Aditya Birla Sun Life AMC

Price Band | 695-712 NOT RATED

September 27, 2021
Aditya Birla Sun Life (ABSL) AMC, a JV between Aditya Birla Capital Ltd and
Sun Life AMC, is one of the leading asset management services in India.
ABSL AMC is ranked as the largest non-bank affiliated AMC in India in terms
of Quarterly Average AUM (QAAUM) since 31st March 2018, and ranks
among four largest AMCs in India by QAAUM since September 2011. As on

IPO Review
June 2021, the company’s total AUM stood at | 293642 crore.
ABSL AMC, since inception in 1994, has established strong geographical
Particulars
presence comprising 194 branches (covering 284 locations) spread over 27
Issue Details
states and 6 union territories. ABSL has extensive & multi-channel
distribution network with over 66000 mutual fund distributors, over 240 Issue Opens 29th Septermber 2021
national distributors and over 100 banks/financial intermediaries. Issue Closes 1st October 2021

In terms of mutual fund business, ABSL manages 118 schemes with QAAUM Issue Size | 2702-2768 crore
of ~| 2.7 lakh crore as on June 2021. Apart from mutual fund business, ABSL Fresh Issue 0
also offers PMS, offshore and real estate offerings which comprises of AUM Price Band | 695-712
| 11515 crore. In FY21, revenue stood at | 1191 crore, i.e ~39 bps of AAUM. No. of shares on
PAT came at | 526 crore (~19 bps of AAUM), with RoE at 33.7%. 3.88 crore
offer (in crore)
QIB (%) 50
Growth driven by strong systematic flows
Retail (%) 35
ABSL’s individual investor MAAUM has seen growth at a CAGR of 18.38% Minimum lot size
in FY16-21. The company offers a range of systematic transaction options 20
(no of shares)
and add-on features including SIPs, STPs and SWPs. As of June 30, 2021, 1944000 equity shares reserved for ABCL
SIPs have become a material portion of AUM accounting for ~41.7% of total employees

ICICI Securities – Retail Equity Research

equity-oriented mutual fund AUM and ~34% of total individual investor
mutual fund AUM. Shareholding Pattern (%)
Pre-Issue Post-Issue
Focused on B-30 penetration to increase customer acquisition
ABCL 51.00 50.01
ABSL is focused on expansion in B-30 cities which has helped to grow retail Sun Life 49.00 36.49
customer acquisition and retention rates. As of June 30, 2021, MAAUM from
Public 0.00 13.50
B-30 cities was | 44701 crore; market share of individual MAAUM from B-30
cities at 7.8%. A large part of industry growth is expected to come from B- Objects of issue
30 cities, and ABSL with an existing large presence & distribution capabilities Objects of the Issue
in B-30 cities, remain well placed to attract customers. The objects of the offer are to
achieve the benefits of listing the | 2702-2768
Key Risks and Concerns Equity Shares on the Stock crore
Exchanges.
 Increased competition may lead to decrease in market share
 Underperformance of investment portfolio could impact AUM Research Analyst

 Concentration risk of investment portfolio to persist Kajal Gandhi

[email protected]

Priced at 7.4% Q1FY22 P/QAAUM on upper band Vishal Narnolia

[email protected]
Post issue, market capitalisation at upper band will be | 20505 crore. At |
712, the stock is available at ~7.4% Q1FY22 QAAUM and at ~33.1x Q1FY22 Sameer Sawant
PAT (annualised basis). [email protected]
Key Financial Summary
(| crore) FY19 FY20 FY21 Q1FY22 2 year CAGR (FY19-21)
Total Income 1407.3 1234.8 1205.8 336.2 -7%
PAT 446.8 494.4 526.3 154.9 9%
EPS (|) 15.5 17.2 18.3 5.4
BV (|) 42.4 45.7 59.2 62.4
RoA (%)* 29.8 31.5 26.5 29.7
RoE (%)* 36.6 37.5 30.9 34.4
P/E (x)* 45.9 41.5 39.0 33.1
P/BV (x) 16.8 15.6 12.0 11.4
P/QAAUM (%) 8.3% 8.3% 7.6% 7.4%
Source: RHP, ICICI Direct Research * Figures for Q1FY22 are annualised
 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

Company background
Aditya Birla Sun Life (ABSL) AMC, is currently set up as a JV between Aditya
Birla Capital Ltd and Sun Life AMC. ABSL is one of the leading asset
management services in India and it manages the investment portfolios of
Aditya Birla Sun Life Mutual Fund. ABSL AMC is ranked as the largest non-
bank affiliated AMC in India in terms of Quarterly Average AUM (QAAUM)
since 31st March 2018 and among four largest AMCs in India by QAAUM
since September 2011. As on June 2021, the company’s total AUM stood at
| 293642 crore.
ABSL AMC, since inception in 1994, has established strong geographical
presence comprising 194 branches (covering 284 locations) spread over 27
states and 6 union territories. The company has extensive and multi-channel
distribution network with significant physical and digital presence. As of 30th
June 2021, it has over 66000 mutual fund distributors, over 240 national
distributors and over 100 banks/financial intermediaries.
In terms of mutual fund business, the company manages 118 mutual fund
schemes comprising 37 equity, 68 debt, 2 liquid, 5 ETFs and 6 domestic FoFs
with a QAAUM of ~| 2.7 lakh crore as on June 2021. Apart from mutual fund
business, the company provides PMS, offshore and real estate offerings
which comprises of AUM | 11515 crore. ABSL’s caters to wide range of
customers including individual and institutional investors. Institutional
investors contribute ~51.2% of closing AUM 45.4% is from individual
investors.
Exhibit 1: ABSL’s AUM breakup
(in | crore ) FY19 FY20 FY21 Q1FY22
Category of Fund AUM % of Total AUM % of Total AUM % of Total AUM % of Total
Mutual Fund - Equity 94105 36.8% 65602 30.5% 96323 35.6% 107285 36.5%
Mutual Fund - Fixed Income 144413 56.5% 136793 63.5% 163099 60.2% 174842 59.5%
Mutual Fund SubTotal 238518 93.3% 202395 94.0% 259422 95.8% 282127 96.1%
Portfolio Management Services (PMS) 2949 1.2% 2055 1.0% 1759 0.6% 1828 0.6%
Offshore 13293 5.2% 10326 4.8% 9077 3.4% 9194 3.1%
Real Estate 855 0.3% 493 0.2% 493 0.2% 493 0.2%
Alternate Assets Sub Total 17097 6.7% 12874 6.0% 11329 4.2% 11515 3.9%
Total 255615 100.0% 215269 100.0% 270751 100.0% 293642 100.0%
Source: RHP, ICICI Direct Research

The company continues to focus on equity-oriented scheme mix which

proves to be a significant factor in enhancing the profitability, as equity-
oriented schemes generally generate higher management fees compared to
other schemes. Between 2016 and 2021, Monthly Average AUM (MAAUM)
grew at a CAGR of ~24.9%, correspondingly the share of equity oriented
MAAUM in total MAAUM increased from 23.66% as on March 2016 to
38.09% as on June 2021. The increase in equity mix was greater than
industry’s increase of 13.65% over the same period.
The company has achieved substantial growth in the individual investor
MAAUM and customer base. The company is the fifth largest player in terms
of market share in individual MAAUM. The individual MAAUM grew at a
CAGR of 18.38% taking the MAAUM mix to 47.01% as on June 2021, which
was second highest increase among five largest AMCs in India.
Exhibit 2: Customer wise AUM breakup (MAAUM)
MAAUM (in | crore) FY19 FY20 FY21 Q1FY22

Individual 124948 106496 126982 133353

Institutional 122683 118890 144021 150304
Source: RHP, ICICI Direct Research

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 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

Industry & Peer Comparison

Exhibit 3: Peer Comparison
Proportion of
Rev as % of PAT as % of Price to
(in | crore) AAUM (June'21) Market Share (%) Equity Revenue (FY21) PAT (FY21) ROE (%) Mcap
AAUM* AAUM** AAUM
MAAUM
SBI AMC 537700 15.8% 29.0% 1617.5 0.32% 862.8 0.17% 37.84%
HDFC AMC 426900 12.5% 45.2% 2201.7 0.54% 1325.8 0.32% 30.11% 68400.2 16.0%
ICICI Prudential AMC 423200 12.4% 44.3% 2233.7 0.55% 1245.4 0.31% 80.28%
Aditya Birla Sun Life AMC 283700 8.3% 38.1% 1054.9 0.39% 517.1 0.19% 33.70% 20505.6 7.2%
Kotak Mahindra AMC 253400 7.4% 41.6% 645.3 0.28% 323.3 0.14% 35.17%
Nippon AMC 248100 7.3% 42.0% 1325.7 0.58% 649.4 0.28% 23.30% 27022.5 10.9%
Axis AMC 218600 6.4% 56.3% 655.3 0.33% 243.7 0.12% 43.07%
UTI AMC 193600 5.7% 37.5% 968.2 0.52% 351.7 0.19% 12.85% 13916.1 7.2%
IDFC AMC 126300 3.7% 23.2% 371.1 0.31% 143.00 0.12% 42.56%
DSP AMC 104800 3.1% 60.5% 580.6 0.59% 259.2 0.27% 19.11%
Top 10 total/average 2816400 82.6% 44.7% 11449.0 0.43% 5921.4 0.22% 35.80%
* This number is calculated as Revenue/AAUM ** This number is calculated as PAT/AAUM

Source: RHP, BSE, ICICI Direct Research

Exhibit 4: Projected growth for industry QAAUM

70

60 57.64

50
(in | lakh crore)

40 36.04
32.11 33.18
30 27.04
23.03 24.46

20 18.28
13.52
11.87
10

0
FY15 FY16 FY17 FY18 FY19 FY20 FY21 Q1FY22 FY22P FY26P

Source: RHP, ICICI Direct Research

Exhibit 5: Projected Revenue growth for industry

35000
30000-33000
30000

25000
(in | crore)

20000
15500 16100 15700
13000-
14100
15000 15000
11800
9700
10000 7500 7600
5800
3900 4800
5000 2300 2900
1700
0
FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY26P

Revenue PAT

Source: RHP, ICICI Direct Research

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 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

Investment Rationale
Growth driven by strong systematic flows
ABSL’s individual investor MAAUM has seen growth at a CAGR of 18.38%
from | 54613 crore in March 2016 to | 126982 crore in March 2021 and |
133353 crore in June 2021. It is the fifth largest player in terms of market
share in individual MAAUM among top 10 AMCs. Investor folios were more
than doubled from 29.3 lakh in March 2016 to 71.8 lakh in June 2021, taking
the market share to 7.13%. The growth in customer base and individual
investor MAAUM has been largely driven by development of its digital
platforms, particularly in the utilization of systematic transactions, as well as
focus on building relationships with distributors, especially through
deepening the B-30 cities presence.
The investments through systematic transaction have become a popular
form of investing in the mutual funds as it offers customers the opportunity
to invest smaller amounts over longer periods and helps mitigate the risk of
market timing. The company offers a range of systematic transaction
options and add-on features including SIPs, STPs and SWPs. As of June 30,
2021, SIPs have become a material proportion of the AUM accounting for
~41.7% of total equity-oriented mutual fund AUM and ~34% of total
individual investor mutual fund AUM. The outstanding SIPs grew from 8.6
lakhs as of March 31, 2016, to 28 lakhs as of June 30, 2021, and SIP AUM
grew from | 8523 crore to | 45692 crore over the same period. The share of
SIP AUM in total equity-oriented mutual fund AUM increased from 25.7% to
41.7% during the same period, which was higher than the industry shares
of 31.36% as of June 30, 2021. As of June 30, 2021, 86.31% of outstanding
SIPs had more than 5-year vintage, while 77.05% of outstanding SIPs had a
more than 10-year vintage depicting customer stickiness.
Exhibit 6: SIP growth over years

50000 42.7% 41.7% 45%

38.4%
41841 40%
45692
40000 32.4% 35%
30511 30%
(in | crore)

30000 25250 25%

(in %)

20%
20000
15%

10000 10%
5%
0 0%
FY19 FY20 FY21 Q1FY22

SIP AUM SIP as % of Equity AUM

Source: RHP, ICICI Direct Research

Exhibit 7: SIP count over years

29.5 29.2 29.2

29

28.5
28.0
(in lakh)

28
27.5
27.5

27

26.5
FY19 FY20 FY21 Q1FY22

Source: RHP, ICICI Direct Research

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 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

Focused on B-30 penetration to increase customer acquisition

ABSL is focused on expansion on underpenetrated B-30 cities which has
helped to grow its retail customer acquisition and retention rates. The
MAAUM from B-30 cities was | 44701 crore as of June 30, 2021. The share
of MAAUM from B-30 cities in total MAAUM as of June 30, 2021, was second
highest amongst the five largest AMCs in India (in terms of MAAUM). The
share of individual MAAUM from B-30 cities in total individual MAAUM
increased from 19.32% as of March 31, 2016, to 27.35% as of June 30, 2021.
The share of equity-oriented MAAUM from B-30 cities in total equity-
oriented MAAUM increased from 24.51% as of March 31, 2016, to 28.82%
as of June 30, 2021. As of June 30, 2021, the market share of individual
MAAUM from B-30 cities was 7.8% and the market share of MAAUM from
B-30 cities was 8.03%. A large part of industry growth is expected to come
from B-30 cities, and AMCs with an existing large presence in B-30 cities will
be well placed to attract customers in these locations due to their
established position, infrastructure and distribution capabilities.
Exhibit 8: T30 & B30 MAAUM
300000 72.0
71.9
71.8 71.8
250000 238956
227249 71.6
214357
191836 71.4
200000
(in | crore)

71.2

(in lakhs)
150000 71.0
70.9
70.8
100000 70.7
70.6
43754 44701 70.4
50000 33274 33550
70.2
0 70.0
FY19 FY20 FY21 Q1FY22

T30 MAAUM B30 MAAUM Folios

Source: RHP, ICICI Direct Research

Diversified distribution network with widespread reach

ABSL has established a geographically diversified pan-India distribution that
is not only extensive but multi-channelled, with a significant physical as well
as digital presence. As of June 30, 2021, the company had a presence in 284
locations, comprising 194 branches in India, spread over 27 states and 6
union territories; of these 143 branches were located in B-30 cities.
Emerging Market (EM) areas are untapped markets in India which have high
growth potential without material capital expenditure.
ABSL’s hub and spoke model further enables them to more effectively
leverage its extensive branch and EM representatives network while keeping
its distribution costs low. Diversification of distribution base had led to a
reduction in the concentration of AUM sourced from top 10 distributors from
49% in 2016 to 37% in 2021.
Mutual Find Distributor’s (MFDs), national distributors and banks/financial
intermediaries contribute 30.18%, 14.37% and 8.59%, respectively, of the
total QAAUM as of June 30, 2021, while direct marketing efforts contribute
to 46.86%. Investment in MFDs has led to increase in equity oriented
QAAUM from MFDs from | 12754 crore in March 2016 to | 51932 crore in
June 2021. Since 2019, the company has added over 8000 MFDs to the
distribution network. MFDs have become a significant channel for growth of
equity oriented schemes.

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 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

The company intends to continue to increase its footprint across India by

focusing on growing its presence in B-30 cities and rural markets that remain
underpenetrated and have less competition. The company believes that
entering these markets at an early stage will enable them to maximize both
consumer mindshare and market share in such areas. ABSL have an
established team dedicated towards deepening its EM presence. The team
operates on a Build, Operate & Transfer (“BOT”) model, and evaluates each
potential location meticulously in consideration of several parameters. While
it continually seeks to strengthen and expand its distribution network
through engagements with public/ co-operative banks and national
distributors, preferably with robust online presence, the company focuses
to remain investing in and expanding its MFD network.

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 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

Key risks and concerns

Increased competition may lead to decrease in market share
The mutual fund industry is rapidly evolving and is intensely competitive and
is further expected to intensify in the future. Further, low barriers to entry
has also resulted in a large number of smaller participants entering in the
market. It is further possible that there may be in the future be consolidation
in the market. Any consolidation may create stronger competitors in the
market overall, or leave it at a competitive disadvantage.
ABSL faces significant competition from companies seeking to attract
investors’ financial assets, including traditional and online brokerage firms,
other mutual fund companies and financial institutions. Competitors may
offer a wide range of financial products and services, at lower investment
management fee, with a wider distribution network. Increased competition
may result either in a decrease in AUM market share, or force to reduce its
management fees so as to preserve such market share, either of which
would decrease the revenue from operations.
Underperformance of investment portfolio could impact AUM
The investment products in respect of which asset management services is
provided may not outperform either relevant benchmarks, or similar
investment products provided by the competitors. The investments held by
the mutual fund may be illiquid or volatile which can result into loss. Such
underperformance may have adverse effect on the business, like existing
investors may withdraw funds which can reduce the AUM, or the ability to
attract funds from new investors, or negative absolute performance may
directly reduce the value of AUM.
Concentration risk of investment portfolio to persist
A large portion of ABSL’s AUM is concentrated in few schemes. As of June
30, 2021, its top five schemes accounted for ₹111017 crores, i.e. 40.3% of
the total QAAUM, whereas its top five equity-oriented schemes accounted
for ₹61333 crores, i.e. 59.73% of total equity-oriented QAAUM and its top
five debt-oriented schemes accounted for ₹89494 crores, i.e. 69.03% of
debt-oriented QAAUM. The performance of these schemes may have a
significant impact on AUM and consequently on the revenues.
Underperformance by any of these funds may cause increased redemptions
and have a disproportionate adverse impact on the liquidity, AUM & income.
Exposure to regulatory risk
As an asset management company, ABSL is regulated by SEBI through a
variety of regulations, guidelines, circulars and notifications issued from
time to time as applicable for mutual funds, PMS and AIFs. Failing to comply
with any regulations or guidelines could lead to fines, sanctions and court
proceedings. Compliance or other costs may rise due to changes in
regulations which may reduce profit. In the event the company is unable to
comply with the observations made by SEBI, it could be subject to penalties
and restrictions which may be imposed by SEBI.

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 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

Financial Summary
Exhibit 9: Profit & Loss Statement (| crore)
Particulars FY19 FY20 FY21 Q1FY22
Revenue from Operations 1406.1 1233.8 1191.0 333.2
Other Income 1.2 0.9 14.8 3.0
Total Income 1407.3 1234.8 1205.8 336.2
Expenses
Fees & Commision Expense 143.5 75.1 47.1 6.2
Finance Cost 5.7 5.4 5.6 1.3
Employee Expenses 277.5 242.0 240.7 69.0
Depreciation and amortization 32.4 36.5 37.4 9.0
Other Expenses 302.3 215.0 179.2 44.9
Total Expenses 761.5 574.0 510.0 130.4
PBT 645.8 660.7 695.9 205.9
Tax 199.0 166.3 169.6 50.9
PAT 446.8 494.4 526.3 154.9
Source: RHP, ICICI Direct Research

Exhibit 10: Balance Sheet (| crore)

Particulars FY19 FY20 FY21 Q1FY22
Assets
Cash and cash equivalents 38.5 46.9 56.8 52.3
Receivables 25.7 40.5 31.0 25.7
Loans 0.1 0.1 0.0 0.0
Investments 1138.1 1263.4 1726.3 1852.1
Non Financial Assets 267.7 208.2 151.3 143.0
Other Assets 28.5 12.9 19.2 12.7
Total 1498.5 1572.0 1984.6 2085.9

Equity & Liabilities

Equity 18.0 18.0 18.0 144.0
Reserves & Surplus 1202.6 1298.9 1686.6 1658.2
Networth 1220.6 1316.9 1704.6 1802.2
Provisions 50.3 70.5 94.5 95.5
Deferred Tax Liabilities (Net) 7.0 14.6 13.7 9.9
Other liabilities 220.5 169.9 171.7 178.2
Total 1498.5 1572.0 1984.6 2085.9
Source: RHP, ICICI Direct Research

Exhibit 11: Key Ratios

FY19 FY20 FY21 Q1FY22
No. of shares (crore) 28.80 28.80 28.80 28.88
BV (|) 42.4 45.7 59.2 62.4
EPS (|) 15.5 17.2 18.3 5.4
P/E (x)* 45.9 41.5 39.0 33.1
P/BV 16.8 15.6 12.0 11.4
RoA (%)* 29.8 31.5 26.5 29.7
RoE (%)* 36.6 37.5 30.9 34.4
Source: RHP, ICICI Direct Research

* Figures for Q1FY22 are annualised

ICICI Securities | Retail Research 8

 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

RATING RATIONALE
ICICI Direct endeavours to provide objective opinions and recommendations. ICICI Direct assigns ratings to
companies that are coming out with their initial public offerings and then categorises them as Subscribe, Subscribe
for the long term and Avoid.

Subscribe: Apply for the IPO

Avoid: Do not apply for the IPO
Subscribe only for long term: Apply for the IPO only from a long term investment perspective

Pankaj Pandey Head – Research [email protected]

ICICI Direct Research Desk,

ICICI Securities Limited,
1st Floor, Akruti Trade Centre,
Road No 7, MIDC,
Andheri (East)
Mumbai – 400 093
[email protected]

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 IPO Review | Aditya Birla Sun Life AMC ICICI Direct Research

ANALYST CERTIFICATION
I/We, Kajal Gandhi, CA, Vishal Narnolia, MBA and Sameer Sawant, MBA, Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect
our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that
above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies
mentioned in the report.

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company/companies mentioned in this report.

ICICI Securities may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report.

Neither the Research Analysts nor ICICI Securities have been engaged in market making activity for the companies mentioned in the report.

We submit that no material disciplinary action has been taken on ICICI Securities by any Regulatory Authority impacting Equity Research Analysis activities.

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ICICI Securities Limited has been appointed as one of the Book Running Lead Managers to the initial public offer of Aditya Birla Sun Life AMC Limited. This report is prepared on the basis of publicly available information
.

ICICI Securities | Retail Research 10