Reliance Nippon Life AMC plans IPO in FY18; eyes valuation of Rs 20,000 cr

RNLAM, which manages assets worth nearly Rs 3.6 lakh cr, had registered a profit of Rs 581 cr

Reliance Nippon Life Asset Management (RNLAM), the asset management arm of Anil Ambani-promoted Reliance Capital, plans to come up with an initial public offering (IPO) — the first by a major asset manager in the country — before March 2018.

Promoters Reliance Capital and Japan’s Nippon Life could tender their shares in the offering. Sources said the asset manager was eyeing valuations of around Rs 20,000 crore. According to industry players, an asset manager is valued at 5 per cent of its assets or 30 times its profit.

For the financial year 2016-17, RNLAM, which manages assets worth nearly Rs 3.6 lakh crore, had registered a profit of Rs 581 crore.

The IPO comes at a time when the domestic mutual fund (MF) industry is witnessing healthy growth in investor flows and assets under management (AUM). The proposed move will also help create positive sentiment towards the Anil Ambani group, which has been saddled with huge debt obligation. Shares of Reliance Capital ended four per cent higher on Wednesday before the announcement.

Currently, Reliance Capital and Nippon Life hold 51 per cent and 44.57 per cent in RNLAM. The deal will be structured in the way that Reliance Capital’s shareholding doesn’t fall below that of Nippon, said a source.

“The board of directors has given its approval for the plan to list the equity shares of the company, subject to necessary regulatory and corporate approvals,” the company said in a release on Wednesday.

“(The IPO) is an opportunity for retail investors to participate as equity shareholders in the asset management company. Along with further consolidations happening in the economy, we would like to be ready to take advantage of suitable acquisitions,” said Sundeep Sikka, executive director & chief executive officer, RNLAM.

In the past 10 years, RNLAM, asset manager to Reliance Mutual Fund, has seen its AUM grow from Rs 51,084 crore to Rs 358,059 crore. About Rs 2.1 lakh crore of these assets are under Reliance MF, while the rest are across pension funds, managed accounts, alternative investments and offshore funds. RNLAM has seen its profits grow from Rs 72 crore in FY07 to Rs 581 crore in FY17, making it the second most profitable asset manager after HDFC MF.

Kaustubh Belapurkar, director (fund research) at Morningstar India, said a first successful listing would open the doors for more fund managers to unlock value by going public. UTI Mutual Fund, among the country’s top 10 fund houses, is also looking to launch an IPO.

In 2012, Reliance Capital had struck a deal with Japan's Nippon Life Insurance Company to acquire 26 per cent stake in the AMC business. Post that, the company was rebranded as RNLAM. Later in FY14, Nippon Life hiked its stake in RNLAM to 35 per cent and further to 49 per cent in FY16. Nippon had hiked its stake in FY14 and FY16 at a significant premium.

In October 2015, RNLAM acquired Goldman Sachs AMC, giving it a strong foothold in the exchange traded funds (ETF) space.

RNLAM will soon start the process of appointing bankers to manage the IPO.