Reliance Nippon Life Asset Management IPO: Brokerage Views

Reliance Nippon Life AMC IPO
This post on Reliance Nippon Life Asset Management IPO tries to bring out consolidated brokerage views opinions, IPO Review / Analysis, Note/ reports and recommendation of brokerages , Analyst, Business New papers, Management views, information on Anchor investors, Subscription etc on Reliance Nippon Life Asset Management IPO and shall be updated continuously till the closure of the issue. The information collated from various sources and reports in public domain can help investors to decide whether they should subscribe to Reliance Nippon Life Asset Management IPO or not.

Related Posts: Reliance Nippon Life Asset Management IPO Review : Group past record vs Strong Tailwinds
Reliance Nippon Life Asset Management IPO: Grey Market Premium etc.

27/10/17 Grey Market Premium Rs. ~65-67,  Kostak (Application rate)-  Rs. ~ 725
26/10/17 Grey Market Premium Rs. ~72-74,  Kostak (Application rate)-  Rs. 725-750
25/10/17 Grey Market Premium Rs. ~75,  Kostak (Application rate)-  Rs. 725-750

24/10/17 Grey Market Premium Rs. ~65,  Kostak (Application rate)-  Rs. ~650

Subscription: Reliance Nippon Life AMC IPO  ( x times)
  QIB NII Retail Total
Day 3  118.4  209.4  5.65  81.54
Day 2   9.8  16.16  2.38  7.45
Day 1 6.13 11.38 0.9 4.64
Complete Anchor List

Anchor Investors (AIs) portion in the Public Issue of Reliance Nippon Life Asset Management Limited, 1,83,60,000 equity shares have been subscribed today by 23 AI’s at Rs. 252/- per equity share.. The Anchor Investors include names like Abu Dhabi Innestment Authority–Behave, Kuwait Investment Authority Fund 225, Morgan Stanley Investment Funds Indian Equity Fund, Filinvestments(Maurjtius) Ltd, Threadneedle Investment Funds Icvc Asia Fund, Threadneedle India Fund Limited , Eastspring Investments India Consumer Equity Open Limited, Hdfc Trustee Company Limited – Iidfc Prudence Fund, Hdfc  Trustee Company Ltd. Hdfc Equity Saving Fund, Aditya Birla Sun Life  Trustee Private Limited A/C Aditya Birla Sun Life Banking and Financial Services Fund, Midcap Fund,  Dividend Yield Plus etc.
Click here for Complete Reliance Nippon Life Asset Management Anchor Investors List

Consolidated opinion of Brokerages, Analysts, Business New Paper Reports, Management Views on Reliance Nippon Life Asset Management IPO .

Angel Broking: “ Reliance Nippon Life Asset Management Ltd (RNAM) is the third largest Asset Management Company (AMC) in terms of quarterly average AUM (QAAUM) with 11.4% market share and is ranked second most profitable AMC. RNAM managed `3,84,061cr as on August 2017, which includes Mutual Fund (`2,28,329cr), Managed Account (`1,53,509cr) and offshore funds & advisory mandates (`2,223cr). It is also the second largest AMC among retail investors (market share of 13.6%), having 7.01 million investor folios, of which 6.72 million retail folios. Outlook & Valuation: At the upper end of the IPO price band it is offered at 37x its FY2017 EPS and 8x its FY2017 book value (Pre-IPO), demanding `15,442cr market cap, which is 6.8% of the MF AUM (`2,28,329cr for the month of August 2017). Considering that RNAM is the third largest AMC coupled with huge potential of MF industry to grow, strong return ratios, asset light business, higher dividend payout ratio and track record of superior investment performance, we are positive on this IPO and rate it as SUBSCRIBE.

Capital Market: ” Score 50/100, Post-issue valuation is Rs 15422 crore at the upper price band of Rs 252 per share and Rs 15116 crore at the lower price band of Rs 247 per share. EPS for FY2017 works out to Rs 6.58 on post-IPO equity basis. The scrip is offered at P/E multiple of 38.3 times FY2017 EPS at the upper price band. The post-issue book value (BV) is Rs 37. The scrip is offered at a P/BV multiple of 6.8 times at the upper price band of Rs 252 per share. There is no comparable peer listed in India.”

Choice Broking: “There are no comparable listed peers in India. Accordingly, it is not possible to provide an industry comparison in relation to RNAM’s operations. At the higher price band of Rs. 252 per share, its share is valued at a FY17 P/E multiple of 38.3x. On valuation front, RNAM is demanding a valuation of 4.25% to its AUM, which is in-line to the recent deal done in Aug. 2017, wherein IIFL Special Opportunities Fund bought around 2.6% stake in the company for a consideration of Rs. 3.9bn, thereby valuing the firm to Rs. 150bn. Since there is no domestic peer, there is no benchmark for valuation. However, if we take few of the listed AMCs in US (considered to be highly penetrated market), the average multiple is 2.3% of the AUM. Higher valuation demanded by RNAM seems to be justified taking into the consideration the growth potential in the domestic market, recent deal as a reference and the first mover advantage in the listing of AMC in the domestic market. Thus considering the above observations, we assign a “SUBSCRIBE” rating for the issue.”

GEPL Capital: “Reliance Nippon Life Asset Management Ltd. stands to gain from operating leverage and also rise in the business. At a P/BV of 8.8x we believe that Reliance Nippon at discount to its domestic. We assign a Subscribe rating to the IPO.”

Dalal Street Investment Journal (DSIJ): “The company is valued at post offer P/B of 5.4x and P/E of 38x. Though the company doesn’t have any listed peers, we see the P/B to be on the higher side considering that listed NBFCs P/B range between 3 to 6. Also, banks like Kotak Mahindra and HDFC with diversified portfolio has current P/B of 5.17. However, considering that the company is looking at almost doubling its branch network and Mutual fund industry witnessing a surge in retail investors, we see that valuation on FY19 to range around 4.3x, which looks reasonable. Also, we expect company’s ad spent to yield results over the next couple of years. Hence, we recommend investors to subscribe for the issue.”

KR Choksey: “RNLAMC is one the largest asset management companies in India, managing a total of Rs. 3,625.5 billion as of June 30, 2017. The company has a market share of 11.4% and was ranked the second most profitable AMC in India during 2016. This is reflected in the company’s growth – over FY13-17, AUM has grown at 22% CAGR (based on QAAUM), revenue has grown at 18.2% and PAT has grown at 15%. From an industry growth perspective, we believe drivers are in place in form of favourable demographics, low penetration, under-representation of MFs as an asset class and deepening bond market. Besides this, we believe company specific levers such as diversified product mix, multi-channel distribution network, strong investment track-record, and experienced management team will help the AMC continue to grow at a robust pace and maintain ROE of more than 20% on a sustainable basis (22% last 3-year average). At the upper price band of Rs. 252 per share, the issue is valued at 8.1x P/Bv and 4.3% of AUM which we believe is justified
on account of the long-term prospects and growth opportunity for the AMC industry as well as Reliance Nippon Life AMC specifically given its industry-leading position. Hence, we recommend to ‘SUBSCRIBE FOR THE LONG-TERM’.

Motilal Oswal: “We like RNLAM as it is the largest AMC with highly diversified product offerings and strong distribution reach. RNLAM’s AUM has grown at CAGR of 22% in FY13-17 and has delivered strong Revenue/EBITDA/PAT growth of 21%/ 28%/ 15% over the same period. Other key strengths of the company are 1) leadership positioning in AMC business with strong credentials to drive growth, 2) strong distribution reach, 3) diversified product mix with strong investment track record, and 4) Strong ROE/ ROCEs of 22%/ 25%. At the upper price band, the issue is priced at PBV of 8.1x for FY17 and 4.2% of AUM (market cap/AUM) which we believe is attractive in context of positives mentioned above. Hence we recommend SUBSCRIBE for long term investment”

Religare Sec. : “Reliance Nippon Life being one of the largest AMCs in India remains in a sweet spot to capitalize on the booming financial industry, mainly mutual funds. It plans to explore both organic and inorganic growth opportunities for expansion in new areas and expand its retail client base. It has reported Revenue and PAT CAGR of 18.2% and 15% respectively over FY13-17. At the upper price band of Rs 252, the company is valued at 36x FY18E expected earnings and ~4% of FY18E expected AUM (market cap/ AUM).”

SP Tulsiyan website: “Poor growth in profitability and promoter pedigree make this IPO a clear avoid, despite string industry tailwinds. ADAG group stocks, have time and again, been wealth destroyers for investors, which make exposure to this group ‘A very DAring Gamble’. ” 

SPA Securities Ltd: “RNLAMC has a market share of 11.5% and was ranked the 2nd most profitable AMC in India during 2016. The company’s QAAUM has grown at a CAGR of 22% over FY13-17, while their revenue and PAT has registered CAGR of 18.2% and 15% respectively over FY13- 17. We believe favorable demographics, low penetration, underrepresentation of MFs as an asset class and deepening bond market will help the AMC to grow at a robust pace. Also, company specific levers such as diversified product mix, multi channel distribution network, strong investment track-record and experienced management team will help in maintaining a ROE of ~20% on a sustainable basis (avg ROE 22% for last 3 years). At the upper price band of Rs. 252 per share, the issue is valued at 8.1x P/BV and 4.3% of AUM. We recommend SUBSCRIBE to the issue as a good long term investment.”

SSJ Finance: “RNLAM has reported a CAGR of 29.0% and 20.5% on revenue and net profit fronts respectively over FY2013-2017. On its upper band of price of Rs 257, the issue is priced at PE ratio of 42.2x of its Q1FY2018 annualised EPS of Rs 6.0. We believe that the IPO is fully priced but since it is the first IPO in the sector we recommend to Subscribe for listing gains the IPO.”

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