Should you subscribe to Aditya Birla Sun Life AMC IPO?

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Aditya Birla Sun Life AMC’s Rs 2,768 crore initial public offering (IPO) has opened for subscription on Wednesday. The offer will be available for investors from September 29-October 1, 2021. On Tuesday, Aditya Birla Sun Life AMC said it had collected Rs 789 crore from anchor investors ahead of the IPO. Here’s everything you need to know about the IPO and whether it makes sense for you to subscribe to it.

IPO Details

It is an offer for sale by promoters Aditya Birla Capital and Sun Life AMC, wherein these shareholders will be selling around 3.9 crore shares. This will together constitute up to 13.5% of the paid-up share capital.

Price Band 

The company has fixed the IPO price at Rs 695 -Rs 712 per share with a Rs 5 per equity share as the face value.

Lot size 

While 50% of the issue size has been reserved for qualified institutional buyers (QIBs), 35% of the issue size is reserved for retail investors and the remaining 15% has been kept reserved for non-institutional investors.

Investors who wish to subscribe to the IPO can bid for a minimum quantity of 20 equity shares and in multiples thereafter. At the upper price band, they will be shelling out Rs 14,240 to get a single lot of the Aditya Birla Sun Life AMC shares.

Objective

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.

Key Strengths

Aditya Birla Sun Life AMC is one of the largest non-bank affiliated asset management companies in India. It is a well-recognised brand with experienced promoters. The company is committed to growing individual investor customer base via strong systematic flows. It has a very diverse product portfolio.

Key Risks

The effects of the pandemic has left a lot of uncertainty in terms of the business growth, overall revenue and profits. Another concern is the underperformance of investment products, which could lead to a loss of investors and subsequently loss of AUM and impacted operations.

About the company 

Aditya Birla Sun Life AMC, the investment manager of Aditya Birla Sun Life Mutual Fund (MF), is a joint venture between the Aditya Birla Group and the Sun Life Financial Inc of Canada. It is the fourth largest fund house, had an average AUM of Rs 2.93 lakh crore as of June quarter. It currently manages 118 schemes.

Should you subscribe?

Anand Rathi

The company is committed to growing its reach by 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.

“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. Given that the company is the largest non-bank affiliated AMC and among the four largest AMCs in India with well recognized promoters, growing individual investor customer base, diverse product portfolio with high RoNW of 30.87% in FY21 – We give this IPO a “Subscribe” rating”, it said.

Nirmal Bang

Ventura Securities