Most of them have ‘subscribe’ ratings on the Rs 2,768 crore issue. The offer is entirely an offer for sale, wherein two promoters — Aditya Birla Capital and Sun Life (India) AMC Investments — will divest their stakes in the asset management firm.
Considering the TTM (trailing 12-month) adjusted EPS of Rs 20.27 on a post-issue basis, the company is going to list at a P/E of 35.13 with a market cap of Rs 20,505 crore, analysts said. Its peers, namely HDFC AMC and Nippon Life, are trading at P/E values of 50 and 39, respectively.
“We assign a ‘subscribe’ rating to this IPO as the company is the largest non-bank affiliated asset manager in India with diverse product portfolio and geographically diversified pan-India distribution presence. Also, the company is available at reasonable valuation compared with its peers,” said Saurabh Joshi of Marwadi Shares and Finance.
Aditya Birla Sun Life AMC is among the four largest AMCs in India by quarterly average assets under management. The company managed a total AUM of Rs 2,93,642 crore as of June, 2021.
The proposed sale of equity shares by Aditya Birla Capital and Sun Life India in the IPO will together constitute up to 13.50 per cent of the paid-up share capital of Aditya Birla Sun Life AMC.
The company has fixed a price band at Rs 695-712 for its share sale. Half of the issue size has been reserved for qualified institutional buyers (QIBs), 35 per cent for retail investors and the remaining 15 per cent for non-institutional investors. Investors can bid for a minimum of 20 equity shares and in multiples of 20 equity shares thereafter.
Vikas Jain, senior research analyst at Reliance Securities, said the implied market cap of the IPO is 7.6 per cent of FY21 AUM, which is at s 40-55 per cent discount to HDFC AMC and Nippon India.
“Its RoE of 31 per cent in FY21 is superior to Nippon and equivalent to that of HDFC AMC. Further, FCF yield at 2.4 per cent looks good. Sustained strong cash flow generation on the backdrop of continued rise in penetration level and improvement in equity AUM is likely to ensure healthy payout, going forward,” said Jain, who advised subscribing to it from a long-term perspective.
Even though the company’s equity AUM exposure at 36 per cent is lower compared with peers, it has been doing exceedingly well in improving its operating efficiency over the years, he said.
The AMC stands to benefit from strong industry prospects, as it has a diversified product portfolio and offers customised solutions to meet financial goals, said analysts at Religare Broking.
Among the key risks are high competition from existing and new participants offering investment products and any regulatory changes that may impact its business.
