. Thus the issue size forms 13.5% of the market cap of ABSL.
Investment Rationale
* Largest non-bank affiliated AMC in India.
* Well recognized brand with experienced promoters having presence in multiple countries.
* Growing individual investor customer base driven by strong systematic flows and B-30 (beyond top 30 cities) penetration.
* Robust fund performance supported by research driven investment philosophy.
* Pan-India, diversified distribution network.
Valuation and Recommendation
Over FY16-21, ABSL has witnessed strong AUM CAGR of ~15% rising from Rs. 1365 Bn to Rs. 2693 Bn. Revenues and profits have grown at a CAGR of 7% and 21% respectively over the same period. Positive macro-economic factors and a robust industry growth prediction of ~12% CAGR over FY21-FY26E, provide the company with a good opportunity to further grow. ABSL enjoys a strong parentage, solid brand image, a decent distribution network and consistently high ROE of over 30%. We thus recommend to “subscribe for the long term”.
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