About the Company

Nippon Life India Asset Management Limited (NAM India) is the asset manager of Nippon India Mutual Fund (NIMF). Nippon Life Insurance Company is the promoter of NAM India and currently holds 75 of its total issued and paid-up equity share capital while Reliance Capital holds 0.93% of shares in the company. Equity Shares of NAM India are listed on BSE Limited and the National Stock Exchange of India Limited​.​​​

Q3 2020 Updates

Financial Results & Highlights

Consolidated Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 360.64 403.97 -10.73% 322.6 11.79% 1043.65 1252.43 -16.67%
PBT 193.64 163.32 18.56% 168.28 15.07% 532.46 488.16 9.07%
PAT 149.3 109.74 36.05% 136.73 9.19% 411.63 335.41 22.72%


Detailed Results

    1. Revenues declined 11% YoY but showed good growth of 12% QoQ. Profits remained buoyant for the company with Q3 PAT rising 36% YoY and 9M PAT growing 23% YoY.
    2. The company saw AUM growth resuming after 4 quarters of AUM decline with 5% QoQ growth to Rs 2,04,370 Cr.
    3. Equity assets grew to 44% of total AUM. Retail Assets were at Rs 54,630 Cr which 26% of total AUM.
    4. B30 assets were at Rs 38,676 Cr accounting for 19% of overall MF AUM. B30 cities contributed to 27% of total AUM showcasing good penetration in these areas.
    5. Individual AUM was at Rs 1,10,232 Cr which accounted for 53% of MF AUM.
    6. The company enjoyed a market share of 16% in ETF space in terms of QAAUM. The company also has a 42% market share in ETF space in terms of folios and 76% in terms of volume share.
    7. Equity AUM rose 9% YoY while fixed income AUM fell 32% YoY.
    8. SIP inflows remained stable YoY but the number of equity transactions grew 14% YoY to 3.3 million transactions per month in Q3. Over 80% of incremental SIPs have a tenure of more than 5 years.
    9. The company added 600 new distributors in Q3 bringing the total up to 76000.
    10. Around 55% of all distributors are IFAs showcasing the strong reach of the company in the IFA community. No single distributor contributes to > 5.3% of AUM.
    11. Digital transactions rose 38% YoY with lumpsum purchases growing 32% YoY and digital SIP registrations grew 27% YoY.
    12. The company’s offshore business has a total AUM of Rs 11,600 Cr as of Dec ’19.
    13. The board has announced an interim dividend of Rs 3 per share.
    14. Nippon India AIF has a commitment around Rs 2700 Cr across all schemes.

Investor Conference Call Highlights

  1. The management mentions that the company has received a good response after the rebranding process was completed in October and the company is seeing HNIs and institutional investors returning to the company.
  2. Over 170 SMEs have started to invest with the company after the rebranding.
  3. The company has received an equity mandate of $500 million from a sovereign wealth fund in the last quarter.
  4. The company has also launched a venture capital fund of funds and has received commitments of $100 million from various investors in Japan.
  5. The management has stated that the exposure to Reliance subsidiaries is around Rs 320 Cr and the company has already written off this amount.
  6. The total exposure to Reliance Capital is only Rs 130 Cr while the balance sheet of the AMC does not contain any exposure to Reliance subsidiaries.
  7. The company earns around Rs 10 Cr currently from AIF and offshore business. The margin on the offshore business is around 33 to 50 bps.
  8. The management has stated that fixed income AUM for the industry has been falling but the management expects the AUM to stabilize in the coming quarters.
  9. The company has around 9 lac customers and the majority of the investment comes from institutional investors. The management is confident that the retail inflows into ETFs are going to rise going forward.
  10. The company has 3 funds in Japan (2 bond funds and 1 equity fund) which account for $1.2 billion.
  11. The management feels that the company stands to gain a lot from foreign capital inflows in the future due to the influence and pedigree of the promoting entity of Nippon Life.
  12. The management has reiterated that the company has a mandate of distributing 60% to 90% of its earnings every year as dividends for the last 5 years and this is expected to stay stable.
  13. The management expects to leverage Nippon Life’s influence to increase the size of alternative investments under the company.
  14. The management has clarified that there have been no major managerial exits from the company in the rebranding process and the top management remains committed to the company.
  15. The management has the company has reinvested almost all the surplus back into the company’s mutual funds and FDs.

Analyst’s View

Nippon India Life Asset Management is one of the leading asset managers in the country. The company has gone through a painful rebranding process in the last 12 months which saw the AUM for the company especially from institutional investors and HNIs decline. The company has finished its rebranding process in October and has also seen its AUM rising in the last quarter. The company has a very good reach and market positioning in the retail market which is evident from the company’s retail assets and its reach in the IFA community. The company also holds a commanding presence in the retail ETF space and has been expanding into the AIF space. This helps the company diversify and grow into alternate revenue streams that are not dependent on the domestic market. The company stands to gain a lot from its association with its promoter Nippon Life which should help the company attract foreign inflows much better than other domestic rivals. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.

 

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