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Reliance Nippon Life IPO review (Apply)

Review By Dilip Davda on Oct 13, 2017

Reliance Nippon Life Asset Management Ltd. (RNL) (erstwhile known as Reliance Capital Asset Management Ltd.) is one of the largest asset management companies in India, managing total AUM of Rs. 3,625.50 billion as of June 30, 2017. RNL is involved in managing (i) mutual funds (including ETFs); (ii) managed accounts, including portfolio management services, alternative investment funds (“AIFs”) and pension funds; and (iii) offshore funds and advisory mandates. It is ranked the third largest asset management company, in terms of mutual fund quarterly average AUM (“QAAUM”) with a market share of 11.4%, as of June 30, 2017, according to ICRA. RNL started mutual fund operations in 1995 as the asset manager for Reliance Mutual Fund, managed QAAUM of Rs. 2,229.64 billion and 7.01 million investor folios, as of June 30, 2017. It managed 55 open-ended mutual fund schemes including 16 ETFs and 174 closed ended schemes for Reliance Mutual Fund as of June 30, 2017. RNL has a pan-India network of 171 branches and approximately 58,000 distributors including banks, financial institutions, national distributors and independent financial advisors (“IFAs”), as of June 30, 2017.

As part of managed accounts business, RNL provides portfolio management services to high net worth individuals and institutional investors including the Employees’ Provident Fund Organisation (“EPFO”) and Coal Mines Provident Fund Organisation (“CMPFO”). It’s Subsidiary, Reliance AIF Management Company Limited (“Reliance AIF”) manages two alternative investment funds, which are privately pooled investment vehicles registered with SEBI. Further, Reliance Capital Pension Fund Limited, one of Group Companies, received a certificate of commencement of business as a pension fund manager from the Pension Fund Regulatory andDevelopment Authority (“PFRDA”) in 2009 and manages pension assets under the National Pension System (“NPS”). As of June 30, 2017, it managed total AUM of Rs. 1,503.93 billion as part of managed accounts business. Company also manages offshore funds through subsidiaries in Singapore and Mauritius and has a representative office in Dubai, which enables it to cater to investors across Asia, Middle East, UK, US, and Europe. As of June 30, 2017, it managed total AUM of Rs. 22.07 billion as part of offshore fund management portfolio. RNL also acts as the advisor for India focused equity and fixed income funds in Japan and South Korea. Further, as of June 30, 2017, it managed Rs. 52.77 billion of international advisory mandates.

RNL is promoted by Reliance Capital Limited, an RBI registered non-banking finance company with business interests including in asset management and mutual funds, life, health and general insurance, commercial and home finance, stock broking, wealth management services and distribution of financial products, asset reconstruction and proprietary investments. Reliance Capital Limited is a part of Reliance Group, which has business interests in financial services, telecommunications, power, energy, infrastructure, and defense. The Reliance Group is led by Mr. Anil D. Ambani, one of India’s prominent business leaders. Its co-promoter, Nippon Life Insurance Company is one of the leading private life insurers in Japan with assets of approximately US$ 577.00 billion, as of March 31, 2017. Nippon Life offers a wide range of financial products, including individual and group life and annuity policies.

To part finance relocating of existing branches, new branches, IT system up-gradation, brand building activities, lending to subsidiaries, investing in new mutual fund schemes and other corpus fund needs, RNL is coming out with a maiden IPO of 61200000 equity share of Rs. 10 each via book building route with a price band of Rs. 247 to Rs. 252 per share to mobilize Rs. 1511.64 crore to Rs. 1542.24 crore (based on lower and upper price bands). Issue consists of fresh equity issue of 24480000 shares and offer for sale of 36720000 shares. Issue constitutes 10% of the paid up equity capital of the company post issue. Issue opens for subscription on 25.10.17 and will close on 27.10.17. Minimum application is to be made for 59 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. BRLMs to this issue are JM Financial Institutional Securities Ltd., CLSA India Pvt. Ltd., Nomura Financial Advisory and Securities (India) Pvt. Ltd., Axis Capital Ltd., Edelweiss Financial Services Ltd., IIFL Holdings Ltd., SBI Capital Markets Ltd. and Yes Securities (India) Ltd. Karvy Computershare Pvt. Ltd. is the registrar to the issue. Having raised initial equity at par from March 1995 to September 2007, it raised further equity in the price range of Rs. 2000 to Rs. 9823.53 per share between December 2007 and March 2011. It has also issued 760000 bonus shares in May 2012 and 576000000 bonus shares in August 2017. Post issue RNL’s current paid up equity capital of Rs. 587.52 crore will stand enhanced to Rs. 612.00 crore. Reliance and Nippon each will continue to hold around 42.5% stake in post issue equity.

On performance front, RNL has (on a consolidated basis) posted revenues and net profits of Rs. 778.77 cr. / Rs. 270.68 cr. (FY14), Rs.955.12 cr. / Rs. 354.49 cr. (FY15), Rs. 1313.82 cr. / Rs. 396.44 cr. (FY16) and Rs. 1435.89 cr. / Rs. 402.76 cr. For Q1 of current fiscal it has earned net profit of Rs. 87.79 crore on total revenue of Rs. 394.80 crore. From fiscal 2013 to 2017, RNL’s total revenues and profit after tax increased by a compound annual growth rate of 18.2% and 15.0%, respectively. For last three fiscals, it has reported an average EPS of Rs. 6.72 and RoNW of 22% on an equity capital of Rs. 11.52 crore. If we annualize latest earnings and attribute on fully diluted equity post issue, then asking price is at a P/E of around 43.9. Thus issue is fully priced. It has no peers to compare with and hence is a first mover in the segment to get listed.

As per the information shared by the management, it is managing and advising on assets over Rs. 380000 crore as on 31.08.17. First Indian AMC to go public. Currently it is getting around Rs. 510 crore per month under SIP from around 18.6 lakh account holders. RNL is second largest ETF player as of June 30, 2017 with 25.4 % market share.

On BRLMs front, eight merchant bankers associated with the offer have collectively handled 48 public offers in the past three years, out of which 11 offers closed below the offer price on listing date.

Conclusion: Investment in fully priced issue may be considered for medium to long term as it is a first mover and likely to create fancy post listing.


Conclusion / Investment Strategy

Investment in fully priced issue may be considered for medium to long term as it is a first mover and likely to create fancy post listing.

Reviewer recommends Subscribing to the issue.

Review By Dilip Davda on Oct 13, 2017

Review Author

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor before making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at its own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

(SEBI registered Research Analyst-Mumbai).


About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

Email: dilip_davda@rediffmail.com

Reliance Nippon Life IPO FAQs

  1. 1. Why Reliance Nippon Life IPO?

    The initial public offer (IPO) of Reliance Nippon Life Asset Management Ltd offers an early investment opportunity in Reliance Nippon Life Asset Management Ltd. A stock market investor can buy Reliance Nippon Life IPO shares by applying in IPO before Reliance Nippon Life Asset Management Ltd shares get listed at the stock exchanges. An investor could invest in Reliance Nippon Life IPO for short term listing gain or a long term.

  2. 2. How is Reliance Nippon Life IPO?

    Read the Reliance Nippon Life IPO recommendations by the leading analyst and leading stock brokers.

  3. 3. Reliance Nippon Life IPO what should investors do?

    Reliance Nippon Life IPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the Reliance Nippon Life IPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is Reliance Nippon Life IPO good?

    Our recommendation for Reliance Nippon Life IPO is to subscribe.

  5. 5. Is Reliance Nippon Life IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe to the Reliance Nippon Life IPO.

  6. 6. When will Reliance Nippon Life IPO allotment status?

    The Reliance Nippon Life IPO allotment status will be available on or around Nov 1, 2017. The allotted shares will be credited in demat account by Nov 3, 2017. Visit Reliance Nippon Life IPO allotment status to check.

  7. 7. When will Reliance Nippon Life IPO list?

    The Reliance Nippon Life IPO will list on Monday, November 6, 2017, at BSE, NSE.

9 Comments

9. Impankaj  Oct 19, 2017 18:04
Reliance Nippon asset ipo. Do not invest as Anil Ambani has poor track record as evident from high debt and low market share of his companies.
9.1. Riaz Khatri  Oct 26, 2017 00:42
Yes this is Anil Ambani group of company. Investors have burnt their fingers in Reliance Power IPO in 2008.

He has, and also had some diffrences with his elder sibbling.

Who had retaliated by breaking prices of his script Rel Power by selling shares from his Mauritius based fund.

Same thing may definately happen this time also.

Hence please be cautious on listing.
8. shomit  Oct 25, 2017 17:56
Involvement of Japanese is really a good thing, they are very perfect in their work. So i am little positive in this IPO not very much. listing price will depend on RII subscription. If Retail investors are not interested then nothing will happen.

I worked with Japanese.
7. MDK  Oct 23, 2017 22:02
Though RNAM is aggressively priced at P/E of 43. Investors should consider applying for listing gain as well as long term investment. It will become first AMC to get listed on the exchange, so RNAM may give 20% return on listing.

Disclaimer: I am not SEBI registered financial adviser. I will apply to RNAM
6. MDK  Oct 23, 2017 21:57
Reliance Nippon Life Asset Management (RNAM) is subsidiary of Reliance Capital Limited. RNAM is one of the only few company of ADAG which enjoys goodwill as well as leadership in the market.

5. AGARWAL RAJESH  Oct 21, 2017 18:21
Dilip Sir,
Pl ignore messages of some people below who unnecessarily try to find out something out of anything.
Continue posting your valuable analysis.
I have always been benefitted from your views.
Thanks.