Reliance Nippon Life Asset Management - Information Analysis

Reliance Nippon Life Asset Management is a joint venture between Reliance Capital and Nippon Life Insurance, which is one of the largest life insurance company in the world. It manages mutual fund schemes (Equity, Debt, Hybrid, Commodities and ETFs). It also provides managed account services which include portfolio management services, alternative investment funds, pension funds, offshore funds and advisory mandates. It is the third largest AMC (asset management company) in India with a market share of 11.4% and total AUM (assets under management) of Rs 3.6 lakh crore, including managed funds of Rs 1.5 lakh crore (as of June 30, 2017). Reliance Nippon has a network of 171 branches and about 58,000 distributors. It also manages 55 open-ended,174 close-ended and 16 ETF (Exchange Traded Funds) schemes. Its management fees and net profit have grown at a rate of 21% and 15% respectively during 2013-17. The Trailbreaker In the 1990s, there used to a small listed AMC which no longer exists. However, the industry conditions and the scale of this AMC is so different now, that for all practical purposes, this is the first IPO from a mutual fund company. The MF industry In India, mutual funds are a sunrise industry with a huge potential. For the entire industry, the last five years growth rate is 24% p.a. for assets under management, 20% for revenues and 23% for net profits as of March 31, 2017. On top of that, in Value Research's estimation, the industry as a whole has hit barely 10% of the total potential. Moreover, although the industry is getting a huge new number of investors every year, an overwhelming potential of Indian savers are yet to wake up to mutual funds. This represents a large potential for growth. Mutual funds account for as low as 3% of total financial savings of Indian households. Management fee is the primary source of revenue for AMCs. It is the fee charged for managing investors' money and is charged, as well as regulated as a percentage of the assets. Market regulator SEBI has imposed a maximum cap on the fees which can be charged based on the asset class. A unique feature of an AMC's revenue is its annuity-like nature. Once an investment is made, it keeps yielding the management fee as long as the investor does not redeem it. Long-lived assets keep making money for the AMC with very little attendant cost, for years and even decades. Asset management is a concentrated industry with top 5 players (out of 41) accounting for 57% of industry as of June 30, 2017 and top 10 players accounting for more than 80% of AUM since 2015. The table below highlights the total AUM of top 5 players in mutual fund industry excluding managed funds. Strengths The AUM size provides it with a big advantage. Bigger th