Aditya Birla Sun Life AMC’s initial public offering opens on September 29. The price band for the shares on offer range from Rs 695 to Rs 712 each, which means a valuation of Rs 20,000 crore to 20,500 crore. MD & CEO A Balasubramanian told Moneycontrol’s Nisha Poddar in an interview that the IPO is reasonably priced. Edited excerpts:
You have said the price band indicates about Rs 20,000-20,500 crore of valuation of the company, as per your IPO issue valuation. What are the matrices based on which you derived this particular valuation and is it enough for shareholders?
I am happy that Aditya Birla Sun Life AMC, being part of the Aditya Birla Group and Aditya Birla Capital, is now finally coming to the listed space after spending 27 years in the mutual fund industry.
With respect to the valuation, clearly the overall asset mix that we have as an AMC compared to competing fund houses and also AMCs that are there in the listed space, actually the profit that has been generated… and the overall AUM mix between equity and fixed income and also profitable high-margin assets that we have, and the large pool of customers that we have built over a period of time – after taking all these into account and also finally, the price that has been arrived at… let us not worry about whatever the actual value the market will give post-listing and since there is a benchmark that is available, what is the kind of discount that one should apply to the existing listed space in order to ensure that investors who come on board at this point of time… it is actually offered at a reasonable price for the investors who will come on board.
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That is the broad thought process we have – looking at our own strength and looking at the competitive, already-listed companies and what should be the benchmark that one should apply on the basis of that, and also taking into account the future profitability growth that we have in mind. But, of course, they are all the projections at the end of the day. Keeping all these in mind, the pricing that you mentioned is something that has been done in the best interests of our investors who would be coming into our shareholders list post the listing.
How will you make your sales pitch to the shareholders?
We as an AMC backed by one of the most trusted household brands in the country… have shown excellent commitment in the last 27 years of being in the mutual fund industry and being a thought leader and being the top fund house in the country, and that is something…
Second is the kind of size that we have built… for the quarter ending June, we had assets under management of close to around Rs 2,80,000 crore… The overall equity that we manage is close to about Rs 1,07,000 crore on average as of June 2021. And as I speak, the assets that we have in equity are close to Rs 1,20,000 crore.
From 7.2 million portfolios and over 5.8 million customers that we have all put together, we have grown our size, both in equity and fixed income, satisfying the growing needs of the customers. Alongside, we also have become one of the profitmaking agencies with a good track record of improving profit each year, along with the size of the pie going up.
Last, but not the least, given the strength that we have, we also created our own distribution network to have a presence in across different parts of the country, including the overseas business… All of this makes us feel that from an investor’s point of view, Aditya Birla Sun Life mutual fund is one of the top fund houses in the country with a huge commitment that comes from the brand itself to the large pool of growing consumers… We as a fund house have been extremely passionate about building the mutual fund business to the next level. We believe that Aditya Birla AMC is well-positioned in that sense.
I want to understand the profit matrices and the cost-to-income ratio. Take us through that trajectory as well?
Our cost-to-income ratio in the last few years has been coming down, given the fact that scale benefit is finally occurring in terms of increasing the revenue on one side. The equity mix between fixed income and equity – I mean more going towards equity with about 38 percent as I mentioned earlier from 25 percent… therefore that improves the overall revenue model.
Even in fixed income, we have many products, which are high-margin assets…
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Scale benefit, the operating leverage that we get has been helping reduce the cost-income ratio. In fact, our cost-income for the quarter ending June 2021 has dropped from 19 basis points to about 16 basis points…. we have as a fund house been very clear about improving the overall cost-income ratio and taking into account the benefit that we can get on scale, operating leverage, at the same time keep the cost under control.
And what about offshore as well as the geographical footprint in terms of your operations?
I think the one area where we look at improving the overall product offering in the country – and not just the mutual fund product – we actually have been developing our own offshore business. In fact, we are the only AMC that has got presence in the overseas market in Singapore and Dubai for the last 10-12 years. I continue to remain committed. I am even looking at opportunities by going to GIFT City very soon. Also, we are evaluating offering products for overseas investors who invest in India.
In fact, we have been managing some of the pension funds, our sovereign fund for global investors for the last 12 years. So that remains a part of our growth driver. In addition to that, this year, we are going about building a separate team of people to drive PMS, drive real estate fund offering and alternative product offering, which will help us in reaching more customers, especially high net worth individuals and pension funds, that is something that will help us even as we have an investment capability to give service to those kind of customers and help double the size and at the same time I am looking at building our future profit with contributions from this segment.