Reliance Mutual Fund IPO draws big demand from anchor investors
ETMarkets.com|
Updated: Oct 23, 2017, 03.26 PM IST
Reliance Nippon Life Asset Management (RNAM) is all set to hit the primary market with its Rs 1,542 crore initial public offering on Wednesday. The firm will announce anchor allocation on Tuesday. According to ETNow sources the anchor book was subscribed over 30 times by midday of Monday.
Here's are key points you must know before considering the issue:
Issue size
The issue of Reliance Nippon Asset Management, a joint venture between Reliance Capital and Japan's Nippon Life, comprises fresh issuance of 2.45 crore shares, in addition to an offer for sale of 3.67 crore shares by Reliance Capital and Nippon Life Insurance Company.
Nippon Life Insurance had in 2012 bought 26 per cent stake in the company by investing Rs 1,450 crore ($286 million), which was the largest foreign direct investment (FDI) in the mutual fund industry at that point.
Reliance Nippon Asset Management would sell shares in the Rs 247-252 price band. The IPO size would be around 10 per cent of the post issue paid-up capital of the company. The minimum bid lot is of 59 equity shares and bids may be made in multiples of 59 equity shares thereafter.
How big it is, what it intends to do?
Reliance Nippon is the third largest asset management company in India in terms of quarterly average AUM with a market share of 11.4 per cent, as of June 30. The company was managing a total AUM of Rs 3,62,550 crore as of June 30 as per its draft prospectus.
RNLAM manages mutual funds including ETFs; managed accounts, including portfolio management services, alternative investment funds and pension funds; and offshore funds and advisory mandates.
The company managed 55 open-ended mutual fund schemes, including 16 ETFs and 174 closed ended schemes as of June 30, 2017. It has a pan-India network of 171 branches and approximately 58,000 distributors including banks, financial institutions, national distributors and independent financial advisers.
The company has pan-India network of 171 branches, of which 132 were in B-15 cities, as of June 30. It intends to increase its branch network by adding 150 new branches and relocating 54 exiting branches in the B-15 locations by March 31, 2021.
How has been the performance so far
The company boasts of being among the most profitable AMCs. Reliance Nippon's profit before tax (PBT) has grown eight times in last 10 years. The company has also performed consistency well over FY13-17.
The company has reported compounded annual growth of 21.1 per cent and 27.9 per cent, respectively, in total operating revenue and Ebitda over the period. Reported PAT has risen by 15 per cent annually during the period, while average return on equity (RoE) and return on invested capital (RoIC) for the period stood at 19.9 per cent and 29.5 per cent, respectively. The company is consistently paying dividend over the last five years with average dividend payout ratio of 65 per cent, brokerages noted.
Valuation
At the upper end of the price band, RNAM is demanding a valuation of 4.25 per cent to its AUM, which is in-line to the recent deal done in August, wherein IIFL Special Opportunities Fund bought around 2.6 per cent stake in the company for a consideration of Rs 390 crore, thereby valuing the firm at Rs 15,000 crore, said Choice Broking in a note.
"If we take few of the listed AMCs in US, the average multiple is 2.3 per cent 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," it said.
Here's are key points you must know before considering the issue:
Issue size
The issue of Reliance Nippon Asset Management, a joint venture between Reliance Capital and Japan's Nippon Life, comprises fresh issuance of 2.45 crore shares, in addition to an offer for sale of 3.67 crore shares by Reliance Capital and Nippon Life Insurance Company.
Nippon Life Insurance had in 2012 bought 26 per cent stake in the company by investing Rs 1,450 crore ($286 million), which was the largest foreign direct investment (FDI) in the mutual fund industry at that point.
Reliance Nippon Asset Management would sell shares in the Rs 247-252 price band. The IPO size would be around 10 per cent of the post issue paid-up capital of the company. The minimum bid lot is of 59 equity shares and bids may be made in multiples of 59 equity shares thereafter.
How big it is, what it intends to do?
Reliance Nippon is the third largest asset management company in India in terms of quarterly average AUM with a market share of 11.4 per cent, as of June 30. The company was managing a total AUM of Rs 3,62,550 crore as of June 30 as per its draft prospectus.
RNLAM manages mutual funds including ETFs; managed accounts, including portfolio management services, alternative investment funds and pension funds; and offshore funds and advisory mandates.
The company managed 55 open-ended mutual fund schemes, including 16 ETFs and 174 closed ended schemes as of June 30, 2017. It has a pan-India network of 171 branches and approximately 58,000 distributors including banks, financial institutions, national distributors and independent financial advisers.
The company has pan-India network of 171 branches, of which 132 were in B-15 cities, as of June 30. It intends to increase its branch network by adding 150 new branches and relocating 54 exiting branches in the B-15 locations by March 31, 2021.
How has been the performance so far
The company boasts of being among the most profitable AMCs. Reliance Nippon's profit before tax (PBT) has grown eight times in last 10 years. The company has also performed consistency well over FY13-17.
The company has reported compounded annual growth of 21.1 per cent and 27.9 per cent, respectively, in total operating revenue and Ebitda over the period. Reported PAT has risen by 15 per cent annually during the period, while average return on equity (RoE) and return on invested capital (RoIC) for the period stood at 19.9 per cent and 29.5 per cent, respectively. The company is consistently paying dividend over the last five years with average dividend payout ratio of 65 per cent, brokerages noted.
Valuation
At the upper end of the price band, RNAM is demanding a valuation of 4.25 per cent to its AUM, which is in-line to the recent deal done in August, wherein IIFL Special Opportunities Fund bought around 2.6 per cent stake in the company for a consideration of Rs 390 crore, thereby valuing the firm at Rs 15,000 crore, said Choice Broking in a note.
"If we take few of the listed AMCs in US, the average multiple is 2.3 per cent 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," it said.
