Aditya Birla Sun Life’s initial public offering started on September 29 and will be open for subscription till October 1. Managing director A Balasubramanian told Nisha Poddar of Moneycontrol that the company’s dividend policy will continue, with 40-50 percent of net profit earmarked for distribution to shareholders after listing as well. Edited excerpts from the interview:
How was the anchor book investors’ response?
It was pretty good. I’m happy to say that we had participation from all the big investors in India as well as some long-term investors from the global market. In fact, as against our Rs 800 crore of anchor book size, we got more than three and a half times the interest. And for the final book, there is a reasonably good mix coming from investors who have great faith in value-based investing. The anchor which has been announced, I think it has come out quite well.
So, a little less than Rs 800 crore out of the Rs 2,770 crore total issue size has come in. But you also launched the IPO for the larger public today. Now, what are your most important pitch points for them to invest?
Aditya Birla Sun Life AMC has got more than 27 years of track record in the AMC business, working shoulder to shoulder with the entire industry players… it is an extremely committed household brand, the name inspires trust… And finally the assets we have between equity and fixed income and the profitability we have been growing continuously year after year. We have been rewarding our shareholders by way of declaration of dividend. All make a good case for investors.
The anchor book has been subscribed at the upper end of the price band, which makes your company’s valuation at about Rs 20,500 crore. What has driven this valuation? Your AAUM ratio is lower than two peers and you also lost some market share over the last few years while some of the listed peers have gained market share. So how have you come to this valuation?
Some of the incumbent players had lost some market share including the listed players. In fact, we have done a little better in maintaining the market share close to 9.1 percent. Absolute growth, if you see, it has improved from over Rs 2,05,000 crore in March 2020 to Rs 3 lakh crore as of today. Have seen significant growth both in equity asset management as well as fixed income asset management. With respect to revenue de-growth, that is more on accounting principle changes… The dip is not because of a drop in revenue. On the contrary, the profitability is a reflection of how the overall business has grown.
In terms of valuation, Rs 27,500 crore valuation is based on comparable valuations. The Rs 27,500 crore is at 38 times multiple as against HDFC, which was at 15 times multiple.
AUM equity mix is under 40 percent, but you have been consistently growing it. As far as the cost-to-income ratio is concerned, how does that picture look?
Two-three factors that will drive the overall mix. The equity assets’ continuous growth we are bringing in through SIP books going up, overall asset management equity has been rising year after year, and fixed income continues to be a dominant player. Put together, revenue will be on the higher path, subject to volatility. And profitability as a result of the operating levels we have, the size we have built, definitely the cost remains more or less the same.
In addition to MF assets and equity, we are also focusing on offering alternate business in the form of AIF and PMS and the real estate fund we are launching.
The broad growth path that we have is the size and scale that we have built.
Also, while people will say our equity assets are 38% of our assets under management, we are the largest fixed income player as well… The moment I drop my fixed income a little bit lower, automatically my equity at 38 percent will go up. The absolute equity that I manage is about Rs 1,27,000 crore – it is as good as some of the lead players.
What has been your dividend policy so far and are you going to stick to it going forward as well in terms of shareholder returns?
In the last seven, eight years, the profit that has been generated has been disbursed in the form of dividend to both the shareholders – Aditya Birla Capital as well as Sun Life. In fact, in the last seven years, we have distributed Rs 1,000 crore dividend to the shareholders. Going by the past track record, in the future, beyond a certain percentage of net profit will be distributed in the form of dividend subject to board and shareholder approval. The broad range we have been thinking about is 40-50 percent of net profit will be distributed to shareholders.