Reliance Nippon IPO: Here’s All You Need To Know
Reliance Nippon looks to raise Rs 1,542 crore through an initial public offering.
Anil Ambani-promoted Reliance Nippon Life Asset Management Ltd.’s Rs 1,542-crore three-day initial public offer opens for subscription tomorrow as it looks to become India’s first asset management company to go public.
The joint venture between Reliance Capital Ltd. and Japan's Nippon Life Insurance Company Ltd. will offer around 6.12 crore equity shares at Rs 247-252 apiece. Reliance Capital will offload shares worth Rs 283 crore while Nippon Life will sell Rs 642-crore stake.
Nippon Life will make more than two times its investment in five years. The Japanese insurer had invested in its Indian joint venture in three tranches – first in 2012 and then 2014 and 2015 – at an average cost of Rs 115 per share.
Business
Reliance Nippon’s assets under management stood at Rs 3,84,062 crore as of August 31, making it the third largest in the country.
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It has a pan-India network of 171 branches and 58,000 distributors, including banks, financial institutions, national distributors and independent financial advisers. The company manages 55 open-ended and 174 close-ended schemes.
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The company has invested 29 percent of its assets in the equity market. That gives it a bulk of its revenue, largely due to higher fees.
Financial Highlights
- Net worth stood at Rs 1,680 crore for the quarter ended June and it had a cash of Rs 265 crore.
- The company's revenue clocked a compounded annual growth rate of 21 percent and net profit rose at 15 percent in five years to March.
- Revenue and net profit for the quarter ended June stood at Rs 364 crore and Rs 88 crore, respectively.
- The company’s expense ratio—operational expenses as a percentage of assets under management—has been 0.2 percent to 0.3 percent in the last five years.
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The company has also been paying dividend regularly.
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Peers And Valuations
Reliance Nippon has no listed peers. In the unlisted space, there are 41 active asset management companies, including private and public players. Reliance Nippon lags behind the top players on most parameters.
At the upper end of the price band, earnings per share, after issuing new shares, for financial year 2017 comes to Rs 6.6 and the price-earnings ratio stands at 38.3 times, according to BloombergQuint’s calculations.
The stock is being offered to the public at a discount to the valuations at which its promoter Nippon Life acquired shares.
Shareholding Pattern
The promoters will sell shares worth Rs 925 crore, bringing down their holding to 86 percent.
Brokerage Take
Brokerage reports that BloombergQuint reviewed had a ‘subscribe’ rating for the IPO.
Reliance Nippon is the largest AMC with highly diversified product offerings and a strong distribution reach. We recommend ‘Subscribe’ for long-term investment.Motilal Oswal
Based on robust growth in AUM and thereby revenue, steady financial performance and healthy return ratios, we have assigned ‘Subscribe’ recommendation to the issue.ICICIdirect Research
At the upper price band of Rs 252, the issue is valued at 8.1 its book value and 4.3 percent of AUM, which we believe is justified on account of the long-term prospects and growth opportunity for the industry as well as Reliance Nippon Life AMC given its industry-leading position. Hence, we recommend ‘Subscribe’ for the long-term.KRChoksey Research