initiating coverage reliance nippon life asset management · mutual fund industry in india: poised...
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Emkay
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore ED: HEMANT MARADIA SA: DHANANJAY SINHA
Mutual fund industry poised for strong growth: The equity investment culture through
mutual funds has been deepening and is reflected well in the strengthening flows from
both Top 15 and B15 locations. Indian mutual fund AUM stood at Rs23tn as of Q4FY18
and the trend suggests a likely growth rate of 22-24% CAGR between FY18-FY22E. This
can more than double the MF AUMs beyond Rs50tn market over next four years. We
expect AMCs with strong distribution reach to benefit from the same.
Multiple factors contributing to AUM growth: While the post-demonetization
dampening of prices has reduced attraction of real estate as an investment, the relatively
stable inflation appears to have taken the sheen off gold. We don’t see this trend altering
meaningfully and as a consequence, expect the demand in financial assets to rise going
forward.
Gross flows remain strong: Recent data shows continued stability of SIP and overall
equity flows despite the correction seen in key indices. We interpret this as a sign of a
maturing investment culture. With rising stability in flows and RNAM’s focus on B15
locations, we expect RNAM to continue benefiting incrementally and report a healthy +22%
CAGR in AUM over FY18-FY20E. We expect the equity AUMs to show a meaningful
improvement in overall AUM.
RNAM – entrenched player with diversified AUM: RNAM with an AUM size of Rs3.9tn
in mutual fund schemes across equity, fixed Income, money market, ETF categories, and
managed assets is the third largest asset management company in India. RNAM has
achieved leadership through MF schemes that have delivered strong returns to investors
as well as a strong and diversified network of distributors across the country. Though not
owned by a bank, RNAM’s products are distributed by major retail banks. The granularity
of its flows and a wide distribution network ensures it is not overly dependent on any single
distributor, thereby reducing a key structural risk to its flows.
Initiate coverage with a ‘BUY’ and PT Rs340: We expect RNAM to deliver a +24%
CAGR in net profit FY17-FY20E driven by a healthy growth in AUMs, stable investment
management fees with rising equity contribution, and stable expense ratios. The target
price values RNAM at 34x/27x FY19E/FY20E EPS and 4.1%/3.4% FY19E/FY20E AUM.
Key risks: Our analysis suggests a strong correlation between index performance and
equity MF inflows though overall flows appear to run nil correlation to index performance,
thereby indicating alternating dominance of equity and debt flows. Sustained period of
lacklustre market performance can ebb incremental flows to equity schemes.
India Equity Research | Banking & Financial Services
April 13, 2018
Initiating Coverage
Reliance Nippon Life Asset Management Refer to important disclosures at the end of this report
Bellwether amongst AMCs
CMP Target Price
Rs 259 Rs 340 as of (April 13, 2018) 12 months
Rating Upside
BUY 31.1 %
Change in Estimates
EPS Chg FY19E/FY20E (%) NA
Target Price change (%) NA
Target Period (Months) 12
Previous Reco NR
Emkay vs Consensus
EPS Estimates
FY19E FY20E
Emkay 10.0 12.5
Consensus 10.6 13.0
Mean Consensus TP (12M) Rs 340
Stock Details
Bloomberg Code RNAM IN
Face Value (Rs) 10
Shares outstanding (mn) 612
52 Week H/L 335 / 237
M Cap (Rs bn/USD bn) 159 / 2.43
Daily Avg Volume (nos.) 340,656
Daily Avg Turnover (US$ mn) 1.5
Shareholding Pattern [Quarter]
Promoters 85.8%
FIIs 0.0%
DIIs 0.0%
Public and Others 14.2%
Price Performance
(%) 1M 3M 6M 12M
Absolute 1 (19) - -
Rel. to Nifty 1 (17) - -
Relative price chart
Source: Bloomberg
This report is solely produced by Emkay Global. The following person(s) are responsible for the production of the recommendation:
Ravikant Bhat
+91-22-266242430
Himanshu Taluja
+91-022-66121248
-10
-2
6
14
22
30
200
230
260
290
320
350
Nov-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18
%Rs
Reliance Nippon (LHS) Rel to Nifty (RHS)
Financial Snapshot (Consolidated)
(Rs mn) FY16 FY17 FY18 FY19E FY20E
Investment Management Fees 11,581 12,676 16,177 20,092 24,932
Total Revenue 13,138 14,359 18,040 22,156 27,225
Net Profit 3,964 4,028 4,957 6,149 7,635
EPS (Rs) 6.5 6.6 8.1 10.0 12.5
AAAUM (Rsbn) 1,533 1,892 2,317 2,827 3,449
ROE (%) 23.8 21.9 22.1 22.9 26.5
PE (x) 40x 39x 32x 26x 21x
Mkt cap/AUM (%) 10.3 8.4 6.8 5.6 4.6
Source: Company, Emkay Research
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 2
Mutual Fund Industry in India: Poised for Strong Growth
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, especially post-
demonetisation looks set to sustain given the continued incremental commitments in form of new
folios. The recent market correction does not appear to have shaken the belief of retail investors
in SIP driven equity investments. And though Mar’18 witnessed a net outflow, our interaction with
industry participants suggests the redemptions were linked to changes in tax proposals and
should therefore be temporary. The overall change therefore augurs well for the Indian MF
industry and especially for the entrenched players with a strong distribution reach. Observing
past trends, we make some secular growth assumptions:
The industry AUM grew at a CAGR of 24% between FY65-2005 (UTI was set up in 1965),
at a CAGR of 33% between FY05-FY10 and at 18% CAGR between FY10-FY18. The
growth trend has again picked up in the last 2-3 years thereby increasing share of equities
in the overall AUM mix. We believe the rising trend can lift the share of equities in the overall
asset mix taking it closer to or above 40% over five year growth period of FY17-FY22E.As
of Q3FY18, the share of equities in the industry AUM mix was 32%, debt 57% and others
including balanced funds ~11%.
Indian mutual fund AUM stood at Rs23tn as of Q4FY18 and the trend suggests a likely
growth rate of 22-24% CAGR between FY17-FY22E. This can take the MF AUMs beyond
Rs50tn market over next four years. A continued preference for financial assets over
physical assets should support the growth in MF AUMs. We expect this to manifest in the
form systematic investment plans (SIPs) and tax saving ELSS schemes through retail
participation. AMC AUMs shall also find growth avenue in ETFs, which have been
expanding fast and the managed assets, which include AIFs, retirement funds (EPFO, NPS
etc), and offshore funds. And finally the expansion in the B15 cities shall also aid this
market.
Exhibit 1: Mutual funds industry historical growth trends…
Source: Company, Emkay Research, AMFI
Exhibit 2: Quarterly average AUM mix as of Q3FY18
Source: Company, Emkay Research, AMFI
-
4,000.0
8,000.0
12,000.0
16,000.0
20,000.0
24,000.0
28,000.0
FY
65
FY
87
FY
93
FY
2003
FY
2004
FY
2005
FY
2006
FY
2007
FY
2008
FY
2009
FY
2010
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
FY
2018
Rs b
n
QAAUM (Rsbn)
38
19
32
7 4
Debt Liquid/Money Market Equity Balanced Others
Mix of equity funds can rise to
40% by FY22E
QAAUM as of Q3FY18 was
Rs22.4tn rising marginally to
Rs23tn in Q4FY18.
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 3
We expect the equity MFs to grow at a rate faster than debt mutual funds. We expect equity
AUM to accelerate faster than the 21% CAGR between FY11-FY17. The retail investor
participation is expected to be strong in the equity AUM growth as incremental flows are backed
by rising SIPs.
Exhibit 3: Equity AUM growth higher than debt mutual funds
Source: Company, Emkay Research, AMFI
Exhibit 4: Debt AUM growth at 19% CAGR between FY11-17
Source: Company, Emkay Research, AMFI
Exhibit 5: Sharp rise in yearly net flows in MFs
Source: Company, Emkay Research, AMFI
Exhibit 6: Investor participation in different schemes (Dec-17)
Source: Company, Emkay Research, AMFI
Exhibit 7: Holding period of equity assets higher than non-equity assets
Source: Company, Emkay Research
Share of mutual funds rising in household saving: Changing pattern of savings
in India
The share of mutual funds has been on the rise from 1.4% of net financial savings in FY12 to
2.9% in FY16. The penetration levels of the MF industry is still very low, with the total AUM to
GDP ratio at ~12% (FY17). With rising income levels of the working population and increased
awareness, the share of household savings is shifting towards financial savings. Since FY12,
the share of financial savings moved from 31.1% to 41.5% in FY16. This data is available with a
significant lag. So though we don’t have the FY17 data on household MF investments, looking
at the weak growth in bank deposits and the strong inflows exhibited by MFs, one can expect
the share to have risen further in FY17 and FY18.
2,169 2,031 1,937 2,134
3,801 4,410
6,727
10,075
-20
0
20
40
60
80
100
-
2,000
4,000
6,000
8,000
10,000
12,000
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
Dec-1
7Equity(Rsbn) Equity growth yoy(%)
3,800 3,845 5,088
6,118 7,027
7,918 10,819
11,192
-10
0
10
20
30
40
-
3,000
6,000
9,000
12,000
15,000
FY
2011
FY
2012
FY
2013
FY
2014
FY
2015
FY
2016
FY
2017
Dec-1
7
Debt (Rsbn) Debt growth yoy(%)
-0.5 -0.2
0.80.5
1.01.3
3.4
2.7
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18
Rs.t
n
1 5 26
14
39
52 83
55
15
1 0 7
-
20
40
60
80
100
Retail HNI Corporates
%
Debt-liquid Debt-Others Equity ETF
6.89.5
14.918.4 18.1
32.3
17.7
12.2 11.915.1
18.2
24.9
0
5
10
15
20
25
30
35
0-1 Months 1-3 Months 3-6 Months 6-12 Months 12-24 Months >24Months
Equity Non-Equity
Equity assets have a longer
average holding period as
compared to non-equity assets
Increasing financial awareness
and increasing trend in financial
savings into MF rising
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 4
Exhibit 8: Increasing trend of financial savings in net household savings pattern
Parameters (Rs bn) FY12 FY13 FY14 FY15 FY16
Net financial savings 6,426 7,336 8,321 9,192 10,825
Growth (%) 14.2 13.4 10.5 17.8
% of net household savings 31.1 32.9 36.5 36.1 41.5
Savings in physical assets 13,892 14,625 14,120 15,782 14,835
Growth (%) 5.3 -3.5 11.8 -6.0
% of net household savings 67.3 65.5 61.9 62.1 56.8
Savings in the form of gold & silver 336 367 368 456 439
Growth (%) 9.2 0.3 23.9 -3.7
% of net household savings 1.6 1.6 1.6 1.8 1.7
Net Household savings 20,654 22,328 22,809 25,430 26,099
Growth (%) 8.1 2.2 11.5 2.6
Source: Company, MOSPI, Emkay Research
While the post-demonetization dampening of prices has reduced attraction of real estate as an
investment, the relatively stable and inflation appears to have taken the sheen off gold, which is
popular as a hedge against inflation. If stable price conditions persist, as expected by RBI, we
don’t see this trend altering meaningfully and as a consequence, expect the demand in financial
assets to rise going forward.
Exhibit 9: Increasing trend in mutual funds levels in net financial savings…
Parameters (Rsbn) FY12 FY13 FY14 FY15 FY16
Currency & Deposits 3,566 3,873 4,078 4,104 4,316
Growth (%) 8.6 5.3 0.6 5.2
% of net financial savings 55.5 52.8 49.0 44.6 39.9
Mutual funds 87 82 150 141 319
Growth (%) -5.7 82.9 -6.0 126.2
% of net financial savings 1.4 1.1 1.8 1.5 2.9
Shares & debentures 78 88 39 57 95
Growth (%) 12.8 -55.7 46.2 66.7
% of net financial savings 1.2 1.2 0.5 0.6 0.9
Insurance 1,957 1,799 2,045 2,993 2,661
Growth (%) -8.1 13.7 46.4 -11.1
% of net financial savings 30.5 24.5 24.6 32.6 24.6
Pension 957 1,565 1,778 1,888 2,769
Growth (%) 63.5 13.6 6.2 46.7
% of net financial savings 14.9 21.3 21.4 20.5 25.6
Claims on govt. -219 -71 231 10 666
Growth (%) -67.6 -425.4 -95.7 6,560.0
% of net financial savings -3.4 -1.0 2.8 0.1 6.2
Net financial savings 6,426 7,336 8,321 9,193 10,825
Source: Company, MOSPI, Emkay Research
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 5
Focus on retail investors from small towns, the new frontier of growth
Penetration of MF products beyond the top 15 locations (B15) remains a key thematic in the
asset management space. Large part of mutual fund AUM currently originates from top 5 cities.
The top 5 cities accounted for c.70% of the total AUM as of Q3FY18. The top 5 cities are Mumbai,
Delhi, Bangalore, Kolkata and Chennai. Only 18% of the total assets of the mutual fund industry
came from B15 locations as of Q3FY18.Hence we see very low penetrations levels from the
small towns as an attractive growth opportunity for AMCs.
The B15 locations are showing strong promise with the AUM from B15 cities growing faster than
T15 locations since FY14. Assets from B15 locations increased from Rs2.81tn in Nov’16 to
Rs4.4tn in Feb’18. Approximately 58% of the assets from small towns are in equity schemes.
Individual investors form a major portion of investments from B15 locations. As per AMFI data,
individual investors have a market share of 74% of total AUM from B15 locations which
contributes to only 27% of total assets held by individual investors.
We believe that inflows to MFs from the small towns will continue to build in a robust manner and
should largely come from retail investors with small ticket sizes.
Exhibit 10: MAAUM from B15 cities rising rapidly
Source: Company, Emkay Research, AMFI
Exhibit 11: B15 cities allocating more towards equities
Source: Company, Emkay Research, AMFI
Exhibit 12: Share of T15 cities is almost 83% of the total AUM
Source: Company, Emkay Research, AMFI
Exhibit 13: T5 cities contributed c.70% of the total AUM as of Q3FY18
Source: Company, Emkay Research, AMFI
Exhibit 14: AUM inflows through direct route is increasing
Source: Company, Emkay Research, AMFI
Exhibit 15: Individual investors now hold a higher share in AUM (Feb-18)
Source: Company, Emkay Research, AMFI
805 921 1,095 1,425 1,846 574 959
1,078
1,639
2,920
13 12
14
28
30
1,392
1,892 2,187
3,091
4,796
-
1,000
2,000
3,000
4,000
5,000
6,000
FY14 FY15 FY16 FY17 11MFY18
Rsbn
Debt Equities+Balanced Others
58 49 50 46 38
41 51 49 53 61
-
20
40
60
80
100
FY14 FY15 FY16 FY17 11MFY18
%
Debt Equities+Balanced Others
71% 74% 73% 72% 72% 72% 70%
14% 13% 13% 14% 14% 13% 13%
0%
20%
40%
60%
80%
100%
FY12 FY13 FY14 FY15 FY16 FY17 9MFY18
Top 5 Next 10
38
14
7
6
5 Mumbai
Delhi
Chennai
Bangalore
Kolkata
34 38 42 42
66 62 58 58
-
20
40
60
80
100
FY15 FY16 FY17 Feb-18
Direct Distributors
45
76
51
55
24
49
0
20
40
60
80
100
120
T15 B15 Total
Individual Institutional
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 6
Rising commitment to MF investments through Systematic Investment Plans
(SIPs)
Apart from the good stock market performance that has obviously attracted investors, there is no
doubt that continuous investor education via industry body AMFI, by individual MFs, as well as
SEBI etc has contributed to a significant awareness amongst retail investors about mutual funds
and SIPs as a convenient and disciplined approach to investing in equities on a periodic
(monthly) basis. Under guidance from SEBI, industry umbrella body AMFI began the ‘Mutual
Funds Sahi Hai’ (Hindi for ‘Mutual Funds Are Good’, also translates as ‘Mutual Funds Are The
Right Choice’) campaign. Over the past two years, the campaign has penetrated multiple media
platforms through its eye catching adverts explaining various aspects of MF investing.
Exhibit 16: The now popular ‘Mutual Funds Sahi Hai’ campaign videos educate on various aspects of MF investing
What is a Mutual Fund? What is a SIP? What is an ELSS?
Source: AMFI, Emkay Research
The following comparative data suggests the campaign has had a beneficial impact on MF flows,
particularly from the B15 locations, which has received special focus.
Exhibit 17: Mutual Funds Snapshot
Particulars Mar-17 Feb-18 (% yoy)
AUM (Rs tn) 17.6 22.2 26.5
Retail AUM (Rs tn) 8.6 11.9 37.8
B 15 cities retail AUM (Rs tn) 2.1 3.2 53.6
Folios (mn) 55.4 69.9 26.2
SIP accounts (mn) 13.5 20.5 51.9
SIP monthly contribution (Rs bn) 43.4 64.3 48.2
AAUM of equity oriented schemes (Rs tn) 5.3 7.7 46.0
Mutual fund AUM as of bank deposits (%) 16.0 19.0 18.8
No of unique investors (basis PAN)* (mn) 12.0 15.2 26.7
Source: Company, Emkay Research, Note: * Figures as of Dec-17 for Mar-17 numbers
An Investor Survey conducted by SEBI in 2015 had revealed c.60% mutual fund investors used
SIP route for investments. Recent data reflects that monthly SIP inflows have more than doubled
from Rs31bn in Apr’16 to Rs64bn in Feb’18. AMFI data shows that the MF industry added an
average 926K SIP accounts each month during FY18, with an average SIP size of about ₹3,300.
This data confirms the popularity of SIPs as an investment instrument.
Exhibit 18: SIP monthly inflows double since April-16
Source: Company, Emkay Research, AMFI
31
43
64
-
10
20
30
40
50
60
70
Ap
r-16
Ma
y-1
6
Jun
-16
Jul-1
6
Au
g-1
6
Se
p-1
6
Oct-
16
Nov-1
6
Dec-1
6
Jan
-17
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Jun
-17
Jul-1
7
Au
g-1
7
Se
p-1
7
Oct-
17
Nov-1
7
Dec-1
7
Jan
-18
Feb-1
8
SIP Monthly inflows (Rs bn)
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 7
Increasing demand for Exchange Traded Funds (ETFs)
ETFs are another category of funds that have witnessed rising popularity since FY16. The ETF
AUM was Rs752bn as of Q3FY18 vs Rs499bn in FY17. It contributed around 3% to the total
mutual funds AUM in Q3FY18. A key trend in ETFs has been the significant shift from gold ETFs
to equity ETFs. The share of gold ETFs to total ETF AUM reduced to 6.5% in Q3FY18 from
~90% in FY13. The rising demand for equity ETFs is mainly driven by EPFO investing in ETFs.
Initially, EPFO was permitted to invest only 5% of it’s incremental corpus. This has now been
revised to 10%, thereby increasing investible corpus of EPFO.
Exhibit 19: Inflows into ETFs doubled in FY17
Source: Company, Emkay Research, AMFI
Exhibit 20: ETFs by Investor type as of Q3FY18
Source: Company, Emkay Research, AMFI
Rising trend in Alternative Investment Funds (AIFs)
AIFs are close ended, privately pooled investment vehicles which collect funds from HNI
investors. These funds are regulated by SEBI. The AIF market in India is still at a very early stage
when compared with mutual funds and PMS. However, we have seen rising trend in the recent
years, with the total commitment raised in AIFs increasing from Rs14.4bn as of Mar’13 to Rs1.4tn
as of Dec’17. We see majority of the commitments raised in Category II (61.7%) AIFs followed
by Category III and Category I AIFs. We believe that HNI participation for these category of funds
will rise and therefore uptrend will continue.
Exhibit 21: Rising inflows in AIFs
Source: Company, Emkay Research, SEBI
Exhibit 22: Majority commitments raised in Category II AIFs
Source: Company, Emkay Research, SEBI
Leading AMCs gaining market share
As of Q3FY18, there were 42 AMCs in India. However, the top 5 AMCs dominated the market
with ~57% market share in the total AUM of Rs22.8tn as of Feb’18. The next 5 AMCs held 24%
of the market share. We believe that top 5 AMCs, with their distribution reach, focus on B-15
locations, and increasing penetration and popularity of their own digital channels shall continue
to dominate the incremental market share. RNAM despite not having bank led distribution model
had second highest retail market share of 13.5% as of Dec-17 with HDFC AMC having the
highest market share of retail AUM.
115 131 132 147
224
499
-
100
200
300
400
500
600
FY12 FY13 FY14 FY15 FY16 FY17
ETFs (Rsbn)
Corporates 84%
HNI (4%)
Retail (7%)
Others (4%)
0
300
600
900
1200
1500
FY13 FY14 FY15 FY16 FY17 9MFY18
(Rs b
n)
Commitments raised Funds raised Investment Made
25
4838
27 24 18
69
4653
62 6162
6 6 8 11 14 20
0
20
40
60
80
100
FY13 FY14 FY15 FY16 FY17 9MFY18
Category I Category II Category III
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 8
Exhibit 23: RNAM third largest AMC, has consistently stayed in top 5
Asset Management companies AUM (Rs tn) (Feb-18) Market share (%)
Top 5 AMCs
ICICI Prudential 3.1 13.0
HDFC 3.0 12.9
Reliance Nippon 2.5 10.7
Birla Sun life 2.5 10.7
SBI Funds Management 2.2 9.3
Total Top 5 AMCs 13.2 56.9
Next five AMCs
UTI 1.6 6.7
Kotak Mahindra 1.3 5.5
Franklin Templeton 1.0 4.5
DSP Blackrock Investment Managers 0.9 3.7
IDFC 0.7 3.0
Next 5 AMCs 5.4 23.4
Rest of the Market 4.6 19.8
Total 23.2 100.0
Source: Company, Emkay Research, AMFI
Exhibit 24: Debt AUM market share as of Q3FY18
Source: Company, Emkay Research, AMFI
Note: Does not include Balanced funds
Exhibit 25: Equity AUM market share as of Q3FY18
Source: Company, Emkay Research, AMFI
Note: Does not include balanced funds
Exhibit 26: Retail AUM market share as of Q3FY18
Source: Company, Emkay Research, AMFi
13 1211 11
8
0
2
4
6
8
10
12
14
Birla Sunlife ICICI Pru HDFC RelianceNippon
SBI
%
15
12
109
7
0
2
4
6
8
10
12
14
16
ICICI Pru HDFC RelianceNippon
Birla Sunlife SBI
%
14 13
11
8 8
-
2
4
6
8
10
12
14
16
HDFC AMC Reliance Nippon ICICI Pru SBI AMC Birla Sunlife
Retail Market Share (%)
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 9
RNAM has highest share in direct channel mobilization
RNAM has built a strong and direct reach in both T15 and B15 locations and reports amongst
the best direct mobilization amongst the top 5 AMCs in these centres. In the T15 locations, RNAM
collected 51% of its MAAUM through own channels, second only to SBI MF, which collected
59%. And in the B15 locations, RNAM was top mobilizer through direct channel, mobilizing 27%
of MAAUM. Mobilization through direct channel helps reduce dependence on agency channels
but does not have direct cost benefit as sourcing commissions are charged to the customer.
Following comparative exhibits are based on Feb’18 data.
Exhibit 27: ICICI Pru MAAUM Mix
MAAUM (Rsbn) T15 B15 Total
Debt 1,407 163 1,569
% of AUM 56 31 51
Equity 850 299 1,149
% of AUM 34 56 38
Balanced 206 70 276
% of AUM 8 13 9
ETF 66 0 66
% of AUM 3 0 2
Total 2,529 532 3,061
% of AUM 83 17 100
Source: Company, Emkay Research, AMFI
Exhibit 28: …Direct vs Distributor mix
Source: Company, Emkay Research, AMFI
Exhibit 29: HDFC AMC MAAUM mix
MAAUM (Rsbn) T15 B15 Total
Debt 1,307 134 1,441
% of AUM 53 24 48
Equity 701 243 944
% of AUM 29 44 32
Balanced 432 172 605
% of AUM 18 31 20
ETF 5 - 5
% of AUM 0 - 0
Total 2,445 550 2,995
% of AUM 82 18 100
Source: Company, Emkay Research, AMFI
Exhibit 30: ….Direct vs Distributor mix
Source: Company, Emkay Research, AMFI
Exhibit 31: Reliance Nippon MAAUM Mix
MAAUM (Rsbn) T15 B15 Total
Debt 1,263 213 1,476
% of AUM 65 40 60
Equity 489 258 747
% of AUM 25 49 30
Balanced 76 46 121
% of AUM 4 9 5
ETF 119 14 134
% of AUM 6 3 5
Total 1,948 531 2,478
% of AUM 79 21 100
Source: Company, Emkay Research, AMFI
Exhibit 32: …..Direct vs Distributor mix
Source: Company, Emkay Research, AMFI
39 18
35
61 82
65
-
20
40
60
80
100
120
T15 B15 Total
%Direct Distributor
36
17 33
64
83 67
-
20
40
60
80
100
T15 B15 Total
%
Direct Distributor
51
27 46
49
73 54
-
20
40
60
80
100
T15 B15 Total
%
Direct Distributor
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 10
Exhibit 33: Birla Sun Life MAAUM Mix
MAAUM (Rsbn) T15 B15 Total
Debt 1,453 163 1,616
% of AUM 70 41 65
Equity 511 178 689
% of AUM 25 45 28
Balanced 115 56 171
% of AUM 6 14 7
ETF 2 0 2
% of AUM 0 0 0
Total 2,081 398 2,478
% of AUM 84 16 100
Source: Company, Emkay Research, AMFI
Exhibit 34: …Direct vs Distributor
Source: Company, Emkay Research, AMFI
Exhibit 35: SBI Funds Management MAAUM mix
MAAUM (Rsbn) T15 B15 Total
Debt 705 329 1,033
% of AUM 46 52 48
Equity 335 192 527
% of AUM 22 30 24
Balanced 102 108 210
% of AUM 7 17 10
ETF 386 6 391
% of AUM 25 1 18
Total 1,528 634 2,161
% of AUM 71 29 100
Source: Company, Emkay Research, AMFI
Exhibit 36: …Direct vs Distributor
Source: Company, Emkay Research, AMFI
48
22
44
52
78
56
-
20
40
60
80
100
T15 B15 Total
%
Direct Distributor
59
19
47
41
81
53
-
20
40
60
80
100
T15 B15 Total
%
Direct Distributor
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 11
Reliance Nippon Life Asset Management: Investment Arguments
Equity AUMs to drive growth
We expect RNAM will continue to drive growth and see a 22% CAGR in AUM between FY17-
FY20E. We believe this growth will led by growth in Equity AUM, which can see a 35% CAGR
growth between FY17-FY20E. The share of equities in the total AUM mix expanded from ~24%
in FY14 to ~28% in FY17 and further to 34% in Q3FY18. We project a more moderate growth in
equity mix and estimate it to rise to 38% by FY20E. We also expect the debt mutual fund to grow
at a CAGR of 14% during the same period though there could be some pressure on the
performance of these funds due to rising bond yields. However, we believe over a longer term
debt funds will be preferred over banking fixed deposits because it provides better returns than
traditional banking products. We expect RNAM to continue its focus on retail clients and the
same will continue to expand in B15 locations.
Exhibit 37: Mutual Fund QAAUM (Rs bn)
Source: Company, Emkay Research
Exhibit 38: Segment wise AUM breakup (%)
Source: Company, Emkay Research
Exhibit 39: Equity AAAUM expects to grow at 36% CAGR between FY17-20E
Source: Company, Emkay Research
Exhibit 40: Debt AAAUM expects to grow at 14% CAGR between FY17-20E
Source: Company, Emkay Research
Strong retail brand franchise
RNAM is the second largest retail AMC with a market share of 13.6% manages retail assets of
Rs710bn as of Q3FY18. Since demonetization, the retail MAAUM increased rapidly touching a
growth rate of 55% yoy in Q3FY18. RNAM, which is present in 261 locations (89 locations added
during Q3FY18) should continue expanding its footprint with a focus on retail investors. The focus
will continue to expand in smaller towns through Independent financial advisors (IFA) to reach
customers in remote areas. RNAM is also developing relationships with banks to cross sell
products as they have better geographical reach. Since FY16, RNAM has doubled market and
advertisement expenditure to promote it’s products through various digital channels.
946 1,035
1,3711,584
2,1092,230 2,314
2,436
0
500
1,000
1,500
2,000
2,500
3,000
FY
13
FY
14
FY
15
FY
16
FY
17
Q1F
Y18
Q2F
Y18
Q3F
Y18
18 24 20 21 18 19 17 17
5050
46 48 49 46 47 44
29 24 32 30 27 29 31 34
3 2 2 1 6 6 6 5
0
20
40
60
80
100
FY
13
FY
14
FY
15
FY
16
FY
17
Q1F
Y18
Q2F
Y18
Q3F
Y18
%
liquid Debt Equity ETFs
360 490 534
774 1,006
1,308
-
200
400
600
800
1,000
1,200
1,400
FY15 FY16 FY17 FY18E FY19E FY20E
Equity AAAUM (Rsbn)
865 1,0241,301 1,478
1,6801,910
0
500
1,000
1,500
2,000
2,500
FY15 FY16 FY17 FY18E FY19E FY20E
Debt QAAUM (Rs bn)
Expect 22% CAGR in AUM
between FY17-20E
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 12
Exhibit 41: Retail AUM share will continue to increase further
Source: Company, Emkay Research
Exhibit 42: Retail client base will expand going forward
Source: Company, Emkay Research
Exhibit 43: RNAM consistently increasing retail AUM market share
Source: Company, Emkay Research
Continued broadening of distribution network to support retail AUM growth
RNAM distributes its products through various channels with over 62,000 distributors which
includes banks, financial institutions, and IFAs. The diversified mix of distributors ensures no
single distributor contributes significantly large AUM. This is a key strength for RNAM since the
company unlike its peers, is not owned by a bank and does not have a captive banking
distribution channel. RNAM continues to strengthen relationship with IFAs to increase retail AUM.
Investments through RNAMs own digital channel have been on the rise.
RNAM’s top 10 distributors collected ~48% of the total commissions paid to distributors in FY17
whereas top 10 distributors contributed ~15% of the total AUM. The top distributor contributed
3.3% of RNAM’s Average AUM as of FY17.
Exhibit 44: Top 10 distributor commissions paid in FY17
Source: Company, Emkay Research
Exhibit 45: Share of commissions among distributors as of FY17
Source: Company, Emkay Research
93 140 273
341
527
752 10
14
1921
25
29
0
5
10
15
20
25
30
35
-
100
200
300
400
500
600
700
800
FY13 FY14 FY15 FY16 FY17 FY18E
Retail (Rs bn) Retail/MAAUM (%)
6.15.3 5.4 5.7
6.6 6.9
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
FY13 FY14 FY15 FY16 FY17 FY18E
Retail folios (mn)
5.7
8.0
11.0 12.3
13.3 13.5
-
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
FY13 FY14 FY15 FY16 FY17 9MFY18
Retail AUM Market Share (%)
15.7
6.1 5.7 4.5 3.6 3.1 2.8 2.6 2.0 1.9
-
4.0
8.0
12.0
16.0
20.0
NJ I
ndia
Invest
IndusIn
d B
ank
HD
FC
Bank
IIF
L W
ea
lth
Ko
tak B
ank
ICIC
I B
ank
Pru
dent C
orp
Ad
vis
ory
Citib
an
k
ICIC
I S
ec
Ba
jaj C
apital
% of total commissions
48.0
12.9
39.1
Top 10distributors
Next 10distributors
Rest
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 13
Exhibit 46: Top 10 distributor by Average AUM FY17
Source: Company, Emkay Research
Exhibit 47: Distribution channel mix(%)
Source: Company, Emkay Research
Rising inflows in SIP by retail investors
RNAM will continue to grow SIP book to ensure long term and stable inflows from retail investors.
Compared to the industry average of Rs3,800-3,900 per SIP p.m., RNAMs average SIP size
stands at Rs2,700 p.m. RNAM has pioneered small SIPs with the lowest ticket size being as
small as Rs100 p.m. Focus on granularity has led to inflows in SIP doubling in last two years.
Total SIP AUM constituted ~29% of the total equity AUM respectively.
Exhibit 48: SIP monthly inflows has more than doubled since FY15
Source: Company, Emkay Research
Exhibit 49: Monthly new SIP amount nearly tripled since FY15
Source: Company, Emkay Research
Exhibit 50: SIP inflows increasing on a yoy basis….
Source: Company, Emkay Research
Exhibit 51: Average ticket size also increasing….
Source: Company, Emkay Research
Gaining market share in smaller towns
RNAM continues to focus on expanding penetration in small cities through increasing branch
expansion beyond top 15 (B15) locations. In Q3FY18, it had increased its presence to 89 new
locations and was present across 261 locations. RNAM typically has a small set-up in B15
locations with a staff count of 1-2 and a break-even period of 1-2 years. As of Feb’18, the total
MAAUM from B15 location was 21% of the total AUM. The MAAUM grew at a CAGR of 27%
between FY14-FY17E. RNAM has the second highest market share in B15 locations after SBI
MF.
3.3
2.3 1.7 1.6
1.2 1.2 1.0 0.9 0.9 0.9
-
1.0
2.0
3.0
4.0N
J I
ndia
Invest
HD
FC
Bank
IIF
L W
ea
lth
LIC
HF
LF
inancia
l…
Ko
tak B
ank
Citib
an
k
Axis
Capital
SP
A C
apital
Se
rvic
es
ICIC
I B
ank
Cre
dit S
uis
se
% of Avg. AUM
18
26
10
46
Banks IFA National distributors Directly by customers
2,742 3,397
4,409
6,490
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
FY15 FY16 FY17 9MFY18
Monthly SIP inflows (Rs mn)
113 110
238
337
-
50
100
150
200
250
300
350
400
FY15 FY16 FY17 9MFY18
New SIP amount (Rsmn)
118 123
171
26 26
29
23
26
29
32
0
50
100
150
200
FY15 FY16 FY17
SIP Book (Rs bn) (LHS) Equity AUM (%) (RHS)
2,1092,326
2,6242,872
0
500
1,000
1,500
2,000
2,500
3,000
3,500
FY15 FY16 FY17 9MFY18
SIP Book average ticket size (Rs)
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 14
Exhibit 52: Top 5 AMC MAAUM contribution from B15 (%)
Source: Company, Emkay Research
Exhibit 53: ….RNAM contribution from B15 over years
Source: Company, Emkay Research
Second largest ETF player
RNAM acquired Goldman Sachs’ domestic Asset Management business in Oct’15 comprising of
12 ETF schemes. The ETF AUM, which was Rs71bn when acquired has expanded significantly
to Rs132bn in Q3FY18 comprising 5% of the mutual funds AUM. RNAM today has 16 ETF
schemes across different asset classes of the market and is now the second largest ETF player
with a 19% market share. The rise in ETFs has been mainly driven by a rise in equity ETFs than
gold ETFs. We believe the share of ETFs can rise to 7% by FY20E.
Exhibit 54: ETFs increased post EPFO permitted to invest into these instruments
Source: Company, Emkay Research
Focus on expanding managed assets
RNAM continues to expand other fund management businesses like the AIF, PMS, international
business through international subsidiaries. It operates AIF business through subsidiary named
Reliance AIF. It launched first AIF in 2014 and is currently managing six schemes. Managing
commitment of Rs ~13bn across 4 AIF schemes. In Dec’17, RNAM launched two new Category
III AIFs - Equity Opportunities AIF Scheme II and Equity Opportunities AIF Scheme III.
RNAM is also expanding its overseas footprint. Nippon Life Insurance (NLI), RNAM’s promoter
shareholder has a strong presence across multiple developed markets and is the driving force
behind RNAM’s expanding presence across globe. NLI has subsidiaries and partnerships in all
major international financial markets like USA, Europe, Asia and Australia which offers a huge
potential to expand internationally.
RNAM acts as an advisor for India focused equity and fixed income funds managed by Nissay
Asset Management, a subsidiary in Japan. It also advises fund managed by its international
partners in Korea and Thailand. As of Q3FY18, RNAM managed ~Rs54bn of international
advisory mandates. Also, with support of NLI, RNAM has partnered with a leading bank in
Thailand to offer India Equity Fund.
Currently RNAM manages offshore funds through its international subsidiaries at Singapore and
Mauritius and has a representative office in Dubai, which enables the company to cater to
investors across Asia, Middle East, UK, US, and Europe. As on Dec 31, 2017, RNAM managed
total AUM of ~Rs30bn as part of offshore fund management portfolio. The aggregate
international AUM of RNAM, comprising advisory mandates and offshore funds stood at Rs84bn
in Q3FY18.
The strong global reach offered by NLI alongwith its very credible brand name places RNAM in
a unique position to diversify its AUM base going forward.
29
21 18 17 16
-
5
10
15
20
25
30
35
SBI MF RelianceNippon
HDFC MF ICICI Pru Birla Sunlife
80 81 80 81 79
20 19 20 19 21
-
20
40
60
80
100
120
FY14 FY15 FY16 FY17 Feb-18
T 15 B 15
6 4
109
28 22 15 14
28
0
20
40
60
80
100
120
140
FY13 FY14 FY15 FY16 FY17
Equity ETF (Rs bn) Gold ETF (Rsbn)
Share of ETFs in MF AUM can
rise to 8% by FY20E
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 15
Exhibit 55: End of period AUM breakup
Particulars (Rs mn) FY13 FY14 FY15 FY16 FY17 Q3FY18
Mutual funds (including ETFs) 8,14,730 9,44,890 12,94,000 14,61,420 20,35,870 22,46,000
% growth NA 16.0 36.9 12.9 39.3 17
% of AUM 50.9 51.2 54.6 53.1 58.0 57.9
Managed accounts 7,22,550 8,51,090 10,14,860 12,46,950 14,52,630 16,02,000
% growth NA 17.8 19.2 22.9 16.5 16.5
% of AUM 45.1 46.1 42.8 45.3 41.4 41.3
-AIF 0 0 5,290 9,530 13,180 17,000
% growth NA NA NA 80.2 38.3 29.0
% of AUM 0.0 0.0 0.2 0.3 0.4 0.4
Offshore funds and advisory mandates 63,170 49,700 60,390 43,270 19,050 31,000
% growth NA -21.3 21.5 -28.3 -56.0 19
% of AUM 3.9 2.7 2.5 1.6 0.5 0.8
Total end of period AUM 16,00,450 18,45,680 23,69,250 27,51,640 35,07,550 38,78,000
Growth % yoy NA 15.3% 28.4% 16.1% 27.5% 17%
Source: Company, Emkay Research
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 16
Financial Analysis: Strong operating metrics
SEBI has been rationalizing fees charged to the investors and over the years has brought in
significant reforms in the AMC business. Discontinuation of entry loads of schemes, discouraging
churn by brokers through abolition of exit load, and a shift to TER (total expense ratio) regime
has made investing in MFs transparent. The TER, as noted below has been defined based on
corpus of the schemes. All these measures have brought stability to earnings outlook of AMCs.
We therefore expect stable investment management fee yield for RNAM. Improving AAUM with
a higher equity mix and stable yield should deliver a secular increase in PAT at 24% CAGR
FY17-FY20E.
Exhibit 56: Investment mgt. fees to improve with rising equity AUM
Source: Company, Emkay Research
Exhibit 57: Total revenues / AAUM to have upside bias
Source: Company, Emkay Research
Exhibit 58: Expenses / AAAUM to stay stable
Source: Company, Emkay Research
Exhibit 59: PAT margin also PAT CAGR of 24%
Source: Company, Emkay Research
Exhibit 60: SEBI expense ratio guidelines
Types Expense Ratio
Fund of Fund 2.5% of daily net assets
Index Fund or ETF 1.5% of daily net assets
Equity
2.5% for first Rs1bn
2.25% for next Rs3bn
2% for the next 3bn
1.75% thereafter
Debt Scheme investing in bonds shall be less by an at least 0.25% of daily net assets
Source: Company, Emkay Research
Exhibit 61: RNAM: Trend in average expense ratio (%)
Category Regular Direct
2016 2017 2016 2017
Equity Diversified 2.51 2.44 1.62 1.55
Equity Balanced 2.52 2.47 1.53 1.3
Debt-liquid 0.27 0.26 0.13 0.1
Debt-Other 1.45 1.44 0.74 0.72
Source: Company, Emkay Research, ICRA
0.66
0.76
0.67
0.700.71
0.72
0.64
0.68
0.72
0.76
0.80
0.84
-
5
10
15
20
25
30
FY15 FY16 FY17 FY18E FY19E FY20E
Invt. Mgt Fees (Rs bn)
Invest. Management fees/AAAUM (%)
0.77
0.86
0.76
0.780.78
0.79
0.75
0.77
0.79
0.81
0.83
0.85
0.87
-
5
10
15
20
25
30
FY15 FY16 FY17 FY18E FY19E FY20E
Total Revenues (Rsbn) Total Revenues/AAAUM(%)
0.39
0.52
0.45 0.46 0.46 0.46
0.35
0.40
0.45
0.50
0.55
-
5.0
10.0
15.0
20.0
FY15 FY16 FY17 FY18E FY19E FY20E
Total Expenses (Rsbn) Total Expenses/AAAUM (%)
0.28 0.26
0.21 0.21 0.22 0.22
0.10
0.20
0.30
0.40
0.0
2.0
4.0
6.0
8.0
10.0
FY15 FY16 FY17 FY18E FY19E FY20E
PAT (Rsbn) PAT/AAAUM (%)
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 17
Strong operating metrics
Despite not enjoying a captive bank distribution channel like bank owned AMCs, RNAM has
maintained a high Revenue/MAAUM at 67bps and PAT/MAAUM at 19bps in FY17. Among the
large players, ICICI Prudential MF and HDFC MF have higher proportion of (equity+ balanced)
mix in the total assets under management (ICICI has 47% and HDFC MF has 52% as of Feb-
18).
Exhibit 62: RNAM generates amongst highest inv. mgt. fees
Source: Company, Emkay Research, AMFI
Note: We have used the MAAUM for comparing yields as it is easily available in AMFI
reporting format.
Exhibit 63: RNAM has highest revenue yield amongst large AMCs
Source: Company, Emkay Research, AMFI
Since there is some level of heterogeneity in the way opex is presented in financials by AMCs,
we have looked at the PBT and PAT margin for comparison. RNAM’s PBT and PAT margins are
amongst the best in the peer group, given the fact it is not backed by a bankassurance channel.
Exhibit 64: PBT/ MAAUM amongst the best
Source: Company, Emkay Research, AMFI
Note: We have used the MAAUM for comparing yields as it is easily available in AMFI
reporting format.
Exhibit 65: PAT / MAAUM amongst the best
Source: Company, Emkay Research, AMFI
0.60 0.59
0.47 0.45 0.44
-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
HDFC RelianceNippon
ICICI Birla Sunlife SBI
Invt. Mgt Fees/MAAUM(%) (FY17)
0.67 0.66
0.54 0.51 0.48
-
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
RelianceNippon
HDFC ICICI Birla Sunlife SBI
Revenue/MAAUM(%) (FY17)
0.33 0.30
0.27
0.20 0.17
-
0.10
0.20
0.30
0.40
HDFC ICICI RelianceNippon
SBI Birla Sunlife
PBT/MAAUM (%) (FY17)
0.23
0.19 0.19
0.14 0.11
-
0.05
0.10
0.15
0.20
0.25
HDFC ICICI RelianceNippon
SBI Birla Sunlife
PAT/MAAUM(%) (FY17)
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 18
Valuation & Outlook
Valuing AMCs: Valuations under AUM approach
In India, valuations of most of the deals in AMC space in past have been reported based on the
size of AUM and a specified value ascribed to the AUM based on equity and debt mix. This value
was typically higher, 5-6% for equity AUM and a lower 3-4% for the debt AUM. RNAM’s current
market capitalization indicates a valuation of 3.6% on the FY18E AUM Rs4.2tn. Using 6% / 3%
value for equity / debt AUMs respectively yields a value of 4.6% of AUM or a target market
capitalization of Rs200bn compared to RNAM’s current market capitalization of Rs159bn. For
balanced funds, we use mid-range values (4.5%) and for managed assets, an even lower, ad-
hoc value of 2%.
DDM approach
Though a regulated business, AMCs are not leveraged entities requiring regulatory capital. With
reinvestment needs limited to branch expansion, mature AMCs like RNAM can pay out
substantial portion of their net profit as dividends. RNAM’s dividend payout ratio has been 60%
(75% including dividend distribution tax). We have kept it unchanged in our explicit estimates.
Constructing a dividend discount model based on profit growth that dovetails to terminal growth
rate of 4% over 20 years and a dividend payout ratio that rises to 95% as business stabilizes,
we arrive at a valuation of Rs208bn for RNAM. We use a uniform CoE of 13%.
Initiate coverage with BUY; TP Rs340
Our FY19E/FY20E EPS Rs10.0/12.5 discounts the target price 34x / 27x respectively. RNAM
currently trades at 26x / 21x FY19E / FY20E EPS. The TP yields an upside of 31% over CMP.
For a business aligned to the stock market performance, the target multiples may appear high
compared to the index multiples. Nevertheless, RNAM’s profit CAGR of 24% FY17-FY20E and
a RoE of 26% in FY20E appear to justify the target multiples.
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 19
Risk Factors
Poor market returns can moderate equity flows and earnings
Our thesis on RNAM assumes a continued popularity of and buoyancy in mutual funds which in
turn would benefit RNAM due to its strong distribution reach and past credibility. The period post-
demonetization has been unique in the way the flows have sustained leading to increasing
assumptions of a) maturing equity culture, and b) a substitution effect wherein bank term deposits
have been replaced by mutual funds.
Given the relatively unattractive nominal rates on bank term deposits (though real rates are
150bps on 1Y TDs), the higher nominal returns on equity schemes appear to be attracting
investors to them. This is borne out by following charts, which show a strong positive correlation
of equity inflows to index performance. The overall flows into MFs show a nil correlation to index
returns. This appears logical since overall flows would also constitute inflows to debt schemes.
Most investor education adverts call upon investors to build discipline and invest in a sustained
manner over long periods. How well this message is accepted may be tested in coming days if
equity / index performance stays weak. Recent flows appear to have moderated in-line with the
volatility witnessed in the markets.
Exhibit 66: Equity flows and index performance strongly correlated
Source: Company, Emkay Research
Exhibit 67: Stronger correlation of balanced funds with index perf.
Source: Company, Emkay Research
Exhibit 68: Nil correlation of overall flows with index performance
Source: Company, Emkay Research
25,000
28,000
31,000
34,000
37,000
-
50
100
150
200
250
Oct-
16
Nov-1
6
Dec-1
6
Jan
-17
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Jun
-17
Jul-1
7
Au
g-1
7
Se
p-1
7
Oct-
17
Nov-1
7
Dec-1
7
Jan
-18
Fe
b-1
8
Monthly Net inflows (Equity) (Rsbn) S&P BSE Sensex
Correlation 0.7
25,000
28,000
31,000
34,000
37,000
-
50
100
150
200
250
300
350
Oct-
16
Nov-1
6
Dec-1
6
Jan
-17
Feb-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Jun
-17
Jul-1
7
Au
g-1
7
Se
p-1
7
Oct-
17
Nov-1
7
Dec-1
7
Jan
-18
Fe
b-1
8
Monthly Net inflows (Equity+Balanced) (Rsbn)
S&P BSE Sensex
Correlation 0.8
25,000
28,000
31,000
34,000
37,000
-2,000 -1,500 -1,000
-500 -
500 1,000 1,500 2,000
Oct-
16
Nov-1
6
Dec-1
6
Jan
-17
Fe
b-1
7
Ma
r-17
Ap
r-17
Ma
y-1
7
Jun
-17
Jul-1
7
Au
g-1
7
Se
p-1
7
Oct-
17
Nov-1
7
Dec-1
7
Jan
-18
Feb-1
8
Monthly Net inflows (Rsbn) S&P BSE Sensex
Nil correlation
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 20
Company Background
RNAM started mutual fund operations in 1995 as Reliance Mutual Fund. Today, it is the third
largest asset management company in India and offers investment products in mutual fund
schemes across equity, fixed Income, money market, and ETF categories. RNAM had an AUM
of Rs3,878bn as of Q3FY18 with ~12% market share. RNAM is also the second largest ETF
player with a 19% market share and an AUM of ~Rs132bn. It had an AUM of Rs1,572bn under
managed accounts category where it acts as an asset manager for assets like PMS, EPFO, AIF,
NPS etc. In the offshore funds category, RNAM manages offshore funds through subsidiaries in
Singapore, Mauritius and a representative office in Dubai. The international funds as of Q3FY18
were Rs84bn, of which, Rs54bn were advisory mandates.
RNAM has three subsidiaries:
Reliance AIF Management Company Ltd. – subsidiary managing AIFs,
Reliance Asset Management (Singapore) Pte Ltd. – managing offshore funds,
Reliance Asset Management (Mauritius) Ltd. – managing offshore funds
Nippon Life first became a shareholder in RNAM in Mar’12 and following subsequent stake
purchase, Reliance Mutual Fund was renamed to Reliance Nippon Life Asset Management
during FY17.
Management profile
RNAM has an experienced top management and investment team that has been with the AMC
for a fairly long time. The stability in the top management and investment team brings the much
desired credibility for a large AMC.
Exhibit 69: Management background
Management Team
Sundeep Sikka
Executive Director & CEO
Mr. Sikka joined RNAM in 2003 and has risen through the ranks to become the CEO. He has handled various
positions through which he has been instrumental in building domestic and international operations of the company.
He has held both Vice-Chairman and Chairman positions of the industry body AMFI. He is a MBA from the
University of Pune. Prior to joining RNAM, Mr. Sikka had worked with ICICI Bank Limited for over four years.
Himanshu Vyapak
Deputy CEO
Mr. Vyapak joined RNAM in 2003. He is actively involved in various industry level initiatives and is also a member
on the ARN Committee of Association of Mutual Funds in India (AMFI), Advisory Committee of FLAB India. He is
an MBA (Gold Medalist) and a Graduate in Economics (Hons) from Delhi University. His career spans over 19
years across varied businesses in the BFSI sector.
Manish Gunwani
CIO-Equity Investments
Mr. Gunwani joined RNAM in Sep’17. Prior to joining RNAM, he worked with ICICI Prudential Asset Management
Company Limited. Mr. Gunwani is a B.Tech from IIT, Madras and MBA from IIM, Bangalore.
Amit Tripathi
CIO- Fixed Income Investments
Mr. Tripathi joined RNAM in 2003. He has successfully managed various fixed income and hybrid funds which have
been recognized for superior performance both nationally and internationally. He leads a team of 20 highly
motivated and experienced fixed income professionals.
Prateek Jain
CFO
Mr. Jain joined as CFO of RNAM in 2013. He has over 16 years of experience in finance. Prior to joining RNAM,
he worked with AIG Global Asset Management Company as CFO & Head - Risk Management. He has also been
associated with organizations like Howden Insurance Brokers India Pvt Ltd. and ICICI Lombard General Insurance
Company Ltd.
Source: Company, Emkay Research
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 21
Exhibit 70: Investment Performance of select equity funds
Top Equity Schemes MAAUM
(Rsbn)
CAGR %
1 Year Return 3 Years Return 5 Years Return
Scheme Benchmark Scheme Benchmark Scheme Benchmark
Reliance Regular Savings Fund - Balanced Option 121 18.1 14.7 11.1 9.0 17.6 13.7
Reliance Tax Saver (ELSS) Fund 104 19.9 19.8 8.3 8.2 23.3 15.3
Reliance Equity Opportunity Fund 102 24.0 19.8 6.9 8.2 17.9 15.3
Reliance Top 200 Fund 80 22.0 20.6 9.4 9.3 18.9 16.4
Reliance Arbitrage Advantage Fund 77 6.3 6.7 6.6 7.4 7.5 8.1
Reliance Growth Fund 70 22.2 19.8 11.7 8.2 20.5 15.3
Reliance Small cap fund 65 41.8 33.3 23.2 18.0 36.7 25.2
Reliance Vision Fund 36 20.5 19.8 7.5 8.2 18.8 15.3
Reliance Mid & Small Cap Fund 33 21.6 29.2 12.8 17.5 26.4 23.4
Reliance Regular savings fund-Equity option 33 25.1 19.8 11.2 8.2 19.2 15.3
Reliance Banking Fund 29 22.2 20.9 12.0 9.7 19.1 16.8
Reliance Equity Savings Fund 24 12.2 10.3 NA NA NA NA
Reliance Diversified Power Sector Fund 20 33.7 3.2 15.5 0.7 18.6 7.0
Reliance Pharma Fund 20 3.7 -7.7 3.4 -2.6 17.1 13.2
Reliance focused large cap fund 14 13.7 19.8 7.0 7.2 16.1 14.4
Source: Company, Emkay Research, AMFI
Exhibit 71: Continuing Interest in the existing MF schemes as on June, 2017
Particulars No of
Schemes
Total
Investment
(Rsmn)
Open Ended Close Ended
Minimum MF continuing
interest as per regulation (Rsmn)
Actual MF continuing interest
by the company (Rsmn)
Actual MF continuing interest
by the company (Rsmn)
Debt 30 3,594 74 2,466 1,054
Debt-Liquid 3 427 18 409 -
Equity 24 2,222 191 1,878 153
ETF 16 744 744 - -
Gold 1 59 5 54 -
Total 74 7,047 1,033 4,807 1,207
Source: Company, Emkay Research
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 22
Key Financials (Consolidated)
Income Statement
Y/E Mar (Rsmn) FY16 FY17 FY18E FY19E FY20E
Total Revenue from Operations 12,001 13,075 16,693 20,700 25,650
-Investment Management Fees 11,581 12,676 16,177 20,092 24,932
Other income 1,137 1,284 1,348 1,456 1,575
Total Revenue 13,138 14,359 18,040 22,156 27,225
Operating Expenses 7,914 8,546 10,642 12,979 15,830
Profit before tax 5,224 5,813 7,398 9,177 11,395
Tax 1,260 1,786 2,441 3,028 3,760
Tax rate (%) 24 31 33 33 33
Profit after tax 3,964 4,028 4,957 6,149 7,635
Balance Sheet
Y/E Mar (Rsmn) FY16 FY17 FY18E FY19E FY20E
Equity 115 115 6,120 6,120 6,120
Reserves & Surplus 17,504 18,511 19,888 21,596 23,717
Net worth 17,619 18,626 26,008 27,716 29,837
Preference Shares 300 300 - - -
Minority Interest 89 - - - -
Provisions 110 216 259 264 269
Other current liabilties 1,190 1,372 1,509 1,660 1,826
Total Liabilities 19,307 20,513 27,775 29,640 31,932
Net fixed assets 119 2,511 2,763 3,039 3,343
Investments 9,108 9,465 10,601 11,873 13,298
Other assets 10,081 8,536 14,412 14,728 15,292
Total assets 19,308 20,513 27,775 29,640 31,932
AAAUM
Y/E Mar (Rsbn) FY16 FY17 FY18E FY19E FY20E
Equity 490 534 774 1,006 1,308
Debt 1,024 1,301 1,478 1,680 1,910
ETF 18 57 65 141 231
Total AAAUM 1,533 1,892 2,317 2,827 3,449
End of period AUM
Y/E Mar (Rsbn) FY16 FY17 FY18E FY19E FY20E
Mutual funds 1,461 2,036 2,493 2,997 3,701
Managed accounts 1,247 1,453 1,714 2,023 2,387
Offshore funds and advisory mandates 43 19 23 27 33
Key Ratios (%)
Y/E Mar (%) FY16 FY17 FY18E FY19E FY20E
Invest. Management fees/AAAUM 0.76 0.67 0.70 0.71 0.72
Revenue from operations/ AAAUM 0.78 0.69 0.72 0.73 0.74
Total Revenue/ AAAUM 0.86 0.76 0.78 0.78 0.79
Marketing Expense/AAAUM 0.24 0.21 0.20 0.20 0.20
Operating Expenses/AAAUM 0.52 0.45 0.46 0.46 0.46
PBT/AAAUM 0.34 0.31 0.32 0.32 0.33
PAT/AAAUM 0.26 0.21 0.21 0.22 0.22
ROE 23.8 21.9 22.1 22.9 26.5
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 23
Per Share Data (Rs) FY16 FY17 FY18E FY19E FY20E
EPS 6.5 6.6 8.1 10.0 12.5
BVPS 29.3 30.9 42.5 45.3 48.8
DPS 2.4 4.0 4.9 6.0 7.5
Valuations (x) FY16 FY17 FY18E FY19E FY20E
PE 39.8 39.2 31.9 25.7 20.7
P/BV 8.8 8.3 6.1 5.7 5.3
Mkt cap/AUM (%) 10.3 8.4 6.8 5.6 4.6
Dividend yield (%) 0.9 1.6 1.9 2.3 2.9
Growth (%) FY16 FY17 FY18E FY19E FY20E
Investment Management fees 41.2 9.5 27.6 24.2 24.1
Total Revenue 37.6 9.3 25.6 22.8 22.9
Operating Expenses 61.1 8.0 24.5 22.0 22.0
PAT 11.8 1.6 23.1 24.0 24.2
AAAUM 23.1 23.4 22.5 22.0 22.0
Shareholding Pattern (%) Dec-16 Mar-17 Jun-17 Nov-17 Dec-17
Promoters - - - 85.8 85.8
Public & Others - - - 14.3 14.3
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 24
Emkay Rating Distribution
BUY Expected total return (%) (Stock price appreciation and dividend yield) of over 25% within the next 12-18 months.
ACCUMULATE Expected total return (%) (Stock price appreciation and dividend yield) of over 10% within the next 12-18 months.
HOLD Expected total return (%) (Stock price appreciation and dividend yield) of upto 10% within the next 12-18 months.
REDUCE Expected total return (%) (Stock price depreciation) of upto (-) 10% within the next 12-18 months.
SELL The stock is believed to underperform the broad market indices or its related universe within the next 12-18 months.
Completed Date: Dissemination Date:
Sources for all charts and tables are Emkay Research unless otherwise specified.
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Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 25
GENERAL DISCLOSURE/DISCLAIMER BY DBS BANK LTD AS DISTRIBUTOR OF THE RESEARCH REPORT This report is solely intended for the clients of DBS Bank Ltd,its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBS Bank Ltd. The research set out in this report is based on information obtained from sources believed to be reliable, but we (which collectively refers to DBS Bank Ltd, its respective connected and associated corporations, affiliates and their respective directors, officers, employees and agents (collectively, the “DBS Group”) have not conducted due diligence on any of the companies, verified any information or sources or taken into account any other factors which we may consider to be relevant or appropriate in preparing the research. Accordingly, we do not make any representation or warranty as to the accuracy, completeness or correctness of the research set out in this report. Opinions expressed are subject to change without notice. This research is prepared for general circulation. Any recommendation contained in this document does not have regard to the specific investment objectives, financial situation and the particular needs of any specific addressee. This document is for the information of addressees only and is not to be taken in substitution for the exercise of judgement by addressees, who should obtain separate independent legal or financial advice. The DBS Group accepts no liability whatsoever for any direct, indirect and/or consequential loss (including any claims for loss of profit) arising from any use of and/or reliance upon this document and/or further communication given in relation to this document. This document is not to be construed as an offer or a solicitation of an offer to buy or sell any securities. The DBS Group, along with its affiliates and/or persons associated with any of them may from time to time have interests in the securities mentioned in this document. The DBS Group, may have positions in, and may effect transactions in securities mentioned herein and may also perform or seek to perform broking, investment banking and other banking services for these companies. Any valuations, opinions, estimates, forecasts, ratings or risk assessments herein constitutes a judgment as of the date of this report, and there can be no assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments. The information in this document is subject to change without notice, its accuracy is not guaranteed, it may be incomplete or condensed, it may not contain all material information concerning the company (or companies) referred to in this report and the DBS Group is under no obligation to update the information in this report. This publication has not been reviewed or authorized by any regulatory authority in Singapore, Hong Kong or elsewhere. There is no planned schedule or frequency for updating research publication relating to any issuer.
The valuations, opinions, estimates, forecasts, ratings or risk assessments described in this report were based upon a number of estimates and assumptions and are inherently subject to significant uncertainties and contingencies. It can be expected that one or more of the estimates on which the valuations, opinions, estimates, forecasts, ratings or risk assessments were based will not materialize or will vary significantly from actual results. Therefore, the inclusion of the valuations, opinions, estimates, forecasts, ratings or risk assessments described herein IS NOT TO BE RELIED UPON as a representation and/or warranty by the DBS Group (and/or any persons associated with the aforesaid entities), that: (a) such valuations, opinions, estimates, forecasts, ratings or risk assessments or their underlying assumptions will be achieved, and (b) there is any assurance that future results or events will be consistent with any such valuations, opinions, estimates, forecasts, ratings or risk assessments stated therein. Please contact the primary analyst for valuation methodologies and assumptions associated with the covered companies or price targets. Any assumptions made in this report that refers to commodities, are for the purposes of making forecasts for the company (or companies) mentioned herein. They are not to be construed as recommendations to trade in the physical commodity or in the futures contract relating to the commodity referred to in this report. DBSVUSA, a US-registered broker-dealer, does not have its own investment banking or research department, has not participated in any public offering of securities as a manager or co-manager or in any other investment banking transaction in the past twelve months and does not engage in market-making.
ANALYST CERTIFICATION BY EMKAY GLOBAL FINANCIAL SERVICES LIMITED (EGFSL) The research analyst(s) primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views. The analyst(s) also certifies that no part of his/her compensation was, is, or will be, directly or indirectly, related to specific recommendations or views expressed in the report. The research analyst (s) primarily responsible of the content of this research report, in part or in whole, certifies that he or his associate1 does not serve as an officer, director or employee of the issuer or the new listing applicant (which includes in the case of a real estate investment trust, an officer of the management company of the real estate investment trust; and in the case of any other entity, an officer or its equivalent counterparty of the entity who is responsible for the management of the issuer or the new listing applicant). The research analyst(s) primarily responsible for the content of this research report or his associate does not have financial interests2 in relation to an issuer or a new listing applicant that the analyst reviews. EGFSL has procedures in place to eliminate, avoid and manage any potential conflicts of interests that may arise in connection with the production of research reports. The research analyst(s) responsible for this report operates as part of a separate and independent team to the investment banking function of the EGFSL and procedures are in place to ensure that confidential information held by either the research or investment banking function is handled appropriately. There is no direct link of EGFSL compensation to any specific investment banking function of the EGFSL. 1 An associate is defined as (i) the spouse, or any minor child (natural or adopted) or minor step-child, of the analyst; (ii) the trustee of a trust of which the analyst, his spouse, minor child (natural or adopted) or minor step-child, is a beneficiary or discretionary object; or (iii) another person accustomed or obliged to act in accordance with the directions or instructions of the analyst. 2 Financial interest is defined as interest that are commonly known financial interest, such as investment in the securities in respect of an issuer or a new listing applicant, or financial accommodation arrangement between the issuer or the new listing applicant and the firm or analysis. This term does not include commercial lending conducted at the arm’s length, or investments in any collective investment scheme other than an issuer or new listing applicant notwithstanding the fact that the scheme has investments in securities in respect of an issuer or a new listing applicant.
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 26
COMPANY-SPECIFIC / REGULATORY DISCLOSURES BY EMKAY GLOBAL FINANCIAL SERVICES LIMITED (EGFSL):
Disclosures by Emkay Global Financial Services Limited (Research Entity) and its Research Analyst under SEBI (Research Analyst) Regulations, 2014 with reference to the subject company(s) covered in this report-: 1. EGFSL, its subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of April 13, 2018 2. EGFSL, and/or Research Analyst does not market make in equity securities of the issuer(s) or company(ies) mentioned in this Research Report Disclosure of previous investment recommendation produced: 3. EGFSL may have published other investment recommendations in respect of the same securities / instruments recommended in this research
report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by EGFSL in the preceding 12 months.
4. EGFSL , its subsidiaries and/or other affiliates and Research Analyst or his/her relative’s does not have any material conflict of interest in the securities recommended in this report as of April 13, 2018.
5. EGFSL, its subsidiaries and/or other affiliates and Research Analyst or his/her relative’s does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the April 13, 2018
6. EGFSL, its subsidiaries and/or other affiliates and Research Analyst have not received any compensation in whatever form including compensation for investment banking or merchant banking or brokerage services or for products or services other than investment banking or merchant banking or brokerage services from securities recommended in this report (subject company) in the past 12 months.
7. EGFSL, its subsidiaries and/or other affiliates and/or and Research Analyst have not received any compensation or other benefits from securities recommended in this report (subject company) or third party in connection with the research report.
8. Securities recommended in this report (Subject Company) has not been client of EGFSL, its subsidiaries and/or other affiliates and/or and Research Analyst during twelve months preceding the April 13, 2018
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 27
COMPANY-SPECIFIC / REGULATORY DISCLOSURES BY DBS BANK LTD AS DISTRIBUTOR OF THE RESEARCH REPORT
1. DBS Bank Ltd., DBS HK, DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), DBSV HK or their subsidiaries and/or other affiliates do not have a proprietary position in the securities recommended in this report as of 31 Jan 2018.
2. Neither DBS Bank Ltd, DBS HK nor DBSV HK market makes in equity securities of the issuer(s) or company(ies) mentioned in this Research Report. Compensation for investment banking services: 3. DBSVUSA, does not have its own investment banking or research department, nor has it participated in any public offering of securities as a manager
or co-manager or in any other investment banking transaction in the past twelve months. Any US persons wishing to obtain further information, including any clarification on disclosures in this disclaimer, or to effect a transaction in any security discussed in this document should contact DBSVUSA exclusively.
Disclosure of previous investment recommendation produced: 4. DBS Bank Ltd. DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates may have published other investment
recommendations in respect of the same securities / instruments recommended in this research report during the preceding 12 months. Please contact the primary analyst listed in the first page of this report to view previous investment recommendations published by DBS Bank Ltd. DBS Vickers Securities (Singapore) Pte Ltd (“DBSVS”), their subsidiaries and/or other affiliates in the preceding 12 months.
RESTRICTIONS ON DISTRIBUTION
General This report is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.
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Indonesia This report is being distributed in Indonesia by PT DBS Vickers Sekuritas Indonesia.
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Singapore This report is distributed in Singapore by DBS Bank Ltd (Company Regn. No. 16800306E) or DBSVS (Company Regn. No. 1860024G) both of which are Exempt Financial Advisers as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. DBS Bank Ltd and/or DBSVS, may distribute reports produced by its respective foreign entities, affiliates or other foreign research houses pursuant to an agreement under Regulation 32C of the financial Advisers Regulations. Singapore recipients should contact DBS Bank Ltd at 6327 2288 for matters arising from, or in connection with the report.
Thailand This report is being distributed in Thailand by DBS Vickers Securities (Thailand) Co Ltd.
United Kingdom This report is disseminated in the United Kingdom by DBS Vickers Securities (UK) Ltd, ("DBSVUK"). DBSVUK is authorised and regulated by the Financial Conduct Authority in the United Kingdom.
In respect of the United Kingdom, this report is solely intended for the clients of DBSVUK, its respective connected and associated corporations and affiliates only and no part of this document may be (i) copied, photocopied or duplicated in any form or by any means or (ii) redistributed without the prior written consent of DBSVUK. This communication is directed at persons having professional experience in matters relating to investments. Any investment activity following from this communication will only be engaged in with such persons. Persons who do not have professional experience in matters relating to investments should not rely on this communication.
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This research report is being distributed by DBS Bank Ltd., (DIFC Branch) having its office at PO Box 506538, 3rd Floor, Building 3, East Wing, Gate Precinct, Dubai International Financial Centre (DIFC), Dubai, United Arab Emirates. DBS Bank Ltd., (DIFC Branch) is regulated by The Dubai Financial Services Authority. This research report is intended only for professional clients (as defined in the DFSA rulebook) and no other person may act upon it.
United Arab Emirates This report is provided by DBS Bank Ltd (Company Regn. No. 196800306E) which is an Exempt Financial Adviser as defined in the Financial Advisers Act and regulated by the Monetary Authority of Singapore. This report is for information purposes only and should not be relied upon or acted on by the recipient or considered as a solicitation or inducement to buy or sell any financial product. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situation, or needs of individual clients. You should contact your relationship manager or investment adviser if you need advice on the merits of buying, selling or holding a particular investment. You should note that the information in this report may be out of date and it is not represented or warranted to be accurate, timely or complete. This report or any portion thereof may not be reprinted, sold or redistributed without our written consent.
United States DBSVUSA did not participate in its preparation. The research analyst(s) named on this report are not registered as research analysts with FINRA and are not associated persons of DBSVUSA. The research analyst(s) are not subject to FINRA Rule 2241 restrictions on analyst compensation, communications with a subject company, public appearances and trading securities held by a research analyst. This report is being distributed in the United States by DBSVUSA, which accepts responsibility for its contents. This report may only be distributed to Major U.S. Institutional Investors (as defined in SEC Rule 15a-6) and to such other institutional investors and qualified persons as DBSVUSA may authorize. Any U.S. person receiving this report who wishes to effect transactions in any securities referred to herein should contact DBSVUSA directly and not its affiliate.
Other jurisdictions In any other jurisdictions, except if otherwise restricted by laws or regulations, this report is intended only for qualified, professional, institutional or sophisticated investors as defined in the laws and regulations of such jurisdictions.
Emkay Global Financial Services Ltd.
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Tel: +91 22 66121212 Fax: +91 22 66121299 Web: www.emkayglobal.com
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 28
SINGAPORE
DBS Bank Ltd
Contact: Janice Chua
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THAILAND
DBS Vickers Securities (Thailand) Co Ltd
Contact: Chanpen Sirithanarattanakul
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Securities and Exchange Commission, Thailand
INDONESIA
PT DBS Vickers Sekuritas (Indonesia)
Contact: Maynard Priajaya Arif
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Tel. 62 21 3003 4900
Fax: 62 21 3003 4943
e-mail: [email protected]
Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage
Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore
ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 29
Ravikant Bhat, MBA
+91-22-266242430