Reliance Nippon Life Asset Management IPO review

Reliance Nippon Life Asset Management Ltd is the assets management company in India. They are going to introduce their initial public offer which will hit the primary market on 25^th October, 2017 and closes on 27^th October, 2017. The company aims to raise around Rs.1, 542.24 crore by offering shares at Rs 247 – Rs 252 Per Equity Share.

About Company

Reliance Nippon Life Asset Management Ltd was incorporated on February 24, 1995 at Ahmedabad. They are one of the asset management companies in India and are involved in managing

• Mutual funds (including ETFs)
• Managed accounts, including portfolio management services, alternative investment funds (“AIFs”) and pension funds
• Offshore funds and advisory mandates.

They managed 55 open ended mutual fund schemes including 16 ETFs and 174 closed ended schemes for Reliance Mutual Fund. They have a pan-India network of 171 branches and approximately 58,000 distributors including banks, financial institutions, national distributors and independent financial advisors (“IFAs”).

They provide portfolio management services to individuals and institutional investors including the Employees Provident Fund Organisation (“EPFO”) and Coal Mines Provident Fund Organization (“CMPFO”).

Their subsidiary, Reliance AIF Management Company Limited (“Reliance AIF”) manages two alternative investment funds, which are privately pooled investment vehicles registered with SEBI. Reliance Capital Pension Fund Limited, one of their Group Companies, received a certificate of commencement of business as a pension fund manager from the Pension Fund Regulatory and Development Authority (“PFRDA”) in 2009 and manages pension assets under the National Pension System (“NPS”). They manage offshore funds through their subsidiaries in Singapore and Mauritius and have a representative office in Dubai, which enables them to cater to investors across Asia, Middle East, UK, US, and Europe.

They are basically promoted by Reliance Capital Limited (“Reliance Capital”) who are 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, 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. Mr. Anil D. Ambani led the Reliance Group.

Their co-promoter, Nippon Life Insurance Company (“Nippon Life”) is one of the leading private life insurers in Japan. Nippon Life basically provides a wide range of financial products, including individual and group life and annuity policies.

Company Strategies

1. Expand Investor Base and Focus on Retail Customers

• Open new branches
• Grow distributor network
• Increase our investor base
• Advertising and marketing initiatives

2. Focus on Developing their AIF Business
3. Inorganic Growth through Strategic Acquisitions
4. Leveraging Technology to Improve Investor Experience
5. Continue to Focus on Robust Investment Process and Product Innovation

Qualitative Factors

Some of the qualitative factors and their strengths which form the basis for the Offer Price are:

1. Leading asset Management Company with strong credentials to drive growth.
2. Multi channel distribution network.
3. Comprehensive suite of products with distinguished investment track record.
4. Strong focus on processes.
5. Focus on customer centricity and innovation.
6. Experienced management team.

Objects of the Issue:

The objects for which Company intends to use the Net Proceeds are as follows:

1. Setting up new branches and relocating certain existing branches.
2. Upgrading the IT system.
3. Advertising, marketing and brand building activities.
4. Lending to their Subsidiary (Reliance AIF) for investment as continuing interest in the new AIF schemes managed by Reliance AIF.
5. Investing towards their continuing interest in new mutual fund schemes managed by them.
6. Funding inorganic growth and other strategic initiatives.
7. Meeting expenses towards general corporate purposes.

Financials

Based on the financial highlights, we can see that they have grown from 589 Cr in 2013 to 1296 Cr in 2017, growing at a CAGR of  21.79%. The PAT has also increased in the same period from 198 Cr to 405, growing at an impressive CAGR of almost 19.5%.

They are the first AMC to come to the market, so there is no other competitors we can compare it to. There EPS is around 6.85 giving them a P/E ratio of around 36.

Disclaimer: We are not SEBI registered advisor and this article is not an investment advice. We are not authorized to give investment advice nor do we provide it on this website. In case you are interested in investing, we would advise you to contact your advisor for the same. We cannot be held liable for any loss arising due to investment made as per this article.