Aditya Birla Sun Life AMC hits the road, expects Rs 22,000-24,000 crore valuation: Sources

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Aditya Birla Capital has taken the first step towards value unlocking with the IPO of its Asset Management business ABSL AMC. Sources with direct knowledge share that the company has kick started its road shows for the listing. AB Capital is looking at a valuation of Rs 22,000-24,000 crores, sources share with Moneycontrol.

The large issuance is an Offer For Sale (OFS) to sell down 13.5% stake in ABSL AMC, large seller is the Canadian JV partner Sun Life which will offer 12.5% of its shares out of the 49% stake held in the company currently. Aditya Birla Capital owns 51% and will sell 1%, sources confirmed.

In an exclusive interview with Moneycontrol, AB Capital’s CEO, Ajay Srinivasan said, “we've filed the DRHP for our asset management company, it's an offer for sale that will lead to the listing of the asset management company, so that is you know the first step in value unlocking.”

When asked on the valuation expectation and timeline, Ajay said, “I can't comment on that. So these are all things that will go through a process and we will see that as it goes through.”

Valuation Dynamics

At expected valuation Rs 22,000-24,000 crores, the company is aiming for a valuation of around 38 times one year forward looking price to earnings ratio. This is very close to the kind of valuation the industry leader in the listed space, HDFC Mutual Fund commands at around the multiples of 40 given the pedigree and performance. Another industry biggie, Nippon India’s shares generally trade at a multiple of around early 30s.

A source said, “The expectation is of the higher level, close to the HDFC Mutual Fund levels which may be achieved due to the leadership strength at the AMC with a strong CEO in A Balasubramanian and the rich parentage of Aditya Birla Group.”

Investor acceptance of the expected valuations and the market appetite and sentiment will define the fate of this IPO from AB Group’s stable. Sources suggest that the company is aiming for a launch in the middle of this calendar year.

Growth Drivers

Cost efficiency, more equity mix and higher penetration are the three levers of further growth in the ABSL AMC business.

Ajay Srinivasan said, “if you look at basis points to AUM, that's expanded from something like 26 basis points to 28 basis points in the year, partly as a result of some of the cost initiatives we've taken. As far as equity is concerned as I said we're really looking at building up our equity mix as a percentage of the total mix that mix also changed last year, so it moved from 35% in the previous year to 36% this year and that journey will continue.”

The company has a total AUM of over Rs 2.60 lakh crores currently out of which the equity fund contribution is a little less than Rs 1 lakh crores and the company is on the path to expand it further.

Ajay Srinivasan also assured, “I think the board will constantly look at different opportunities and avenues to be able to unlock value and we've decided that the AMC opportunity is a great place to do that.”