New Delhi: Aditya Birla Sun Life AMC has received capital markets regulator Sebi‘s approval to raise funds through an initial share sale. The initial public offer (IPO) is entirely an offer for sale, wherein two promoters — Aditya Birla Capital and Sun Life (India) AMC Investments — will divest their stake in the asset management firm, according to the draft red herring prospectus (DRHP).
The IPO of up to 3.88 crore equity shares comprises an offer for sale of up to 28.51 lakh equity shares by Aditya Birla Capital and up to 3.6 crore equity shares by Sun Life AMC.
The asset management company, which had filed preliminary IPO papers with Sebi in April, obtained the final “observation” letter from the regulator on August 5, an update with the markets watchdog showed on Monday.
In market parlance, observation of Sebi is a kind of its go-ahead to float the public issue.
Based on the average industry price earning ratio, the IPO is expected to fetch Rs 1,500-2,000 crore, merchant banking sources said.
The proposed sale of equity shares by Aditya Birla Capital and Sun Life India in the IPO will together constitute up to 13.50 per cent of the paid-up share capital of Aditya Birla Sun Life AMC.
Aditya Birla Sun Life AMC Ltd, the investment manager of Aditya Birla Sun Life Mutual Fund, is a joint venture between Aditya Birla Group and Sun Life Financial Inc of Canada.
Asset management firms like Nippon Life India Asset Management, HDFC AMC and UTI AMC are already listed on the stock exchanges.
Aditya Birla Sunlife MF, the fourth largest fund house, had average assets under management of Rs 2.7 lakh crore as of March quarter.
Kotak Mahindra Capital Company, BofA Securities, Citigroup Global Markets India, Axis Capital, HDFC Bank, ICICI Securities, IIFL Securities, JM Financial, Motilal Oswal Investment Advisors, SBI Capital Markets and YES Securities (India) Limited are the merchant bankers to the issue.
Earlier in June, Sebi had kept the proposed initial share-sale of Aditya Birla Sun Life AMC in “abeyance”.
However, the regulator had not disclosed the reason for the same.
Amandeep Chopra, group president and head of fixed income, UTI AMC,
The rate cycle bottomed out last year but without the central bank changing its accommodative stance. This is the new normal. Amandeep Chopra, group president and head of fixed income, UTI AMC, in an interview with FE’s Urvashi Valecha and Malini Bhupta, explains why the higher-than-expected fiscal deficit has created concerns among market participants. Excerpts:
The government borrowing programme for the next fiscal at Rs 12 lakh crore is huge. Will the markets be able to absorb this?
The Budget has targeted growth with a strong fiscal stimulus. The fiscal deficit for FY21-22 (BE — 6.8%) is much higher than the market expectation of around 5.5%, which has created concerns among market participants. There doesn’t seem to be that level of demand among local investors. Presently, it’s unlikely that FPIs will create additional demand in FY22. This has already led to the yield curve shifting up. The market has been able to absorb gross borrowings of around `11.6 trillion so far in FY20-21 only with the help of RBI. Hence, the markets are relying on the central bank to support the borrowing calendar next year as well.
RBI’s decision to withdraw liquidity saw the yields spike. What is the yield curve suggesting? Will a calibrated withdrawal of liquidity work without a sharp reaction from the market?
The RBI has given a calibrated schedule to withdraw liquidity, which will align the short-term rates with the operative rate (reverse repo). The excess liquidity was leading to the 3-month rates trading at levels well below the reverse repo and creating an aberration in the short-term yield curve.
When do you see the rate cycle turn? Economists are suggesting that withdrawal of liquidity is a sign of rate cycle turning. Your view.
The global economic outlook has improved significantly over 2020 with most of the lead indicators rising. The benefits of a fast roll-out of vaccination have further improved this outlook and market sentiments. The combination of aggressive fiscal stimulus and central bank easing could lead to some inflationary fears as well. This has led to a generalised rise in global bond yields anticipating withdrawal of accommodation by the Fed and other central banks.
For India, we have been saying for some time now that do not expect further easing by the RBI and the rate cycle seems to have bottomed out. We have a few quarters before we see RBI starting to raise policy rates as normalcy returns to pre-pandemic levels across sectors. Given the current circumstances, how can bond investors play the debt markets?
I would not recommend the investors to play the markets during these evolving times. We recommend staying true to your asset-allocation for investing for long-term goals. The debt fund portfolios could be shuffled towards the shorter-duration funds if the investment horizon is less than three years.
From January 1, Sebi mandate on categorising the risks of MFs came into the picture. Has that had an impact on the flows into debt MFs, have retail inflows into debt funds become erratic?
Sebi reviewed the guidelines for product labels in MFs based on the recommendation of the Mutual Fund Advisory Committee (MFAC) and modified the ‘Risk-o-meter’ to depict six levels of risk.
With its implementation, each scheme was assigned a risk level and going forward the majority of the schemes are expected to settle down within one particular risk level, providing the investors with a relative framework on risk across schemes and categories.
Debt funds in January have seen outflows worth Rs 33,408.76 crore. Is this expected to continue?
The outflows in debt funds for January can primarily be attributed to outflows in the liquid fund categories to the tune of `45,315 crore. As a whole, debt funds have seen strong inflows to the tune of Rs 2,81,400 crore this financial year and I expect the trend to continue.
Financial Express is now on Telegram.