Reliance Nippon Life Asset Management Ltd IPO............. Should you apply????
Hello
Friends,
We are in
the last week of the month and this month has seen lesser IPOs than the
previous months. Another one lined up is Reliance Nippon Life Asset Management
Ltd which was formerly known as Reliance Capital Asset Management Ltd. The
company is in the business of providing life insurance.
Lets first
look at the basics.
Particulars
|
Details
|
Company Name
|
Reliance Nippon Life
Asset Management Ltd
|
Issue Open Date
|
25th Oct
2017
|
Issue Closing Date
|
27th Oct
2017
|
Issue Price Band
|
Rs 247 to Rs 252
|
Issue Size
|
Rs 1542.24 Crs
|
Shares per Lot
|
59 Shares
|
About the
company!!!
The company is in the business of life insurance. But along
with life insurance it also provides Health insurance, pension plans, Mutual
Funds, retirement plans etc. It’s a part of ADAG i.e Anil Dhirubai Ambani
Group. The company is a collaboration between Reliance Capital and Nippon Life
of Japan. After the government increased FDI investment in Insurance from 26%
to 49%, Nippon Life increased their stake in the company to 49%.
Now that
you know the company, should you invest in Reliance Nippon Life Asset
Management Ltd?
Come let’s
dive into this company to look at the fruits it might hold.
Utilization
of Funds!!!
The issue
is partly an OFS and partly a fresh issue.
1. OFS of Rs 925.34 Crs which will go
to the promoters and will not be received by the company.
2. Fresh issue of Rs 616.90 Crs which
will be utilized for the following
a. Setting up new branches and relocating
certain existing branches Rs 38.31 Crs
b. Upgrading the IT system Rs
40.65 Crs
c. Advertising, marketing and brand building
activities Rs 72.10 Crs
d.
Lending to its Subsidiary (Reliance AIF) for
investment as continuing interest in the new AIF schemes managed by Reliance
AIF Rs 125.00
Crs
e.
Investing towards their continuing interest in
new mutual fund schemes managed by the company Rs
100.00 Crs
f.
Funding inorganic growth and other strategic
initiatives Rs 165.00 Crs
g.
Meeting expenses towards general corporate
purposes. Balance
A major chunk of money is gonna go to its
subsidiary it seems.
So into the
Financials now!!!!
1. The company’s networth has increased
from Rs 1417.82 Crs as on 31.03.2013 to Rs Rs 1870.30 Crs as on 31.03.2017 and
to Rs 1653.47 Crs as on 30.06.2017. The company has made profits in Q1 of
2017-18 and therefore the dip in networth should amount to some adjustments in
the reserves. Growth in networth is not that great. However when compared to
other long term liabilities the company is very much in a comfortable position.
2. The company has a good amount of
money invested in fixed assets mainly intangible assets. The company is having
Rs 235.63 Crs in intangible assets as on 30.06.2017 whereas only Rs 9.17 Crs in
tangible assets.
3. The company’s investment value,
which is the most important figure for an asset management company is Rs 626.50
Crs as on 30.06.2017 which is a good number.
4. The company’s total revenue was at
Rs 712.67 Crs in the year 2012-13 which has increased to and Rs 1400.44 Crs in 2016-17
and also made a business of Rs 378.15 Crs in Q1 of 2017-18.
5. Now looking into the profit of the
company, its increased from Rs 198.96 Crs in 2012-13 to Rs 405.57 Crs in
2016-17. Even in the 3 months of Q1 2017-18 the company has made a profit of Rs
834.37 Crs which if we annualize will be around Rs 333.75 Crs, which is less
than the previous year. Not sure how much of this is attributable to recent
reforms in the country. I sure hope that the other 3 quarters will be very much
fine.
Valuations!!!
The company’s
growth on the EPS level has not been that great. Its basic EPS has only
increased from Rs 6.2 in 2014-15 to Rs 6.87 in 2016-17. The diluted is not much
different. So with a EPS of Rs 6.87 the PE at Rs 252 comes around 36.68, which
is very reasonable as compared to SBI life and very much inline with ICICI
prudential. The issue is surely not overpriced and I would surely say that it’s
a little undervalued. Further Insurance is a very profitable business, not to
mention that they have mutual funds as well under their arsenal. You can see
that the company’s revenue in 2016-17 was Rs 1400.44 Crs and the profit during
that year was Rs 405.57 Crs now that’s almost 30% profit.
So the
verdict on this case!!!
Reliance
Nippon Life Asset Management Ltd looks very promising and is a “Subscribe”.
Thank you
very much for joining us.
-RicherInvestor
Written by
Roger Vins Herman (CA, Mcom)
Disclosures:
The author or any person at RicherInvestor doesn't have any financial interest in the Company.
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