Reliance Nippon Life Asset Management Ltd - Research Report

Private Client Research




Finance - Asset Management


Reliance Nippon Life Asset Management Ltd

Finance - Asset Management

October 24, 2019

Sensex: 39020.39

CNX Nifty: 11582.6


BSE: 540767

Reco Price
Rs. 310
Price Target (1.5 - 2 Years)
Rs. 400


October 24, 2019



CNX Nifty








Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
355 - 127.8
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio (x)

One Year indexed Stock Performance

Reliance Nippon Life Asset Management Ltd Sensex
Reliance Nippon Life Asset Management Ltd
Return (%)


(in %)

+91 22 6639 3000


Nippon India Mutual Fund (NIMF) is one of India's leading mutual funds, with Average Assets Under Management (AAUM) of Rs 2,02,649.49 crores​​ ​(July 2019 - Sept 2019 QAAUM) and 90.26 lakh folios (as on​ September 30, 2019​​).

NIMF is one of the fastest growing mutual funds in India and offers investors a well-rounded portfolio of products to meet varying investor requirements. It has presence in 300​ cities (as on​ March 31, 2019​​) across the country. NIMF constantly endeavours to launch innovative products and customer service initiatives to increase value to investors.

Nippon Life Insurance Company (“NLI”) is Japan’s leading private life insurer and offers a wide range of financial products including individual and group life and annuity policies through various distribution channels, mainly using face-to-face sales channels for its traditional insurance products. It primarily operates in Japan, North America, Europe, Oceania and Asia, and is headquartered in Osaka, Japan. NLI conducts asset management operations in Asia, through its subsidiary Nissay Asset Management Corporation (“Nissay”), which manages assets globally.

Beginning of new journey with huge opportunity lying ahead

Exposure to ADAG group stands clear:
Anil Dhirubhai Ambani Group (ADAG) group has re-paid Inter Corporate Deposits (ICDs) worth Rs4.2bn to NLAM. Accordingly, to this extent, the exposure of ADAG to RNAM stands cleared. Scheme level exposures to ADAG have also been on a decline.

Gaining lost market share:
With the change of brand name to ‘Nippon India Mutual Fund’ from earlier ‘Reliance Mutual Fund’ and a global sponsor with a good track record, the fund house hopes to regain its market share, which it has steadily lost over the years and attract a section of institutional and high net worth customers who had exited because of concerns about the financial health of the ADAG - the erstwhile co-sponsor of the fund house.

Emerging growth opportunities in ETFs, AIF and offshore funds:
NIMF is the second largest ETF (exchange traded funds) player with a market share of approx. 18% in the segment. AIF (alternate investment funds) is emerging as the next engine of growth. NIMF has launched industry-first commodity and offshore real estate fund. NIMF will work closely with Nippon Life Insurance to leverage its global tie-ups for attracting higher flows from international investors.

Strengthened risk management with international best practices:
Based on Nippon’s Life Insurance global positioning and relationships, NIMF is expected to adopt best governance and risk management practices.

B30 cities to drive growth:
NIMF continues to be amongst the leaders in this segment, which contributed AUM of more than Rs.45,000 crore. Nearly 20% of total assets are sourced from B30 cities and beyond, as against 15% for the Industry. NIMF has one of the largest on-ground presence at 300 locations pan-India.
Penetration of MF products beyond the top 30 cities (B30) remains a key focus in the asset management space. A large part of mutual fund AUM currently originates from the top 5 cities. Very low penetration levels in small towns is an attractive growth opportunity for AMCs. The B30 locations are showing strong promise with the AUM from B30 cities growing faster than T30 (Top 30 cities) locations since FY14. Retail investors form a major portion of investments from B30 locations. We believe that inflows to MFs from small towns will continue to build in a robust manner and should largely come from retail investors with small ticket sizes.

Reliance Nippon Life Asset Management Ltd

Long term and stable Systematic Investment Plans (SIPs) inflows:
NIMF has Rs.859 crore of SIPs which is a recurring monthly inflow resulting in annualized inflows of approx. Rs.10,300 crore. SIP Book is contributed by approx. 31 lakh SIPs and has grown by 17% this year. The SIP book grew by 15% in FY2018-19. About 78% of the incremental SIPs have tenure of over 5 years.

Beneficiary of fundamental transformation in the Indian savings environment:
India has historically been and is expected to remain a savings economy. The gross domestic savings rate (as a percentage of GDP) is higher than those of major economies such as the US, the UK, France, Japan and Germany. Indians traditionally have been great ‘savers’ but not good investors. Both the terms used to be confused with each other and most of the savings went into gold, real estate and fixed deposits. However, what is happening now is nothing short of a revolution with people preferring more of financial assets as compared to physical assets and within the realm of financial assets, the allocation towards smarter investment products like mutual funds is increasing compared to fixed deposits.

Mutual Fund Industry in India is poised for strong growth:
The Indian mutual funds industry is eyeing four-fold rise in Assets Under Management (AUMs) to Rs 100 trillion (Rs 100 lakh crore from existing Rs 25 lakh crore), and a five-fold rise in investor base to 100 million (from existing 20 million) over the next decade.

The equity investment culture through mutual funds has been deepening and we believe the MF industry is in a sweet spot to exploit the same. The strengthening of SIP flows looks sustainable given the continued incremental commitments in the form of new folios.

A continued preference for financial assets over physical assets should support the growth in MF AUMs (Note: Financial assets include equity, debt securities, ETFs, etc. Physical assets include real estate, gold, etc). We expect this to manifest in the form systematic investment plans (SIPs) and tax saving ELSS schemes (ELSS schemes are tax-saving schemes which are equity oriented, they offer tax deduction under section 80C of the Income tax Act) through retail participation.


Mutual fund Industry in India
AUM growth
The mutual fund industry’s AUM has grown from Rs. 8.3 lakh crore as of March 2014 to Rs. 23.8 lakh crore as of March 2019, Average Assets Under Management (AAUM) of the Indian Mutual Fund Industry for the month of April 2019 crossed a landmark of ₹ 25 lakh crore and stood at ₹ 25,27,633 crore, supported by strong investor inflows. Equity as % of total AUM has increased from 25% in March 2014 to 43% in March 2019. The ETF segment also saw robust growth due to the recent move by the Employees’ Provident Fund Organization (EPFO) to invest a portion (currently 15%) of the corpus in equities (Note: ETF stands for Exchange Traded Funds. These are listed securities that are based on a stock market index or gold). The AUM of liquid/money-market funds also grew at a rapid pace, supported by corporate investments and stable returns. The strong growth of the mutual fund industry can largely be attributed to higher financial savings combined with growing investor awareness of such products.

SIP book size
Systematic wealth accumulation has gained significance in recent years, especially among individual investors. The SIP book size increased from Rs.3,120 crore as of April 2016 to Rs.7,120 crore as of March 2018 to more than Rs.8,000 crores as of March 2019.

AUM attributable to individual investors has witnessed the fastest growth among investor categories. With the recent surge in individual investors’ participation in mutual funds, they have shown a growing preference for equity-oriented funds.

It is seen that lower holding periods are dominated by corporate investments. This category generally uses mutual funds for parking money for shorter tenures. Going up the holding-period buckets, individual investors hold the majority share as they tend to invest a higher proportion of their assets in equity-oriented funds, which are positioned as long-term investment products. AUM accumulated through SIP mode tends to be held for longer duration. Such sticky AUM is important for AMCs since it accounts for longevity as well as regularity in inflows.

Profit & Loss Statement:- (Consolidated)

(Rs Crores)

Particulars FY17 FY18 FY19 FY20 E FY21 E
Revenue from operations 1307.50 1591.77 1478.64 1242.06 1465.63
Other Income 132.57 156.85 171.28 171.00 171.00
Total Income 1440.07 1748.62 1649.92 1413.06 1636.63
Fees and Commission 259.43 310.51 258.29 85.16 93.68
Employee Benefit Epenses 195.68 257.23 293.49 336.00 369.60
Depriciation and Amortization 17.91 8.53 10.07 33.48 37.50
Other Expenses 381.58 516.75 387.83 261.34 287.47
Total Expenses 854.60 1093.02 949.68 715.98 788.25
Profit before Tax (PBT) 585.47 655.60 700.24 697.07 848.38
Tax Expense 179.35 198.38 213.17 174.27 212.09
Profit after tax (PAT) 401.96 457.22 487.07 522.81 636.28
Earning per Share (EPS) 6.85 7.45 7.94 8.54 10.40
Source: Stockaxis Research, Company Data


Nippon Life Insurance, a global MNC, leader in insurance and asset management, being the sole promoter with 75% stake, company is much better placed to leverage Nippon Life’s global network.

With new brand identity, we expect NIMF to improve market share and profitability by maximizing synergies in risk management and international businesses.
We initiate buy with target price of Rs.400.