Aditya Birla Sun Life AMC, India’s fourth largest asset management company (AMC), is considering launching an initial public offering (IPO), said its parent firm on Wednesday, joining a slew a fund houses that listed recently.
“The board of directors of Aditya Birla Capital at its meeting held on March 17, 2021, have provided in principle approval to explore an initial public offering of Aditya Birla Sun Life AMC, a material subsidiary of the company subject to market conditions, receipt of applicable approvals and other considerations,” said Aditya Birla Capital in a stock exchange notification.
Aditya Birla Capital holds 51 per cent in the AMC and the remaining 49 per cent is with Sun Life, a Canadian financial services firm.
HDFC AMC, Nippon AMC and UTI AMC had IPOs: shares of the three listed AMCs currently trade above their IPO price.
SBI AMC, India’s largest asset manager, is said to be planning an IPO. The fund house is a joint venture between State Bank of India (SBI) and France’s Amundi Asset Management.
“The fact is that Aditya Birla Sun Life AMC in absence of a major distribution partner it has been able to become quite a sizable entity. They have grown the business with sincerity and they are not flamboyant. These are some of the advantages of the fund house. The IPO will unlock huge value for the fund house,” said Dhirendra Kumar, CEO at Value Research.
A diversified channel mix and continued investment in expanding the distribution network has led to steady gains in market share over FY 2014-18 (equity-oriented market share of 9.2 per cent, up 320 bps during the period), said Kotak Institutional Equities recently in a note.
Aditya Birla Sun Life AMC delivered annualised profit growth of 26 per cent over the past decade underpinned by 15 per cent annualised growth in assets under management (AUM). The fund house had posted net profit of Rs 147 crore for the quarter ended December. It’s average AUM stood at Rs 2.55 trillion for the December quarter.
Typically, leading fund houses have sound fundamentals and yield high return on equity (RoE). Over the long term, they benefit from operating leverage and high profit margin. However, over the past few years regulatory tightening by market regulator Sebi and focus on lowering costs have weighed on the performance of some players.