Nippon Life India Asset Management Stock Analysis

Nippon Life India

Nippon Life India Asset Management Limited (“Nippon Life” or the “Company”) is one of India’s leading mutual funds, with Average Assets Under Management (AAUM) of Rs 2,04,370.79 Crores​​ ​(Oct 2019 – Dec 2019 QAAUM) and 88.78 lakhs folios (as on​ December 31, 2019​​).

The Company is one of the fastest-growing mutual funds in India, offering a well-rounded portfolio of products to meet varying investor requirements and has presence in 300​ cities (as on​ March 31, 2019​​) across the country. 

Nippon India Mutual Fund was earlier known as Reliance​​​ Mutual Fund. The name of Mutual Fund was changed from Reliance Mutual Fund to Nippon India Mutual Fund effective September 28, 2019.

Presence in about 2,500 locations covering branches and business partners over 500 cities in India.

Financial Position

Particulars

FY15

FY16

FY17

FY18

FY19

Revenue (In Rs. Cr.)

847.24

1,200.09

1,307.50

1,591.77

1,478.64

Growth

41.65%

8.95%

21.74%

-7.11%

EBITDA (In Rs. Cr.)

362.84

412.98

470.81

509.45

539.03

EBITDA Margin

42.83%

34.41%

36.01%

32.01%

36.45%

EBIT (In Rs. Cr.)

355.97

408.67

452.90

500.92

528.96

EBIT Margin

42.02%

34.05%

34.64%

31.47%

35.77%

PBT (In Rs. Cr.)

463.85

522.4

581.31

655.60

700.24

PAT (In Rs. Cr.)

354.46

396.43

401.96

455.74

486.09

PAT Margin

41.84%

33.03%

30.74%

28.63%

32.87%

EPS (In Rs.)

6.57

7.45

7.94

EPS Growth Rate

13%

7%

Historic P/E (Closing Price of 31st March)

45.05

33.23

25.56

CURRENT P/E (based on price of 14th Feb – Rs. 397.80)

43.48

CURRENT P/B (based on price of 14th Feb – Rs. 397.80)

9.47

D/E

ROCE

23.49%

22.93%

25.14%

20.96%

20.97%

ROE

23.08%

22.12%

21.47%

19.27%

18.91%

Quarterly Performance

 

Q3 FY 2019

Q4 FY 2019

Q1 FY 2020

Q2FY 2020

Q3FY 2020

TTM

Q-o-Q %

Y-o-Y %

Revenue

349.85

343.22

325.11

300.23

303.14

1,271.70

0.97%

-13.35%

EBITDA

118.17

141.46

154.58

145.13

147.14

588.31

1.38%

24.52%

EBITDA Margin

33.78%

41.22%

47.55%

48.34%

48.54%

46.26%

 

 

PAT

109.52

151.08

125.40

136.81

149.32

562.61

9.14%

36.34%

PAT Margin

31.30%

44.02%

38.57%

45.57%

49.26%

44.24%

 

 

EPS

1.79

2.47

2.05

2.24

2.39

9.15

6.70%

33.52%

Q3 FY 2020 Highlights:

  • Nippon Life Insurance of Japan on 27 September 2019 announced that it has successfully completed the acquisition of 75% stake in Reliance Nippon Life Asset Management from Reliance Capital.
  • Declared an interim dividend of Rs. 3/- per Equity Share
  • AUM was Rs. 3,10,100 Cr.
  • Post transaction witnessed reversal in AUM growth after four quarters of decline, MF assets under management (QAAUM) at Rs. 2,04,370 Cr.
  • As on Dec 2019, the Company has approx. 89 lakh investor folios
  • One of the largest ETF players with approx. 16% market share
  • Fees and Commission Expense stood at 11.97 Cr. in Dec 19 as compared to Rs. 72.85 in Dec 18

WHAT’S DRIVING THE STOCK?

AUM Growth Post Transaction – After 8 quarters of witnessing muted-to-negative AUM growth, the company delivered a 6% QoQ growth in MF QAAUM.

Nippon LifeStrong Distribution Network – Nippon Life has empanelled ~600 new distributors in Q3 FY20. Total independent financial advisors stood at ~76,000.

Nippon Life IndiaNippon Life has a total AUM of Rs. 310100 Cr., of which MF AUM is at Rs. 204370 Cr. A strong foothold in B30 cities (19% of AUM) has helped AMC garner & improve its retail share, which has aided in lowering its dependence on HNI & institutional flows.

Strong Promoter Group | Nippon Life Insurance Company – Japan’s s largest private life insurer & one of the largest in the world.

WHAT’S DRAGGING THE STOCK?

Revenue traction remains weak – Sequential flat revenue from operations at Rs. 303.14 Cr. due to sluggish AUM growth.

SIP inflow witnessed a marginal dip at Rs. 838 Cr. in Q3FY20 compared to Rs. 842 Cr. in Q3FY19.

Uncertainties Inherent In Capital-Market-Related Businesses – Given the cyclical nature of the business, the earnings are highly dependent on the level of investing (SIPs or lump-sum) activity in the capital markets.