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Reliance Nippon AMC IPO – An Asset Indeed

  • IPO Opens 25-27th Oct with Application Price range is Rs. 247-252
  • Valuations: P/E 38.2 times TTM, P/B 6.1 times (Post IPO) 
  • Mid Cap: Rs. 15,400 cr. Mkt cap and Industry – Asset Management
  • Advice: SUBSCRIBE 

JainMatrix Investments, Reliance Nippon AMC

 

  • Overview: RNAMC is one of the largest asset management companies in India, managing total AUM of Rs. 3,62,000 crores. They offer products like mutual funds, portfolio management services, alternative investment funds, pension funds; and offshore funds and advisory mandates.
  • Revenues and profit for FY17 were Rs. 1,436 cr. and Rs. 403 cr. RNAMC’s revenues, EBITDA and PAT grew at 18.2%, 18.7% and 14.9% CAGR in 5 years.
  • The Indian mutual fund industry is expected to grow at a CAGR of 20% between FY18 and FY22, due to buoyant capital markets, and a shift from physical to financial assets.
  • At a P/E of 38.2 times, the valuations of the IPO appear high. But good track record, robust financial performance, sectoral tailwinds and a good management team makes this IPO attractive.
  • Risks: Promoter related image, senior level exits and regulatory uncertainties are the key risks.
  • Opinion: Investors can SUBSCRIBE to this IPO with a 2 year perspective.

Here is a note on Reliance Nippon Asset Management Company (RNAMC) IPO.

IPO HIGHLIGHTS

  • The IPO opens: 25-27th Oct 2017 with the Price band: Rs. 247-252 per share.
  • Shares offered to public number 6.12 crore. The FV of each is Rs. 10 and market Lot is 59.
  • The IPO in total will collect Rs. 1,542 cr. while selling 10% of post IPO equity. The offer includes OFS and fresh issue of shares. The OFS proceeds would be Rs. 925 cr. (UMP) and fresh issue is Rs. 617 cr.
  • The selling shareholders are Nippon Life and Reliance Capital. Nippon Life and Reliance Capital are selling 8.85% and 4.10% of the current holding. Post IPO both promoters will hold 42.8% in RNAMC.
  • The net proceeds from fresh issue of shares will be utilized as follows:

JainMatrix Investments, Reliance Nippon AMC IPO

 Exhibit 1(a) – IPO Selling Shareholders and Exhibit 1(b) – Utilization of Net Proceeds

  • The Promoter group (Reliance Capital and Nippon Life Insurance) owns 95.5% in RNAMC which will fall to 85.7% post-IPO.
  • Reliance Capital is an NBFC that is engaged in corporate lending and investment activities. It is an Anil Ambani – Reliance group firm. Nippon Life Insurance Company underwrites and sells life insurance and is the largest Japanese life insurance company by revenue.
  • The IPO share quotas for QIB, NIB and retail are in ratio of 50:15:35.
  • The unofficial/ grey market premium for this IPO is Rs. 65-70/share. This is a positive.

INTRODUCTION

  • RNAMC is one of the largest AMC companies in India, managing total Assets Under Management (AUM) of Rs. 3,62,550 cr. as of June 2017. They are involved in managing (i) mutual funds (MFs including ETFs); (ii) managed accounts, including portfolio management services (PMS), alternative investment funds (“AIFs”) and pension funds; and (iii) offshore funds and advisory mandates.
  • RNAMC was ranked the 3rd largest AMC, in terms of MF quarterly average AUM with a market share of 11.4%, as of June 2017. For FY16, they were the 2nd most profitable AMC in India.
  • Revenues and profit for FY17 were Rs. 1,436 cr. and Rs. 403 cr. It has 971 employees out of which 563 are in sales & distribution and 179 are in operations and customer service.
  • RNAMC has managed 55 open-ended MF schemes including 16 ETFs and 174 closed ended schemes for Reliance MF as of June 2017. They have a pan-India network of 171 branches and 58,000 distributors including banks, financial institutions, national distributors and financial advisors (IFA).
  • 59% of the AUM is in MFs, 40% are managed accounts and 1% is offshore funds. In managed accounts business, they provide PMS to HNIs and institutional investors including the Employees Provident Fund Organization (EPFO) and Coal Mines Provident Fund Organization (CMPFO). A subsidiary, Reliance AIF manages 2 alternative investment funds registered with SEBI. RNAMC manages offshore funds through its subsidiaries in Singapore and Mauritius and have an office in Dubai, which caters to investors across Asia, Middle East, UK, US, and Europe. They also advise on India focused equity and fixed income funds in Japan and South Korea. See Fig 2.

JainMatrix Investments, Reliance Nippon AMC IPO

Exhibit 2 (a) – AUM by product offering and 2 (b) Managed Accounts segments

 

JainMatrix Investments, Reliance Nippon AMC

Fig 2 (c) – RNAMC AUM trend from FY13-17

  • Within the MFs 64% of the AUM is debt MFs, 30% is equity and 6% are gold & ETF focused MFs. Within the managed accounts 84% of the AUM is EPFO, 14% CMPFO and 2% PMS & AIF AUM.
  • Their monthly inflow from Systematic Investment Plan (SIP) into MFs increased to Rs. 509 cr. in June 2017 from Rs. 274 cr. in April 2015. The number of SIP accounts stood at 18.6 lakh accounts, an addition of 5.6 lakh. The average ticket size of SIPs rose to Rs. 3,915 in June 2017 from Rs. 2,822.
  • Leadership is Vijayendra Nath Kaul (Non-Exec Chairman), Sandeep Sikka CEO and Prateek Jain CFO.

You may visit www.jainmatrix.com to see the rest of this report.

DISCLAIMER

This document has been prepared by JainMatrix Investments Bangalore (JM), and is meant for use by the recipient only as information and is not for circulation. This document is not to be reported or copied or made available to others without prior permission of JM. It should not be considered or taken as an offer to sell or a solicitation to buy or sell any security. The information contained in this report has been obtained from sources that are considered to be reliable. However, JM has not independently verified the accuracy or completeness of the same. JM has no stake ownership or known financial interests in RNAMC or any group company. Punit Jain may apply for this IPO in the Retail category. Neither JM nor any of its affiliates, its directors or its employees accepts any responsibility of whatsoever nature for the information, statements and opinion given, made available or expressed herein or for any omission therein. Recipients of this report should be aware that past performance is not necessarily a guide to future performance and value of investments can go down as well. The suitability or otherwise of any investments will depend upon the recipient’s particular circumstances and, in case of doubt, advice should be sought from an Investment Advisor. Punit Jain is a registered Research Analyst under SEBI (Research Analysts) Regulations, 2014. JM has been publishing equity research reports since Nov 2012. Any questions should be directed to the director of JainMatrix Investments at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

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