Aditya Birla AMC IPO Financial Analysis (Subscribe)

Key Business Highlights

ABSLMF is one of the leading Fund Houses in India with a PAN India presence with 284 locations spread over 27 states and six union territories. ABSLMF has a wide range of product offerings across equity, debt, and balanced as well as structured asset classes.
Additionally, ABSL AMC provides other services such as Portfolio Management Services, Real Estate Investments, and Alternative Investment Funds.
Focus on enhancing presence in B30 cities, development of digital platforms, and building relationships with distributors and wide channel distribution across smaller emerging markets are the keys for the growth in AUM.
Improved equity-oriented scheme mix is a significant factor to enhance profitability, as equity-oriented schemes generate higher management fees compared to other schemes.

Financial Review

Rise in the total AAUM which derived increase in commissions income; revenue from operations increased by 30% to Rs 333.24 crore in Q1FY22 as against Rs 256.62 crore for Q1FY21. However, when FY21 as compared to FY20, total revenues are reduced by 2.34% to Rs 1205.84 crore in FY21 from Rs 1233.84 crore. This was due to the decrease in total AAUM mainly driven by market volatility in the mutual fund industry in India due to loss of investor sentiment during the current COVID-19 pandemic. PAT showed an increasing trend for all the three fiscals as seen from the financial table below. PAT has been increasing despite the fall in AAUM due to a decrease in the prepaid commission expenses as a result of the trailing effect of the 2018 SEBI Circular as well as lower commission expenses incurred in connection with portfolio management services in line with a decrease in portfolio management services AAUM.

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars	Q1FY22	FY21	FY20	FY19
Total Revenue	336.24	1205.84	1234.77	1407.25
PAT	154.94	526.28	494.40	446.80
EBITDA	216.21	738.89	702.69	683.90
Total Assets	2085.88	1984.55	1571.96	1498.46
Cash and Bank	52.04	56.56	46.63	38.25
Cash generated from operations	204.76	663.22	667.37	543.59

Valuation and peer comparison

With annualised EPS of 21.52, the issue is priced at 33x of its upper price band of Rs 712 per share. The industry average P/E is 39.84x indicating a reasonable valuation of the IPO. P/BV is 11.38x with a NAV of Rs 62.57 as of 30th June 2021.

The listed peers of the Issuer are HDFC AMC, Nippon Life AMC, and UTI AMC. SBI Life AMC and ICICI Prudential AMC MF are other large unlisted peers. The Peer Comparison table can be seen below.

Table 1 - Financials and Ratios (Amount in INR Crore)
Particulars	HDFC AMC	Nippon Life AMC	UTI AMC	ABSL AMC
Face value per share	5	10	10	5
Revenues for FY21 (INR Crores)	2201.74	1419.34	1198.63	1205.84
EPS	62.28	11.04	38.97	18.27
NAV per share	224.28	50.29	255.31	59.19
Return on net worth	27.76%	21.94%	15.27%	30.87%
P/E	50.9	38.46	30.14	33

Summary and Conclusion

Aggregate industry AUM grew 39.2% post-COVID-19 to Rs 33.7 trillion as of June 2021 from Rs 22.3 trillion as of March 2020, driven by recovery post the pandemic, increased B-30 penetration, and rising popularity of SIPs as an investment vehicle. AMC industry has seen robust growth, especially in recent years, driven by a growing investor base due to increasing penetration across geographies, strong growth of capital markets, technological progress, and regulations to make mutual fund products more transparent and investor-friendly.

Returns of listed AMCs

ABSL AMC has maintained a market-leading position in B-30 penetration over the years which contributed to the growth of the individual investor base as well as improvement in profitability. Its share of MAAUM from B-30 cities in total MAAUM increased from 13.44% as of March 31, 2019, to 15.76% as of June 30, 2021. Also, all the listed AMC’s have shown good performance and given good returns to the investors as seen in the table (returns given by listed AMC’s). Hence, one may subscribe to the Issue.

Historically listed company's return
Listed AMCs	Listing year	Issue Price	Listing Price	CMP	Listing gains/loss	XIRR
Nippon Life AMC	Oct-17	252	296	437	17.42%	14.80%
HDFC AMC	July-18	1100	1739	3208	58.09%	39.13%
UTI AMC	Sep-20	554	490	1097	-11.51%	89.53%

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 8th Sep 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

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