Nippon India MF looks to regain lost market share after RNam takeover

RNam market share slid from 12% to 8.5% in 4 years; Re-branded fund house looks to regain investor assets in debt-oriented schemes

Japanese financial services giant Nippon Life on Monday officially announced the takeover of Reliance Nippon Life Asset Management Company (RNam), and unveiled the company’s new brand identity, Nippon India Mutual Fund (NIMF).

Under the aegis of Nippon Life, Sundeep Sikka, executive director and chief executive officer of NIMF, said he expects fund house to quickly reverse the market share loss seen in the institutional investors and high networth investors (HNIs) segment.

Sikka said the fund house looks to leverage the global presence of Nippon Life and also re-align fund house’s risk-management practices with those of the financial services giant.

Over the last four years, RNam has seen its overall market share decline from 12 per cent to 8.5 per cent. In September quarter, the fund houses’ average assets under management (AAUM) stood at Rs 2.02 trillion, which was nine per cent lower than previous quarter, showed data collated from Association of Mutual Funds in India.

The asset erosion has largely been on the debt side. A CLSA note pointed out that within liquid schemes -- a category largely dominated by institutional and corporate investors -- the company’s AUM has dropped 38 per cent; from Rs 46,400 crore in August last year (before IL&FS), to Rs 28,700 crore in August, 2019. In overall debt space, assets have shrunk 36 per cent lower to Rs 93,600 over the same period, as per the note.

Advisors say re-branding and Nippon Life's global expertise bodes well for the fund house. "Change-over from Reliance Capital group's name after their stake sale will improve perception towards the fund house. Also, investors would expect fund house to adopt better risk-management framework with Nippon Life holding 75 per cent stake," said Amol Josi, founder of Plan Rupee Investment Services.

“It will be important to watch how the company is able to reclaim some of the share lost over the past year or so, partly due to investor concern over its sponsors besides the general risk-aversion of investors,” analysts at CLSA said in the note.

Sikka highlighted that the fund house’s market share in the retail segment has remained on a strong footing. He added that the fund house will continue to focus on this segment, as it looks to build a sustainable long-term business model.

A closer integration with Nippon Life can help the fund house in making further inroads in alternate business and garnering more foreign flows.

“We will provide full support to expand International and alternate business by leveraging our global network,” said Hiroshi Shimizu, president, Nippon Life Insurance.

In June, launch of Indo-Japan fund of funds was announced with the mandate to invest in Indian start-ups and look at other opportunities in the South Asian region. The fund has had letter of intent from marquee Japanese investors including Mizuho Bank, Development Bank of Japan, Suzuki and Nippon Life, raising around $200 million so far.