Aditya Birla AMC IPO opens today: Should you subscribe to the issue?

The initial public offer (IPO) of Aditya Birla Sun Life AMC opened today. The AMC aims to collect Rs 2,768.25 crore from the issue which will close on October 1.

The share of Aditya Birla Sun Life AMC  is likely to be listed on October 11.

The AMC has collected Rs 789 crore from anchor investors a day ahead of the IPO.

Allotment of 1,10,80,800 shares has been done for anchor investors at Rs 712 apiece, valuing the aggregate transaction at Rs 788.95 crore.

ICICI Prudential Mutual Fund (MF), SBI MF, SBI Life Insurance Co Ltd, Axis MF, UTI MF BNP Paribas Arbitrage, Max Life Insurance Company and HSBC Global Investment Funds were among the anchor investors.

Price band of the IPO has been fixed at Rs 695-712 per share. The IPO is entirely an offer for sale, wherein two promoters -- Aditya Birla Capital and Sun Life (India) AMC Investments -- will divest their stake in the asset management firm.

The IPO of up to 3.88 crore equity shares comprises an offer for sale of up to 28.51 lakh equity shares by Aditya Birla Capital and up to 3.6 crore equity shares by Sun Life AMC.

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.

Aditya Birla Sun Life AMC Ltd, the investment manager of Aditya Birla Sun Life Mutual Fund, is a joint venture between Aditya Birla Group and Sun Life Financial Inc of Canada.

A retail investor can buy 20 shares or one lot of the share sale at Rs 14,240.  Bids can be made for a maximum of 14 lots or 280 shares by spending Rs 1,99,360.

Peers of Aditya Birla Sun Life AMC such as Nippon Life India Asset Management, HDFC AMC and UTI AMC are already listed on the stock exchanges.

Here's a look at what brokerages and analyst said about the prospects of the IPO.

Jyoti Roy - DVP- Equity Strategist, Angel One has given a subscribe call to the IPO.

"Aditya Birla AMC has witnessed a steady growth in AUM since 2016 and has also been constantly increasing the share of Individual AUM within the mix. Moreover, the share of high margin Equity AUM has normalised to 36.5% of AUM in Q1FY2022 as compared to 30.5% of AUM from 30.5% of AUM at the end of FY2020. At the higher end of the price band, the AMC will be trading at Market/AUM of 7.3xQ1FY22 Avg. AUM which is at a discount to Nippon Life AMC and at a similar level to that of UTI AMC. Given the discount to Nippon AMC and strong growth prospects of the AMC due to a buoyant capital market, we would recommend to SUBSCRIBE to the IPO."

Choice Broking is positive on the prospects of the IPO and has given a subscribe call to the issue.

"With supportive government policies, financialisation of household savings, increasing penetration in the B30 cities, the macros of the domestic mutual fund industry are positive and provide huge scope for growth and  development.  At  higher  price  band  of  Rs 712,  ABAMC  is  demanding  a  TTM  P/E  multiple  of  35.1x  (to  its  TTM  EPS  of  Rs. 20.3),  which  is  at  discount  to  the  peer  average  of  38.3x.  Moreover,  based  on  FY24E  earnings,  the  stock  is  demanding  a  P/E valuation  of  29.4 times,  which  seems  to  be  attractive  for  a  company  with  a  RoE  excess  of  25%," the brokerage said.

Aditya Birla Sunlife MF, the fourth largest fund house, had an average asset under management of Rs 2.93 lakh crore as of the June quarter. At present, it manages 118 schemes.

Since its inception in 1994, the fund house has established a geographically diversified pan-India distribution presence covering 284 locations spread over 27 states and six union territories.