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Aditya Birla Sun Life AMC has a tepid listing – What should investors do?

Although the company’s financials have shown good growth, experts said it faces competition from peers that have the support of banks in terms of business expansion and client acquisition.

October 11, 2021 / 03:57 PM IST
 
 
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Aditya Birla Sun Life AMC had a tepid debut on the stock exchanges on October 11, falling as much as 2.25 percent to a low of Rs 696 on the BSE from the issue price of Rs 712.

The stock declined 1.7 percent to Rs 699.65 at the close on the BSE. That was below the grey market price of Rs 732-737 even though market conditions were positive. The BSE Sensex and the Nifty 50 hit fresh highs and continued their uptrend for the third consecutive session.

Still, experts advised holding the stock for the long term, citing, among other things, the positive outlook for mutual funds with growing investments awareness.

“We recommend holding the stock for the long term as the company being the largest non-bank affiliated asset manager in India and among the four largest asset management companies in India by quarterly average assets under management has a well-recognised brand with experienced promoters,” said Astha Jain, a senior research analyst at Hem Securities.

She said the company’s growing individual investor customer base is driven by strong systematic flows and from beyond the Top 30 cities.

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“The company has a pan-India, diversified distribution network with long-term track record of innovation and use of technology and franchises led by experienced and stable management and investment teams,” Jain said.

Santosh Meena, head of research at Swastika Investmart, advised staying invested in the stock because the long-term outlook for the sector is very bullish.

“The AMC industry has grown tremendously in recent years on the back of strong flows by individuals as the AMCs are increasing penetration across geographies. Also, tech easiness is helping millennials to get access to AMCs easily,” Meena said.

Aditya Birla Sun Life AMC managed total assets of Rs 2,93,642 crore under its suite of mutual fund (excluding its domestic fund-of-funds), portfolio management services, offshore and real estate offerings as of June 30, 2021.

It has been the largest non-bank affiliated AMC in India by quarterly average assets under management since March 2018 and among the four largest AMCs in India since September 2011.

“We recommend allotted investors to hold on from the long-term perspective as we have a positive view of the company’s business prospects. Overall, we are optimistic on the AMC industry with the rising investment awareness in mutual funds, which is poised for a decent growth,” said Prashanth Tapse, VP research, at Mehta Equities.

However, Tapse said Aditya Birla Sun Life is a non-bank backed AMC, unlike listed peers like HDFC AMC and SBI MF, which have support from their banks in terms of business expansion and client acquisition. Also, new-age platforms such as Zerodha and Bajaj Finserv may start asset management businesses in the near future.

“Healthy return on equity, well-diversified product portfolio and well-recognised promoter group would act as a long-term rationale to accumulate Aditya Birla Sun Life AMC post-listing,” Tapse said.

According to Gaurav Garg, head of research at CapitalVia Global Research, new investors can buy shares on listing day with a medium to long-term view if they are available below Rs 740.

Aditya Birla Sun Life AMC, which is owned by Aditya Birla Capital and Sun Life AMC, reported profit after tax of Rs 526.28 crore on revenue of Rs 1,191 crore for the financial year FY21 against profit of Rs 494.4 crore on revenue of Rs 1,233.8 crore in FY20.

The company’s earnings before interest, tax, depreciation and amortisation rose to Rs 724 crore in FY21 from Rs 701.7 crore in FY20 and the margin expanded to 60.79 percent from 56.88 percent in the same period.

Aditya Birla Sun Life had a presence in 284 locations, comprising 194 branches in India (and three outside India), spread over 27 states and six Union Territories, as of June 2021.

The company’s Rs 2,768 crore public issue was a complete offer for sale by the promoters and it did not get any funds from the offer.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before making any investment decisions.
Sunil Shankar Matkar
first published: Oct 11, 2021 03:57 pm

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