in its report said ABSL AMC, being the fourth largest mutual fund manager in the country, is well poised to capitalise on opportunities in the fast-growing and under-penetrated MF industry in India.
“Company is strengthening its retail franchise to arrest market-share loss in the equity segment and is focussing on alternate assets to create a complementary revenue stream. Post its recent correction, the stock trades attractively and has potential to re-rate,” said Devesh Agarwal of IIFL Securities.
IIFL Securities has set a 12-month price target of Rs 720 on the counter, which puts it just above the IPO issue price. The stock closed at Rs 537 on NSE on Tuesday, meaning a potential upside of 34 per cent from the current levels.
As of November 2021, the company manages mutual fund assets worth Rs 3 lakh crore with a total market share of 7.8 per cent. It has an Equity-Debt AUM mix of 40-60 against 55-45 for the industry. The AMC is dominant on the debt side with 11.3 per cent market share.
In response to declining market share on the equity side, analysts noted that the money manager is strengthening retail franchises and aspires to be a large player in alternate assets. The company sees huge potential in them with the target of growing 5 times in five years.
Despite these plans, since its listing, ABSL AMC stock has corrected by 26 per cent, given increasing competitive intensity and concerns about passive investing.
“The stock now trades at 18x FY24 EPS, at a discount to peers, on our base case earnings growth forecast of 17 per cent per annum over FY21-24. We believe that given its long-term growth potential and free cash flow generating revenue model, the sector should trade at better valuations. We value ABSLACM at 25x FY24 EPS,” said Agarwal.
He added though that near-term stock performance may be impacted by market-share trends.
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