Aditya Birla Sun Life AMC IPO opens today, analysts bet high on the growing mutual fund industry

• Aditya Birla Sun Life AMC’s IPO is opening on September 29 and will close on October 1.
• The asset management company is looking to raise ₹2,768 crore through public listing.
• Analysts expect the mutual industry’s AUM to grow by 11-13% in the next five years at ₹57 trillion and Aditya Birla Sun Life AMC to benefit from strong industry prospects given it is among the top five players.

The initial public offering (IPO) of Aditya Birla Sun Life AMC is opening today, September 29, and will close on October 1. If you are looking to invest, here is what analysts are expecting from the company.

Analysts expect the mutual industry’s assets under management (AUM) to grow by 11-13% in the next five years to ₹57 trillion and Aditya Birla Sun Life AMC to benefit from strong industry prospects given it is among the top five players in the country.

“Going forward, the overall industry’s AUM is projected to grow between 11-13% from 2021-2026 and reach ₹57 trillion, largely driven by a pick-up in corporate earnings following stronger economic growth, higher disposable income and investable household surplus, improving technology and expanding internet footprint and better awareness of mutual funds as long-term wealth creators,” said Religare Broking in a report.

“Moreover, the fund house stands to benefit from strong industry prospects as it has a diversified product portfolio and also offers customised solutions to meet financial goals,” added the report.

The mutual fund company will be the fourth fund house to get listed on exchanges. So far, HDFC AMC, Nippon Life India AMC and UTI AMC are listed.

However, analysts believe the IPO pricing is undervalued compared to other listed peers HDFC AMC and Nippon India AMC. Ventura Securities expects a potential upside of 25% in the stock over the next 24 months while it recommends subscribing to the IPO for the long term.

Here is the list of brokerages that have recommended subscribing to the IPO:

The mutual fund company is looking to raise ₹2,768 crore through sale of 3.88 crore shares. The IPO proceeds will go to promoters since the IPO is an offer for sale by promoters. The fund house is a joint venture between Aditya Birla Capital and Canadian firm Sun Life AMC. Both the promoters will jointly sell a 13.5% stake in the company through the IPO.

A report by Nirmal Bang said, “ABSL enjoys a strong parentage, solid brand image, a decent distribution network and consistently high return on equity of over 30%. We thus recommend to “subscribe for the long term.”

Aditya Birla Sun Life AMC is the fourth largest mutual fund house in the country with ₹2.75 billion average assets under management after SBI MF, HDFC MF and ICICI Prudential MF as of June quarter.

The company manages 135 schemes comprising 35 equity, 93 debt, 2 liquid schemes, 5 exchange traded funds (ETFs), and 6 domestic Funds of Funds as of December 31, 2020.

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