Aditya Birla Sun Life AMC IPO opens tomorrow, grey market premium falls further; should you invest?

Aditya Birla Sun Life AMC’s Rs 2,768 crore IPO will open for subscription tomorrow.

Aditya Birla Sun Life AMC’s Rs 2,768 crore IPO will open for subscription tomorrow amid a falling grey market premium. The joint venture between Aditya Birla Capital Ltd and Sun Life AMC is offering 3.88 crore equity shares, constituting 13.50% of the post-offer paid-up equity share capital of the company, in a fixed price band of Rs 695-712 per share. The initial public offering of Aditya Birla Sun Life AMC will remain open for subscription till Friday this week. Incorporated in 1994, the JV between Aditya Birla Capital and Sun Life AMC is ranked as the largest non-bank affiliated AMC in the country.

Grey market premium slips

Ahead of the IPO, shares of Aditya Birla Sun Life AMC are trading at a premium of Rs 30-40 per share in the unlisted space. This has come down from a premium of Rs 50 per share at the end of last week. “The issue is not exactly bad and the company’s performance is in line, however, the pricing of the issue could be called fully priced in,” Manan Doshi, Cofounder of UnlistedArena, a firm dealing in unlisted & pre-IPO shares told Financial Express Online. He added that the possibility of extra ordinary listing gains from the IPO could be scarce while adding that long-term investors could still go for the IPO of Aditya Birla Sun life AMC.

Investors can bid for the IPO in a price band of Rs 695 to 712 per share, in a bid lot of 20 shares and multiples thereafter. This translated to a minimum investment of Rs 14,240 for investors. The IPO of  Aditya Birla Sun Life AMC issue will entirely be an offer for sale (OFS) by existing shareholders with 28.51 lakh equity shares offered by Aditya Birla Capital and up to 3.6 crore equity shares by Sun Life AMC. Post issue, the promoter group’s shareholding in the company will drop to 86.5% from the current 100% while the public shareholding will increase to 13.5%. Half of the IPO is reserved for Qualified Institutional Buyers (QIB) while 35% is reserved for retail investors and 15% for Non-Institutional Investors (NII). 

Aditya Birla Sun Life AMC manages a total Asset Under Management of Rs 2.94 lakh crore under the suite of mutual fund (excluding the domestic FoFs), portfolio management services, offshore and real estate offerings as of June 30, 2021. 

Should you subscribe?

“Considering the TTM adjusted EPS of Rs 20.27 on 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 while its peers namely HDFC AMC and Nippon Life are trading at a P/E of 49.99 and 38.61 respectively,” said analysts at Marwadi Financial Services. “We assign “Subscribe” rating to this IPO as company is 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 as compared to its peers,” they said. 

Risks associated with the company include an increased competition that may lead to a decrease in market share along with underperformance of investment portfolio that could impact AUM. “Post issue, market capitalisation at upper band will be | 20505 crore. At | 712, the stock is available at ~7.4% Q1FY22 QAAUM and at ~33.1x Q1FY22 PAT (annualised basis),” said domestic brokerage firm ICICI Direct in a note. 

On listing, Aditya Birla Sun Life AMC could join peers such as HDFC AMC, Nippon India Asset Management Limited, and UTI AMC.

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