Optimal pricing during equity market boom is bound to impact the stock price severely when the market takes a turn.

ADITYA BIRLA SUN LIFE AMC OFFER AT A GLANCE
Offer Type	Book Built
Platform	Main Frame
Fresh Issue	Nil
Offer for Sale	3,88,80,000 shares (Rs 2768 Cr)
Face Value	Rs 5
Price Band	Rs 695–712
Mkt/Bid Lot	20 Nos.
Implied M-Cap	Rs 20,506 Cr
Implied Equity Cap	Rs 144 Cr
Free Float	13.5%
Lead Manager	Kotak Mahindra, BofA Sec, Citigroup, Axis Cap, HDFC Bank, ICICI Sec, IIFL Sec, JM Fin, Motilal Oswal, SBI Cap and Yes Sec
Registrar	KFin Technologies
Listing At	BSE, NSE

 

INDICATIVE ISSUE SCHEDULE
Opening          : 29-Sep-2021	Closing    :1-Oct-2021
Allotment        : 6-Oct-2021	Refunding  :7-Oct-2021
Demat Credit : 8-Oct-2021	Trading  :11-Oct-2021

 

The Offer

Aditya Birla Group’s mutual fund arm, Aditya Birla Sun Life AMC Ltd (ABSL) is going public with an offer for sale (OFS) of 3,88,80,000 shares(28,50,880 shares from Aditya Birla Capital and 3,60,29,120 shares from Sun Life AMC Investments). The offer is being made through the book-building route with a price band of Rs 695-712 for Rs 5 paid-up share. At the cap price, the value of IPO amounts to Rs 2,768 cr.

Applicants should bid for a minimum lot of 20 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on October 11, 2021. As many as eleven investment bankers (Kotak Mahindra Capital, BofA Securities, Citigroup Global Markets, Axis Capital, HDFC Bank, ICICI Securities, IIFL Securities, JM Financial, Motilal Oswal Investment, SBI Capital Markets and Yes Securities) have been roped in as lead managers to the offer and KFin Technologies is acting  as registrar to the issue. The bidding opens on Wednesday, September 29 and closes on Friday, October 1, 2021.

Being an offer for sale, the company would not receive any amount from the IPO. The object of the offer is obviously to facilitate the OFS and achieve the benefits of listing the shares on the exchange.

 

Lineage

ABSL was originally incorporated as Birla Capital International AMC Ltd by the Aditya Birla Group in 1994. Following the entry of Sun Life of Canada in 1999, the name was changed to Birla Sun Life Asset Management Company Ltd. The name was changed to the present one in the year 2017. Currently, the 2007-registered Aditya Birla Capital, promoted by Grasim Industries, is holding 51% of ABSL’s equity. The balance 49% is held by the 1999-incorporated Sun Life AMC which is a wholly-owned subsidiary of Sun Life Assurance Company of Canada. Sun Life Financial Inc is the ultimate holding company of Sun Life AMC.

ABSL is ranked as the largest non-bank-affiliated asset management company in India by QAAUM (quarterly average assets under management) since March 31, 2018, and among the four largest AMCs in India by QAAUM since September 30, 2011, according to the CRISIL Report. The company reportedly managed total AUM of Rs 293,642 Cr under its suite of mutual fund), portfolio management services, offshore and real estate offerings, as of June 30, 2021.

The company managed 118 schemes comprising 37 equity schemes, 68 debt schemes, two liquid schemes, five ETFs (exchange traded funds) and six domestic FoFs (fund of funds), as of June 30, 2021. It had pan-India distribution presence covering 284 locations spread over 27 states and six union territories.

 

Key Management

Aditya Birla Group chairman, Kumar Mangalam Birla (54), is the non-executive chairman of ABSL. A Balasubramanian (55) is the Managing Director and Chief Executive Officer of the company. He has been associated as an employee of the company since 1994. He was the Chief Investment Officer from 2006 to 2009 and has been the CEO since 2009. In the early part of his career, he had worked with Canbank Financial and GIC Mutual Fund.

 

Stakeholders

Of the present equity of 28.8 crore shares Aditya Birla Capital is holding 14.69 crore shares at an average cost of Rs 2.30 each. Sun Life AMC is having 14.11 cr shares at a cost of Rs 2.77 a piece. Post offer for sale, the former will hold 14.40 crore shares (50.01%) at a negative cost of Rs 11.75 and Sun Life will have 10.51 crore shares (36.49%) at a negative cost of Rs 240.38 per share.

 

Business Track

ABSL’s total QAAUM (quarterly average assets under management) grew at a CAGR of 14.55% from Rs 1,36,503 cr in March 2016 to Rs 2,69, 278 cr in March 2021 and further to Rs 2,75,454 cr at the end of June 2021. The equity-oriented MAAUM (monthly average assets under management) grew at a CAGR of 24.94% from Rs 32,345 cr at the end of March 2016 to Rs 98,480 cr in March 2021 and further to Rs 1,08,044 cr in June 2021.

ABSL’s share of equity-oriented MAAUM in total MAAUM increased from 23.66% in March 2016 to 38.09% by June 2021. This 14.43% increase in equity mix was claimed to be greater than the industry increase of 13.65% over the same period, and was the second highest increase among the five largest AMCs in India by MAAUM. Correspondingly, share of SIP AUM (systematic investment plan assets under management) in total equity-oriented mutual fund AUM increased from 25.7% in March 2016 to 41.7% in June 2021.

 

Financial Track

Even though ABSL’s top line has witnessed negative growth in last couple of years, operating margin has significantly improved from 42% in 2018 to 61% in fiscal 2021. Consequently, net profit has surged from Rs 348 cr in 2018 to Rs 526 cr in 2021. Till recently, the company’s equity capital was at Rs 18 cr which has now leapt to Rs 144 cr due to a bumper seven for one bonus issue. Even on the enlarged equity base, the earning per share is attractive at over Rs 18 against the paid up value of Rs 5. The company’s reserves too were significantly high at more than Rs 1600 cr.

Aditya Birla Sun Life Consolidated Financials (in Cr)
Period Ended	Mar-21	Mar-20	Mar-19	Mar-18
Months	12	12	12	12
Revenue	1191	1234	1406	1323
Operating Profit	724	702	683	552
OPM%	60.8	56.9	48.6	41.7
Other Income	15	1	1	1
EBIDTA	739	703	684	552
EBIDTA %	61.3	56.9	48.6	41.7
Interest	6	5	6	5
Depreciation	37	37	32	26
Net Profit	526	494	447	348
Equity (implied)	144	18	18	18
Reserves	1658	1299	1203	1120

 

Valuation

ABSL has kept a price band of Rs 695-712 for Rs 5 paid-up share. Perhaps, as compared to its listed peers, the pricing may not appear unreasonable. Nonetheless, the timing of the IPO and its price-discounting give a feeling that the IPO P/E of 39x and P/BV of 11x may not sustain when the current euphoria cools down.

It’s worth noting that mutual fund asset management companies are generally in a buoyant mood when equity markets boom, as a large number of the schemes managed by the AMCs include significant equity investments which substantially boost their NAV. Similarly, depression in equity markets would cause reduction in NAV as the value of the securities declines. Moreover, when securities investment becomes less attractive for investors, there will be net AUM outflows or redemptions which would badly hit AMCs.

 

Financials
(Amount in Cr)	Aditya Birla Sun Life	HDFC Asset Management	Nippon Life Asset	UTI Asset Management
Market Cap	20506	68369	26937	13913
Fixed Assets	12	137	12	245
Revenue	1191	1853	1062	1169
Other Income	15	349	357	30
EBIDTA	739	1813	916	647
Interest	6	9	4	8
Net Profit	526	1326	680	494
Equity Cap	144	107	618	127
Reserves	1658	4670	2484	3099
Stock Features
Current Price (Rs)	712	3209	436	1097
Face Value (Rs)	5	5	10	10
Book Value	62.57	224.17	50.17	254.42
Promoter Stake %	86.5	73.9	74.2	0
Profitability
OPM %	60.8	79.0	52.6	52.8
Net Margin %	43.6	60.2	47.9	41.2
Cash EPS	19.57	64.83	11.54	41.8
Earnings Per Share	18.27	62.22	11.00	38.97
Growth
CAGR 3Yr Sales %	-3.4	1.7	-12.5	0.5
CAGR 3Yr EBIDTA %	10.2	19.1	6.4	3.6
Return
RONW %	29.2	27.8	21.9	15.3
ROCE %	38.9	36.8	28.4	18.9
Discounting
Price/Earnings	39.0	51.6	39.6	28.2
Price/Cash EPS	36.4	49.5	37.8	26.3
Price/Book Value	11.4	14.3	8.7	4.3
Price/EBIDTA	27.8	37.7	29.4	21.5
Price/Revenue	17.2	36.9	25.4	11.9
Distribution
Dividend %	49	680	80	70
Yield %	0.3	1.1	1.8	0.6
Pay-out %	13.4	54.6	72.7	43.6