Aditya Birla Sunlife AMC (ABSL AMC)- An Underrated AMC


Financialisation of Savings in India

Introduction and History:

Aditya Birla Sun Life (ABSL) AMC, a JV between Aditya Birla Capital Ltd and Sun Life AMC, is the 4th largest AMC on the basis of Quarterly Average AUM (QAAUM) as of 30th June 2021. It was formed in 1994 and is one of the oldest players in the Mutual Funds (MF) Industry.

One point that I would like everyone to note here is that though it is the 4th largest player, it is the largest non-bank player, and they even surpass the MF players which are backed by large banks such as Kotak and Axis Bank. This truly speaks volumes about their execution as banks have an inherent advantage when it comes to the distribution of MF products.

In terms of mutual fund business, ABSL manages 118 schemes with QAAUM of ~| 2.7 lakh crore as of June 2021. Apart from mutual fund business, ABSL also offers PMS, offshore, and real estate offerings which comprise AUM- 11515 crores. In FY21, revenue stood at | 1191 crore, i.e ~39 bps of AAUM. PAT came at 526 crores (~19 bps of AAUM), with RoE at 33.7%.

Branches and Distributors:

It has established a strong geographical presence comprising 194 branches (covering 284 locations) spread over 27 states and 6 union territories. ABSL has an extensive & multi-channel distribution network with over 66000 mutual fund distributors, over 240 national distributors, and over 100 banks/financial intermediaries.

In my opinion, one very important point to note here is to find out the number of branches that its parent- AB Capital has. It has a number of other businesses like life and general insurance, Brokerage, and financing, which also requires the setting up of branches. The management of AB Capital in various interviews has said that they have become very aggressive in cross-selling each of the financial services to its customers. So, if any of the parents’ businesses set up a branch, this increases the distribution and marketing/brand reach of ABSL AMC. Thus, they could compete with the distribution reach of even larger bank-backed MFs.

Focus on B-30 Cities:

ABSL is focused on expansion in B-30 cities which has helped to grow retail customer acquisition and retention rates. As of June 30, 2021, MAAUM from B-30 cities was 44701 crore; the market share of individual MAAUM from B-30 cities at 7.8%. A large part of industry growth is expected to come from B- 30 cities, and ABSL with an existing large presence & distribution capabilities in B-30 cities, remains well placed to attract customers.

Now, I am sure most of us have heard interviews of many AMCs saying that they are focusing on B-30 cities, but I have come across a few of the AMCs who are not really walking the talk. So, to verify this I will add a slide from the latest quarterly earnings presentation of the AMC.

As you can see in the image, more than 80% of their branch locations are in B-30 cities, even though not even 20% of their AUM comes from them. I also did a bit of scuttlebutt to verify this with a few local MF distributors in my town. They told me that one of the most aggressive AMCs is ABSL.

SIP Growth:

SIP growth maintains consistency of AUM and thus earnings. Hence it is important to know this about every AMC. ABSL’s individual investor MAAUM has seen growth at a CAGR of 18.38% in FY16-21. 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 portion of AUM accounting for ~41.7% of total equity-oriented mutual fund AUM and ~34% of total individual investor mutual fund AUM.

Screenshot 2021-12-14 at 5.49.09 PM

As you can see in the above image their SIP as a % of their AUM has been continuously growing.


I have added a slide from the ICICI Direct IPO note for this purpose, as the concerns of nearly all AMCs are quite similar.


On an FY21 Earnings basis, the stock is currently trading at a PE of 31 and on the basis of H1FY22 annualized earnings, it is trading at 26 PE.

Now, I would just like to compare this company with its larger non-bank peer- Nippon AMC. I am not Comparing it with HDFC AMC as it is a bank-backed player and thus deserves better valuations.

Now, ABSL AMC is trading at FY21 PE of 31 with a market can of around 16,700 crores and Nippon AMC at an FY21 PE of 29 and a market cap of 22,400 crores.

Now, I believe that ABSL AMC should at least be trading at a market cap higher than Nippo. And I will tell you why:

  1. If you look at the earnings comparison between the two, you will see that on a 3-year basis, the PAT of ABSL has grown at a 15% CAGR while NIppon’s has grown at 11% CAGR.

  2. It is very important to note the period of earnings between 2018 and 2020 when the stock market was going through a severe downturn, especially in the mid and small caps. Here, you will see that Nippon’s PAT fell drastically over the 2 years. On the other hand, ABSL’s PAT grew as consistently as it did. In fact, in FY20 ABSL’s PAT, was far higher than that of Nippon’s. The reason for this is that Nippon has Equity heavy AUM whereas ABSL has about 60% Fixed Income AUM. Fixed income is far more consistent and thus the book of ABSL is far more stable. And stability deserves a premium. Nippon will possibly go through similar situations when the stock market decelerates.

  3. Lastly, I am not sure whether this is only true for the region that I live in, but Aditya Birla has a much better and recognizable brand name than Nippon. Especially, after Reliance’s brand was removed from it. To the ordinary citizen, the brand is very important when it comes to their savings. That is why people have FDs in SBI and HDFC rather than Equitas and RBL, even though the latter gives much better returns.

Future of Industry:

Screenshot 2021-12-14 at 6.50.36 PM
Screenshot 2021-12-14 at 6.50.45 PM

Financials and other important information:

Screenshot 2021-12-14 at 7.11.03 PM
Screenshot 2021-12-14 at 7.11.10 PM

Disclosure: I am a relatively new investor and thus please do your own research when it comes to my opinions on some of the information in regard to the company. I have a 4% allocation to it in my portfolio and thus my views may be biased.



ICICI_Securitie_Adity_Birla_Sun_Life_AMC_Initiating_Coverage (1).pdf (751.6 KB)

ICICI Securities initiates coverage with an upside of 35%.

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Yes Securities initiates coverage with a target price of 783, i.e. an upside of 44%.

428ece52-99a2-437e-a57e-cba69935786a.pdf (2.1 MB)

Investor Presentation & results for Q3

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Interesting Read

HDFC_Securities_Institutional_Equities__Aditya_Birla_Sunlife_AMC__Initiating_Coverage (1).pdf (837.3 KB)

Hdfc Securities initiates coverage on ABSL AMC with an upside of 35%.

Aditya Birla AMC has been underperforming (in terms of stock price) since listing. Price has gone down from 700 to 500 since listing. During that time, company has come out with very good numbers, with major improvement in margins. The FY22Q3 margins of 72% may not be sustainable as it contains a write back provision on employee costs which will now be incurred through ESOPs. However, 60-65% operating margins should be doable (in-line with Nippon AMC)

Its also rare to see company employees subscribing to the IPO, then buying shares regularly through open market post IPO.

This is a very high quality business throwing out a lot of freecash flow and being reasonably valued. Its good seeing employees regulary buying shares through secondary market (rather than through ESOPs).

Disclosure: Invested (position size here)


ABSL AMC is the only non-bank backed AMC in the Top 5 Mutual Fund houses in India
It has to be on top of the game when it comes to sales growth as they don’t have the privilege of taking low hanging fruits.

Snapshot of 5 year performance

Main areas of focus

  • Maintaining strong relationships with its MFDs
    They mentioned during the concall that the sharing proposition with distributor remains at 60% which I think must be higher compared to bank backed AMCs. The incentive bias of the distributor reflected in its gain of market share in equity from 25.6% in Q4 FY17 to 40.9% in Q4 FY22

  • Increase revenue share from B-30 market even though it is less profitable in the short term
    Based on my scuttlebutt, UTI and ABSL are having good distributor presence in B-30. T-30 is 75% penetrated and there is more ground for penetration in B-30. There is also a support from policy front to charge extra expense ratio in B-30 compared to T-30 to encourage more penetration. For Q4 FY22, B-30 share is 15.9%. 75% of AUM in B-30 is from Equity side which translates to more sales revenue.

Source - Ventura IPO Note

  • increase SIP AUM which is sticky and good for long-term sustainable AUM
    B-30 comes with low ticket inflows however, there will be more stability of inflows. The aspiration is to make 1000 Cr monthly SIP runrate. For Q4 FY22, it is at 895 Cr and with recent bull run, the SIPs will continue as shown in below screen-shot. The long-tenure SIP book is more consistent than HDFC AMC long-tenure SIP book


  • Tap the NRI investments & Ramp up AIF/PMS
    ABSL is the front runner in opening AIF fund in GIFT City among MF houses and they also have subsidiaries in offshore centers like Singapore, Dubai, Mauritius etc to attract NRI money. In Q4 FY22 concall, they mentioned about new international CIO who is ex-ASK PMS portfolio manager. Ideally, PMS is B2B and so may not be much profitable compared to regular MF schemes but AIF is something which can result in more revenue. As there is a push to make GIFT City attractive(Under PM’s radar), there can be encouragement in the form of less tax which can result in good inflows from NRIs.

P&L Statement Analysis

  • Sales growth is not consistent
    This is due to SEBI’s policy to move MF scheme specific expenses to scheme itself in 2018/19 and so, the sales revenue we see now are after scheme-specific expenses cut from respective MF schemes

  • PAT increased YoY even though TER has been cut by SEBI
    The primary reason is the reduction in tax rate from ~34% to ~25%. ABSL has effectively passed on the cut in the TER rate to distributors like other MF houses. There is a growth in equity segment in overall AUM from 25.9% to 40.9% in last 5 years.

Source - Ventura IPO Note

  • Other Income of 116 Cr in FY22
    ABSL AMC has investments worth 2121 Cr and my understanding is, the majority of this other income is from the returns generated out of the investments

  • Reduction in expenses
    The digital push due to Covid has helped in reduction of expenses. The management has also informed on their various tie-ups with fintechs to reduce the expenses further as can be seen in their digital onboarding


Current Marketcap is ~12.2k Cr
Investments ~2.2k Cr
Total Outstanding Shares 28.8 Cr
Overall AUM ~3,00,000 Cr
Yield 0.41% of AUM ~1230 Cr per year
TTM PAT 673 Cr
TTM EPS 23.4 Rs
CMP 425 Rs
Removing the investment part(~73 per share) from CMP gives 352 Rs per share
P/E = 352/23.4 = ~15
At current CMP and 50% dividend payout, the dividend yield comes to 3%

I agree we are in peak earnings due to bull run but the underlying SIP business model ensures that AUM will keep on increasing. The recent bull run just gave more reasoning for distributors/retail to invest in stock market. Even as the expense ratio comes down, AMCs come up with new products/schemes like smart beta ETFs etc to increase yields compared to regular ETFs and it is a given that industry AUM will increase multi-fold in India going forward.

ABSL AMC survived multiple cycles without any backing of bank. They have more presence in B-30 market other than SBI which needs more hand holding. Like HDFC AMC, the funds of ABSL AMC are also not great with returns but then, the strength of a resilient business lies in its handling of operations during their downturn. The insider buying from market purchase also is a positive sign which I don’t see in other listed AMCs like HDFC, UTI or Nippon. This is a high quality business with almost no need of capital infusion and free cashflow generating. In the Q4 FY22 HDFC AMC concall, Navneet Munot mentioned that by 1970’s MF industry in US is already 5 decade old but the AUM has moved by 1000 times from then. The growth in MF AUM will be huge and there will be multiple winners in this industry. Like Ramdev Agarwal says, it is not just about the earnings but also the quality of earnings that matter. I believe the quality of earnings in AMCs are top notch compared to other cyclical industries.

Discl - Invested 4% of PF at 413


Promoter holding in ABSL AMC is 86%. As SEBI mandates promoter holding of max 75%, whats the timeline for reduction of promoter holding and what is the expected impact on stock price?

Disclosure - invested so views are biased

If allowed above will cause re-rating of all MUTUAL FUND AMC’s

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They might offload to a PE since ABSL AMC’s CEO himself is head of the working group formed by SEBI to think on the proposal to allow PE’s to own AMC’s

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It will cause a derating due to higher competitive intensity from new AMCs.
Classic reduction in entry barriers.