Initiating Coverage Reliance Nippon Life Asset Management · Mutual Fund Industry in India: Poised...

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Emkay

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore ED: HEMANT MARADIA SA: DHANANJAY SINHA

Mutual fund industry poised for strong growth: The equity investment culture through

mutual funds has been deepening and is reflected well in the strengthening flows from

both Top 15 and B15 locations. Indian mutual fund AUM stood at Rs23tn as of Q4FY18

and the trend suggests a likely growth rate of 22-24% CAGR between FY18-FY22E. This

can more than double the MF AUMs beyond Rs50tn market over next four years. We

expect AMCs with strong distribution reach to benefit from the same.

Multiple factors contributing to AUM growth: While the post-demonetization

dampening of prices has reduced attraction of real estate as an investment, the relatively

stable inflation appears to have taken the sheen off gold. We don’t see this trend altering

meaningfully and as a consequence, expect the demand in financial assets to rise going

forward.

Gross flows remain strong: Recent data shows continued stability of SIP and overall

equity flows despite the correction seen in key indices. We interpret this as a sign of a

maturing investment culture. With rising stability in flows and RNAM’s focus on B15

locations, we expect RNAM to continue benefiting incrementally and report a healthy +22%

CAGR in AUM over FY18-FY20E. We expect the equity AUMs to show a meaningful

improvement in overall AUM.

RNAM – entrenched player with diversified AUM: RNAM with an AUM size of Rs3.9tn

in mutual fund schemes across equity, fixed Income, money market, ETF categories, and

managed assets is the third largest asset management company in India. RNAM has

achieved leadership through MF schemes that have delivered strong returns to investors

as well as a strong and diversified network of distributors across the country. Though not

owned by a bank, RNAM’s products are distributed by major retail banks. The granularity

of its flows and a wide distribution network ensures it is not overly dependent on any single

distributor, thereby reducing a key structural risk to its flows.

Initiate coverage with a ‘BUY’ and PT Rs340: We expect RNAM to deliver a +24%

CAGR in net profit FY17-FY20E driven by a healthy growth in AUMs, stable investment

management fees with rising equity contribution, and stable expense ratios. The target

price values RNAM at 34x/27x FY19E/FY20E EPS and 4.1%/3.4% FY19E/FY20E AUM.

Key risks: Our analysis suggests a strong correlation between index performance and

equity MF inflows though overall flows appear to run nil correlation to index performance,

thereby indicating alternating dominance of equity and debt flows. Sustained period of

lacklustre market performance can ebb incremental flows to equity schemes.

India Equity Research | Banking & Financial Services

April 13, 2018

Initiating Coverage

Reliance Nippon Life Asset Management Refer to important disclosures at the end of this report

Bellwether amongst AMCs

CMP Target Price

Rs 259 Rs 340 as of (April 13, 2018) 12 months

Rating Upside

BUY 31.1 %

Change in Estimates

EPS Chg FY19E/FY20E (%) NA

Target Price change (%) NA

Target Period (Months) 12

Previous Reco NR

Emkay vs Consensus

EPS Estimates

FY19E FY20E

Emkay 10.0 12.5

Consensus 10.6 13.0

Mean Consensus TP (12M) Rs 340

Stock Details

Bloomberg Code RNAM IN

Face Value (Rs) 10

Shares outstanding (mn) 612

52 Week H/L 335 / 237

M Cap (Rs bn/USD bn) 159 / 2.43

Daily Avg Volume (nos.) 340,656

Daily Avg Turnover (US$ mn) 1.5

Shareholding Pattern [Quarter]

Promoters 85.8%

FIIs 0.0%

DIIs 0.0%

Public and Others 14.2%

Price Performance

(%) 1M 3M 6M 12M

Absolute 1 (19) - -

Rel. to Nifty 1 (17) - -

Relative price chart

Source: Bloomberg

This report is solely produced by Emkay Global. The following person(s) are responsible for the production of the recommendation:

Ravikant Bhat

[email protected]

+91-22-266242430

Himanshu Taluja

[email protected]

+91-022-66121248

-10

-2

6

14

22

30

200

230

260

290

320

350

Nov-17 Nov-17 Dec-17 Jan-18 Feb-18 Mar-18 Apr-18

%Rs

Reliance Nippon (LHS) Rel to Nifty (RHS)

Financial Snapshot (Consolidated)

(Rs mn) FY16 FY17 FY18 FY19E FY20E

Investment Management Fees 11,581 12,676 16,177 20,092 24,932

Total Revenue 13,138 14,359 18,040 22,156 27,225

Net Profit 3,964 4,028 4,957 6,149 7,635

EPS (Rs) 6.5 6.6 8.1 10.0 12.5

AAAUM (Rsbn) 1,533 1,892 2,317 2,827 3,449

ROE (%) 23.8 21.9 22.1 22.9 26.5

PE (x) 40x 39x 32x 26x 21x

Mkt cap/AUM (%) 10.3 8.4 6.8 5.6 4.6

Source: Company, Emkay Research

Reliance Nippon Life Asset Management (RNAM IN) India Equity Research | Initiating Coverage

Emkay Research is also available on www.emkayglobal.com, Bloomberg EMKAY<GO>, Reuters and DOWJONES. DBS Bank Ltd, DBS Vickers Securities (Singapore) Pte Ltd,its respective connected and associated corporations and affiliates are the distributors of the research reports, please refer to the last page of the report on Restrictions on Distribution. In Singapore, this research report or research analyses may only be distributed to Institutional Investors,Expert Investors or Accredited Investors as defined in the Securities and Futures Act, Chapter 289 of Singapore

ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018 | 2

Mutual Fund Industry in India: Poised for Strong Growth

The equity investment culture through mutual funds has been deepening and we believe the MF

industry is in a sweet spot to exploit the same. The strengthening of SIP flows, especially post-

demonetisation looks set to sustain given the continued incremental commitments in form of new

folios. The recent market correction does not appear to have shaken the belief of retail investors

in SIP driven equity investments. And though Mar’18 witnessed a net outflow, our interaction with

industry participants suggests the redemptions were linked to changes in tax proposals and

should therefore be temporary. The overall change therefore augurs well for the Indian MF

industry and especially for the entrenched players with a strong distribution reach. Observing

past trends, we make some secular growth assumptions:

The industry AUM grew at a CAGR of 24% between FY65-2005 (UTI was set up in 1965),

at a CAGR of 33% between FY05-FY10 and at 18% CAGR between FY10-FY18. The

growth trend has again picked up in the last 2-3 years thereby increasing share of equities

in the overall AUM mix. We believe the rising trend can lift the share of equities in the overall

asset mix taking it closer to or above 40% over five year growth period of FY17-FY22E.As

of Q3FY18, the share of equities in the industry AUM mix was 32%, debt 57% and others

including balanced funds ~11%.

Indian mutual fund AUM stood at Rs23tn as of Q4FY18 and the trend suggests a likely

growth rate of 22-24% CAGR between FY17-FY22E. This can take the MF AUMs beyond

Rs50tn market over next four years. A continued preference for financial assets over

physical assets should support the growth in MF AUMs. We expect this to manifest in the

form systematic investment plans (SIPs) and tax saving ELSS schemes through retail

participation. AMC AUMs shall also find growth avenue in ETFs, which have been

expanding fast and the managed assets, which include AIFs, retirement funds (EPFO, NPS

etc), and offshore funds. And finally the expansion in the B15 cities shall also aid this

market.

Exhibit 1: Mutual funds industry historical growth trends…

Source: Company, Emkay Research, AMFI

Exhibit 2: Quarterly average AUM mix as of Q3FY18


-

4,000.0

8,000.0

12,000.0

16,000.0

20,000.0

24,000.0

28,000.0

FY

65

FY

87

FY

93

FY

2003

FY

2004

FY

2005

FY

2006

FY

2007

FY

2008

FY

2009

FY

2010

FY

2011

FY

2012

FY

2013

FY

2014

FY

2015

FY

2016

FY

2017

FY

2018

Rs b

n

QAAUM (Rsbn)

38

19

32

7 4

Debt Liquid/Money Market Equity Balanced Others

Mix of equity funds can rise to

40% by FY22E

QAAUM as of Q3FY18 was

Rs22.4tn rising marginally to

Rs23tn in Q4FY18.




We expect the equity MFs to grow at a rate faster than debt mutual funds. We expect equity

AUM to accelerate faster than the 21% CAGR between FY11-FY17. The retail investor

participation is expected to be strong in the equity AUM growth as incremental flows are backed

by rising SIPs.

Exhibit 3: Equity AUM growth higher than debt mutual funds


Exhibit 4: Debt AUM growth at 19% CAGR between FY11-17


Exhibit 5: Sharp rise in yearly net flows in MFs


Exhibit 6: Investor participation in different schemes (Dec-17)


Exhibit 7: Holding period of equity assets higher than non-equity assets


Share of mutual funds rising in household saving: Changing pattern of savings

in India

The share of mutual funds has been on the rise from 1.4% of net financial savings in FY12 to

2.9% in FY16. The penetration levels of the MF industry is still very low, with the total AUM to

GDP ratio at ~12% (FY17). With rising income levels of the working population and increased

awareness, the share of household savings is shifting towards financial savings. Since FY12,

the share of financial savings moved from 31.1% to 41.5% in FY16. This data is available with a

significant lag. So though we don’t have the FY17 data on household MF investments, looking

at the weak growth in bank deposits and the strong inflows exhibited by MFs, one can expect

the share to have risen further in FY17 and FY18.

2,169 2,031 1,937 2,134

3,801 4,410

6,727

10,075

-20

0

20

40

60

80

100

-

2,000

4,000

6,000

8,000

10,000

12,000

FY

2011

FY

2012

FY

2013

FY

2014

FY

2015

FY

2016

FY

2017

Dec-1

7Equity(Rsbn) Equity growth yoy(%)

3,800 3,845 5,088

6,118 7,027

7,918 10,819

11,192

-10

0

10

20

30

40

-

3,000

6,000

9,000

12,000

15,000

FY

2011

FY

2012

FY

2013

FY

2014

FY

2015

FY

2016

FY

2017

Dec-1

7

Debt (Rsbn) Debt growth yoy(%)

-0.5 -0.2

0.80.5

1.01.3

3.4

2.7

-1.0

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18

Rs.t

n

1 5 26

14

39

52 83

55

15

1 0 7

-

20

40

60

80

100

Retail HNI Corporates

%

Debt-liquid Debt-Others Equity ETF

6.89.5

14.918.4 18.1

32.3

17.7

12.2 11.915.1

18.2

24.9

0

5

10

15

20

25

30

35

0-1 Months 1-3 Months 3-6 Months 6-12 Months 12-24 Months >24Months

Equity Non-Equity

Equity assets have a longer

average holding period as

compared to non-equity assets

Increasing financial awareness

and increasing trend in financial

savings into MF rising




Exhibit 8: Increasing trend of financial savings in net household savings pattern

Parameters (Rs bn) FY12 FY13 FY14 FY15 FY16

Net financial savings 6,426 7,336 8,321 9,192 10,825

Growth (%) 14.2 13.4 10.5 17.8

% of net household savings 31.1 32.9 36.5 36.1 41.5

Savings in physical assets 13,892 14,625 14,120 15,782 14,835

Growth (%) 5.3 -3.5 11.8 -6.0


Savings in the form of gold & silver 336 367 368 456 439

Growth (%) 9.2 0.3 23.9 -3.7


Net Household savings 20,654 22,328 22,809 25,430 26,099

Growth (%) 8.1 2.2 11.5 2.6

Source: Company, MOSPI, Emkay Research

While the post-demonetization dampening of prices has reduced attraction of real estate as an

investment, the relatively stable and inflation appears to have taken the sheen off gold, which is

popular as a hedge against inflation. If stable price conditions persist, as expected by RBI, we

don’t see this trend altering meaningfully and as a consequence, expect the demand in financial

assets to rise going forward.

Exhibit 9: Increasing trend in mutual funds levels in net financial savings…

Parameters (Rsbn) FY12 FY13 FY14 FY15 FY16

Currency & Deposits 3,566 3,873 4,078 4,104 4,316

Growth (%) 8.6 5.3 0.6 5.2

% of net financial savings 55.5 52.8 49.0 44.6 39.9

Mutual funds 87 82 150 141 319

Growth (%) -5.7 82.9 -6.0 126.2


Shares & debentures 78 88 39 57 95

Growth (%) 12.8 -55.7 46.2 66.7


Insurance 1,957 1,799 2,045 2,993 2,661

Growth (%) -8.1 13.7 46.4 -11.1


Pension 957 1,565 1,778 1,888 2,769

Growth (%) 63.5 13.6 6.2 46.7


Claims on govt. -219 -71 231 10 666

Growth (%) -67.6 -425.4 -95.7 6,560.0

% of net financial savings -3.4 -1.0 2.8 0.1 6.2

Net financial savings 6,426 7,336 8,321 9,193 10,825

Source: Company, MOSPI, Emkay Research




Focus on retail investors from small towns, the new frontier of growth

Penetration of MF products beyond the top 15 locations (B15) remains a key thematic in the

asset management space. Large part of mutual fund AUM currently originates from top 5 cities.

The top 5 cities accounted for c.70% of the total AUM as of Q3FY18. The top 5 cities are Mumbai,

Delhi, Bangalore, Kolkata and Chennai. Only 18% of the total assets of the mutual fund industry

came from B15 locations as of Q3FY18.Hence we see very low penetrations levels from the

small towns as an attractive growth opportunity for AMCs.

The B15 locations are showing strong promise with the AUM from B15 cities growing faster than

T15 locations since FY14. Assets from B15 locations increased from Rs2.81tn in Nov’16 to

Rs4.4tn in Feb’18. Approximately 58% of the assets from small towns are in equity schemes.

Individual investors form a major portion of investments from B15 locations. As per AMFI data,

individual investors have a market share of 74% of total AUM from B15 locations which

contributes to only 27% of total assets held by individual investors.

We believe that inflows to MFs from the small towns will continue to build in a robust manner and

should largely come from retail investors with small ticket sizes.

Exhibit 10: MAAUM from B15 cities rising rapidly


Exhibit 11: B15 cities allocating more towards equities


Exhibit 12: Share of T15 cities is almost 83% of the total AUM


Exhibit 13: T5 cities contributed c.70% of the total AUM as of Q3FY18


Exhibit 14: AUM inflows through direct route is increasing


Exhibit 15: Individual investors now hold a higher share in AUM (Feb-18)


805 921 1,095 1,425 1,846 574 959

1,078

1,639

2,920

13 12

14

28

30

1,392

1,892 2,187

3,091

4,796

-

1,000

2,000

3,000

4,000

5,000

6,000

FY14 FY15 FY16 FY17 11MFY18

Rsbn

Debt Equities+Balanced Others

58 49 50 46 38

41 51 49 53 61

-

20

40

60

80

100

FY14 FY15 FY16 FY17 11MFY18

%

Debt Equities+Balanced Others

71% 74% 73% 72% 72% 72% 70%

14% 13% 13% 14% 14% 13% 13%

0%

20%

40%

60%

80%

100%

FY12 FY13 FY14 FY15 FY16 FY17 9MFY18

Top 5 Next 10

38

14

7

6

5 Mumbai

Delhi

Chennai

Bangalore

Kolkata

34 38 42 42

66 62 58 58

-

20

40

60

80

100

FY15 FY16 FY17 Feb-18

Direct Distributors

45

76

51

55

24

49

0

20

40

60

80

100

120

T15 B15 Total

Individual Institutional




Rising commitment to MF investments through Systematic Investment Plans

(SIPs)

Apart from the good stock market performance that has obviously attracted investors, there is no

doubt that continuous investor education via industry body AMFI, by individual MFs, as well as

SEBI etc has contributed to a significant awareness amongst retail investors about mutual funds

and SIPs as a convenient and disciplined approach to investing in equities on a periodic

(monthly) basis. Under guidance from SEBI, industry umbrella body AMFI began the ‘Mutual

Funds Sahi Hai’ (Hindi for ‘Mutual Funds Are Good’, also translates as ‘Mutual Funds Are The

Right Choice’) campaign. Over the past two years, the campaign has penetrated multiple media

platforms through its eye catching adverts explaining various aspects of MF investing.

Exhibit 16: The now popular ‘Mutual Funds Sahi Hai’ campaign videos educate on various aspects of MF investing

What is a Mutual Fund? What is a SIP? What is an ELSS?

Source: AMFI, Emkay Research

The following comparative data suggests the campaign has had a beneficial impact on MF flows,

particularly from the B15 locations, which has received special focus.

Exhibit 17: Mutual Funds Snapshot

Particulars Mar-17 Feb-18 (% yoy)

AUM (Rs tn) 17.6 22.2 26.5

Retail AUM (Rs tn) 8.6 11.9 37.8

B 15 cities retail AUM (Rs tn) 2.1 3.2 53.6

Folios (mn) 55.4 69.9 26.2

SIP accounts (mn) 13.5 20.5 51.9

SIP monthly contribution (Rs bn) 43.4 64.3 48.2

AAUM of equity oriented schemes (Rs tn) 5.3 7.7 46.0

Mutual fund AUM as of bank deposits (%) 16.0 19.0 18.8

No of unique investors (basis PAN)* (mn) 12.0 15.2 26.7

Source: Company, Emkay Research, Note: * Figures as of Dec-17 for Mar-17 numbers

An Investor Survey conducted by SEBI in 2015 had revealed c.60% mutual fund investors used

SIP route for investments. Recent data reflects that monthly SIP inflows have more than doubled

from Rs31bn in Apr’16 to Rs64bn in Feb’18. AMFI data shows that the MF industry added an

average 926K SIP accounts each month during FY18, with an average SIP size of about ₹3,300.

This data confirms the popularity of SIPs as an investment instrument.

Exhibit 18: SIP monthly inflows double since April-16


31

43

64

-

10

20

30

40

50

60

70

Ap

r-16

Ma

y-1

6

Jun

-16

Jul-1

6

Au

g-1

6

Se

p-1

6

Oct-

16

Nov-1

6

Dec-1

6

Jan

-17

Fe

b-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Feb-1

8

SIP Monthly inflows (Rs bn)

http://www.mutualfundssahihai.com/en/what-is-a-mutual-fund

http://www.mutualfundssahihai.com/en/what-is-sip

http://www.mutualfundssahihai.com/en/What-is-an-ELSS




Increasing demand for Exchange Traded Funds (ETFs)

ETFs are another category of funds that have witnessed rising popularity since FY16. The ETF

AUM was Rs752bn as of Q3FY18 vs Rs499bn in FY17. It contributed around 3% to the total

mutual funds AUM in Q3FY18. A key trend in ETFs has been the significant shift from gold ETFs

to equity ETFs. The share of gold ETFs to total ETF AUM reduced to 6.5% in Q3FY18 from

~90% in FY13. The rising demand for equity ETFs is mainly driven by EPFO investing in ETFs.

Initially, EPFO was permitted to invest only 5% of it’s incremental corpus. This has now been

revised to 10%, thereby increasing investible corpus of EPFO.

Exhibit 19: Inflows into ETFs doubled in FY17


Exhibit 20: ETFs by Investor type as of Q3FY18


Rising trend in Alternative Investment Funds (AIFs)

AIFs are close ended, privately pooled investment vehicles which collect funds from HNI

investors. These funds are regulated by SEBI. The AIF market in India is still at a very early stage

when compared with mutual funds and PMS. However, we have seen rising trend in the recent

years, with the total commitment raised in AIFs increasing from Rs14.4bn as of Mar’13 to Rs1.4tn

as of Dec’17. We see majority of the commitments raised in Category II (61.7%) AIFs followed

by Category III and Category I AIFs. We believe that HNI participation for these category of funds

will rise and therefore uptrend will continue.

Exhibit 21: Rising inflows in AIFs

Source: Company, Emkay Research, SEBI

Exhibit 22: Majority commitments raised in Category II AIFs

Source: Company, Emkay Research, SEBI

Leading AMCs gaining market share

As of Q3FY18, there were 42 AMCs in India. However, the top 5 AMCs dominated the market

with ~57% market share in the total AUM of Rs22.8tn as of Feb’18. The next 5 AMCs held 24%

of the market share. We believe that top 5 AMCs, with their distribution reach, focus on B-15

locations, and increasing penetration and popularity of their own digital channels shall continue

to dominate the incremental market share. RNAM despite not having bank led distribution model

had second highest retail market share of 13.5% as of Dec-17 with HDFC AMC having the

highest market share of retail AUM.

115 131 132 147

224

499

-

100

200

300

400

500

600

FY12 FY13 FY14 FY15 FY16 FY17

ETFs (Rsbn)

Corporates 84%

HNI (4%)

Retail (7%)

Others (4%)

0

300

600

900

1200

1500

FY13 FY14 FY15 FY16 FY17 9MFY18

(Rs b

n)

Commitments raised Funds raised Investment Made

25

4838

27 24 18

69

4653

62 6162

6 6 8 11 14 20

0

20

40

60

80

100


Category I Category II Category III




Exhibit 23: RNAM third largest AMC, has consistently stayed in top 5

Asset Management companies AUM (Rs tn) (Feb-18) Market share (%)

Top 5 AMCs

ICICI Prudential 3.1 13.0

HDFC 3.0 12.9

Reliance Nippon 2.5 10.7

Birla Sun life 2.5 10.7

SBI Funds Management 2.2 9.3

Total Top 5 AMCs 13.2 56.9

Next five AMCs

UTI 1.6 6.7

Kotak Mahindra 1.3 5.5

Franklin Templeton 1.0 4.5

DSP Blackrock Investment Managers 0.9 3.7

IDFC 0.7 3.0

Next 5 AMCs 5.4 23.4

Rest of the Market 4.6 19.8

Total 23.2 100.0


Exhibit 24: Debt AUM market share as of Q3FY18


Note: Does not include Balanced funds

Exhibit 25: Equity AUM market share as of Q3FY18


Note: Does not include balanced funds

Exhibit 26: Retail AUM market share as of Q3FY18

Source: Company, Emkay Research, AMFi

13 1211 11

8

0

2

4

6

8

10

12

14

Birla Sunlife ICICI Pru HDFC RelianceNippon

SBI

%

15

12

109

7

0

2

4

6

8

10

12

14

16

ICICI Pru HDFC RelianceNippon

Birla Sunlife SBI

%

14 13

11

8 8

-

2

4

6

8

10

12

14

16

HDFC AMC Reliance Nippon ICICI Pru SBI AMC Birla Sunlife

Retail Market Share (%)

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RNAM has highest share in direct channel mobilization

RNAM has built a strong and direct reach in both T15 and B15 locations and reports amongst

the best direct mobilization amongst the top 5 AMCs in these centres. In the T15 locations, RNAM

collected 51% of its MAAUM through own channels, second only to SBI MF, which collected

59%. And in the B15 locations, RNAM was top mobilizer through direct channel, mobilizing 27%

of MAAUM. Mobilization through direct channel helps reduce dependence on agency channels

but does not have direct cost benefit as sourcing commissions are charged to the customer.

Following comparative exhibits are based on Feb’18 data.

Exhibit 27: ICICI Pru MAAUM Mix

MAAUM (Rsbn) T15 B15 Total

Debt 1,407 163 1,569

% of AUM 56 31 51

Equity 850 299 1,149

% of AUM 34 56 38

Balanced 206 70 276

% of AUM 8 13 9

ETF 66 0 66

% of AUM 3 0 2

Total 2,529 532 3,061

% of AUM 83 17 100


Exhibit 28: …Direct vs Distributor mix


Exhibit 29: HDFC AMC MAAUM mix


Debt 1,307 134 1,441

% of AUM 53 24 48

Equity 701 243 944

% of AUM 29 44 32

Balanced 432 172 605

% of AUM 18 31 20

ETF 5 - 5

% of AUM 0 - 0

Total 2,445 550 2,995

% of AUM 82 18 100


Exhibit 30: ….Direct vs Distributor mix


Exhibit 31: Reliance Nippon MAAUM Mix


Debt 1,263 213 1,476

% of AUM 65 40 60

Equity 489 258 747

% of AUM 25 49 30

Balanced 76 46 121

% of AUM 4 9 5

ETF 119 14 134

% of AUM 6 3 5

Total 1,948 531 2,478

% of AUM 79 21 100


Exhibit 32: …..Direct vs Distributor mix


39 18

35

61 82

65

-

20

40

60

80

100

120

T15 B15 Total

%Direct Distributor

36

17 33

64

83 67

-

20

40

60

80

100

T15 B15 Total

%

Direct Distributor

51

27 46

49

73 54

-

20

40

60

80

100

T15 B15 Total

%

Direct Distributor



ED: HEMANT MARADIA SA: DHANANJAY SINHA April 13, 2018| 10

Exhibit 33: Birla Sun Life MAAUM Mix


Debt 1,453 163 1,616

% of AUM 70 41 65

Equity 511 178 689

% of AUM 25 45 28

Balanced 115 56 171

% of AUM 6 14 7

ETF 2 0 2

% of AUM 0 0 0

Total 2,081 398 2,478

% of AUM 84 16 100


Exhibit 34: …Direct vs Distributor


Exhibit 35: SBI Funds Management MAAUM mix


Debt 705 329 1,033

% of AUM 46 52 48

Equity 335 192 527

% of AUM 22 30 24

Balanced 102 108 210

% of AUM 7 17 10

ETF 386 6 391

% of AUM 25 1 18

Total 1,528 634 2,161

% of AUM 71 29 100


Exhibit 36: …Direct vs Distributor


48

22

44

52

78

56

-

20

40

60

80

100

T15 B15 Total

%

Direct Distributor

59

19

47

41

81

53

-

20

40

60

80

100

T15 B15 Total

%

Direct Distributor




Reliance Nippon Life Asset Management: Investment Arguments

Equity AUMs to drive growth

We expect RNAM will continue to drive growth and see a 22% CAGR in AUM between FY17-

FY20E. We believe this growth will led by growth in Equity AUM, which can see a 35% CAGR

growth between FY17-FY20E. The share of equities in the total AUM mix expanded from ~24%

in FY14 to ~28% in FY17 and further to 34% in Q3FY18. We project a more moderate growth in

equity mix and estimate it to rise to 38% by FY20E. We also expect the debt mutual fund to grow

at a CAGR of 14% during the same period though there could be some pressure on the

performance of these funds due to rising bond yields. However, we believe over a longer term

debt funds will be preferred over banking fixed deposits because it provides better returns than

traditional banking products. We expect RNAM to continue its focus on retail clients and the

same will continue to expand in B15 locations.

Exhibit 37: Mutual Fund QAAUM (Rs bn)


Exhibit 38: Segment wise AUM breakup (%)


Exhibit 39: Equity AAAUM expects to grow at 36% CAGR between FY17-20E


Exhibit 40: Debt AAAUM expects to grow at 14% CAGR between FY17-20E


Strong retail brand franchise

RNAM is the second largest retail AMC with a market share of 13.6% manages retail assets of

Rs710bn as of Q3FY18. Since demonetization, the retail MAAUM increased rapidly touching a

growth rate of 55% yoy in Q3FY18. RNAM, which is present in 261 locations (89 locations added

during Q3FY18) should continue expanding its footprint with a focus on retail investors. The focus

will continue to expand in smaller towns through Independent financial advisors (IFA) to reach

customers in remote areas. RNAM is also developing relationships with banks to cross sell

products as they have better geographical reach. Since FY16, RNAM has doubled market and

advertisement expenditure to promote it’s products through various digital channels.

946 1,035

1,3711,584

2,1092,230 2,314

2,436

0

500

1,000

1,500

2,000

2,500

3,000

FY

13

FY

14

FY

15

FY

16

FY

17

Q1F

Y18

Q2F

Y18

Q3F

Y18

18 24 20 21 18 19 17 17

5050

46 48 49 46 47 44

29 24 32 30 27 29 31 34

3 2 2 1 6 6 6 5

0

20

40

60

80

100

FY

13

FY

14

FY

15

FY

16

FY

17

Q1F

Y18

Q2F

Y18

Q3F

Y18

%

liquid Debt Equity ETFs

360 490 534

774 1,006

1,308

-

200

400

600

800

1,000

1,200

1,400

FY15 FY16 FY17 FY18E FY19E FY20E

Equity AAAUM (Rsbn)

865 1,0241,301 1,478

1,6801,910

0

500

1,000

1,500

2,000

2,500


Debt QAAUM (Rs bn)

Expect 22% CAGR in AUM

between FY17-20E

saket.karan

Highlight




Exhibit 41: Retail AUM share will continue to increase further


Exhibit 42: Retail client base will expand going forward


Exhibit 43: RNAM consistently increasing retail AUM market share


Continued broadening of distribution network to support retail AUM growth

RNAM distributes its products through various channels with over 62,000 distributors which

includes banks, financial institutions, and IFAs. The diversified mix of distributors ensures no

single distributor contributes significantly large AUM. This is a key strength for RNAM since the

company unlike its peers, is not owned by a bank and does not have a captive banking

distribution channel. RNAM continues to strengthen relationship with IFAs to increase retail AUM.

Investments through RNAMs own digital channel have been on the rise.

RNAM’s top 10 distributors collected ~48% of the total commissions paid to distributors in FY17

whereas top 10 distributors contributed ~15% of the total AUM. The top distributor contributed

3.3% of RNAM’s Average AUM as of FY17.

Exhibit 44: Top 10 distributor commissions paid in FY17


Exhibit 45: Share of commissions among distributors as of FY17


93 140 273

341

527

752 10

14

1921

25

29

0

5

10

15

20

25

30

35

-

100

200

300

400

500

600

700

800

FY13 FY14 FY15 FY16 FY17 FY18E

Retail (Rs bn) Retail/MAAUM (%)

6.15.3 5.4 5.7

6.6 6.9

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

FY13 FY14 FY15 FY16 FY17 FY18E

Retail folios (mn)

5.7

8.0

11.0 12.3

13.3 13.5

-

2.0

4.0

6.0

8.0

10.0

12.0

14.0

16.0


Retail AUM Market Share (%)

15.7

6.1 5.7 4.5 3.6 3.1 2.8 2.6 2.0 1.9

-

4.0

8.0

12.0

16.0

20.0

NJ I

ndia

Invest

IndusIn

d B

ank

HD

FC

Bank

IIF

L W

ea

lth

Ko

tak B

ank

ICIC

I B

ank

Pru

dent C

orp

Ad

vis

ory

Citib

an

k

ICIC

I S

ec

Ba

jaj C

apital

% of total commissions

48.0

12.9

39.1

Top 10distributors

Next 10distributors

Rest




Exhibit 46: Top 10 distributor by Average AUM FY17


Exhibit 47: Distribution channel mix(%)


Rising inflows in SIP by retail investors

RNAM will continue to grow SIP book to ensure long term and stable inflows from retail investors.

Compared to the industry average of Rs3,800-3,900 per SIP p.m., RNAMs average SIP size

stands at Rs2,700 p.m. RNAM has pioneered small SIPs with the lowest ticket size being as

small as Rs100 p.m. Focus on granularity has led to inflows in SIP doubling in last two years.

Total SIP AUM constituted ~29% of the total equity AUM respectively.

Exhibit 48: SIP monthly inflows has more than doubled since FY15


Exhibit 49: Monthly new SIP amount nearly tripled since FY15


Exhibit 50: SIP inflows increasing on a yoy basis….


Exhibit 51: Average ticket size also increasing….


Gaining market share in smaller towns

RNAM continues to focus on expanding penetration in small cities through increasing branch

expansion beyond top 15 (B15) locations. In Q3FY18, it had increased its presence to 89 new

locations and was present across 261 locations. RNAM typically has a small set-up in B15

locations with a staff count of 1-2 and a break-even period of 1-2 years. As of Feb’18, the total

MAAUM from B15 location was 21% of the total AUM. The MAAUM grew at a CAGR of 27%

between FY14-FY17E. RNAM has the second highest market share in B15 locations after SBI

MF.

3.3

2.3 1.7 1.6

1.2 1.2 1.0 0.9 0.9 0.9

-

1.0

2.0

3.0

4.0N

J I

ndia

Invest

HD

FC

Bank

IIF

L W

ea

lth

LIC

HF

LF

inancia

l…

Ko

tak B

ank

Citib

an

k

Axis

Capital

SP

A C

apital

Se

rvic

es

ICIC

I B

ank

Cre

dit S

uis

se

% of Avg. AUM

18

26

10

46

Banks IFA National distributors Directly by customers

2,742 3,397

4,409

6,490

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

FY15 FY16 FY17 9MFY18

Monthly SIP inflows (Rs mn)

113 110

238

337

-

50

100

150

200

250

300

350

400


New SIP amount (Rsmn)

118 123

171

26 26

29

23

26

29

32

0

50

100

150

200

FY15 FY16 FY17

SIP Book (Rs bn) (LHS) Equity AUM (%) (RHS)

2,1092,326

2,6242,872

0

500

1,000

1,500

2,000

2,500

3,000

3,500


SIP Book average ticket size (Rs)




Exhibit 52: Top 5 AMC MAAUM contribution from B15 (%)


Exhibit 53: ….RNAM contribution from B15 over years


Second largest ETF player

RNAM acquired Goldman Sachs’ domestic Asset Management business in Oct’15 comprising of

12 ETF schemes. The ETF AUM, which was Rs71bn when acquired has expanded significantly

to Rs132bn in Q3FY18 comprising 5% of the mutual funds AUM. RNAM today has 16 ETF

schemes across different asset classes of the market and is now the second largest ETF player

with a 19% market share. The rise in ETFs has been mainly driven by a rise in equity ETFs than

gold ETFs. We believe the share of ETFs can rise to 7% by FY20E.

Exhibit 54: ETFs increased post EPFO permitted to invest into these instruments


Focus on expanding managed assets

RNAM continues to expand other fund management businesses like the AIF, PMS, international

business through international subsidiaries. It operates AIF business through subsidiary named

Reliance AIF. It launched first AIF in 2014 and is currently managing six schemes. Managing

commitment of Rs ~13bn across 4 AIF schemes. In Dec’17, RNAM launched two new Category

III AIFs - Equity Opportunities AIF Scheme II and Equity Opportunities AIF Scheme III.

RNAM is also expanding its overseas footprint. Nippon Life Insurance (NLI), RNAM’s promoter

shareholder has a strong presence across multiple developed markets and is the driving force

behind RNAM’s expanding presence across globe. NLI has subsidiaries and partnerships in all

major international financial markets like USA, Europe, Asia and Australia which offers a huge

potential to expand internationally.

RNAM acts as an advisor for India focused equity and fixed income funds managed by Nissay

Asset Management, a subsidiary in Japan. It also advises fund managed by its international

partners in Korea and Thailand. As of Q3FY18, RNAM managed ~Rs54bn of international

advisory mandates. Also, with support of NLI, RNAM has partnered with a leading bank in

Thailand to offer India Equity Fund.

Currently RNAM manages offshore funds through its international subsidiaries at Singapore and

Mauritius and has a representative office in Dubai, which enables the company to cater to

investors across Asia, Middle East, UK, US, and Europe. As on Dec 31, 2017, RNAM managed

total AUM of ~Rs30bn as part of offshore fund management portfolio. The aggregate

international AUM of RNAM, comprising advisory mandates and offshore funds stood at Rs84bn

in Q3FY18.

The strong global reach offered by NLI alongwith its very credible brand name places RNAM in

a unique position to diversify its AUM base going forward.

29

21 18 17 16

-

5

10

15

20

25

30

35

SBI MF RelianceNippon

HDFC MF ICICI Pru Birla Sunlife

80 81 80 81 79

20 19 20 19 21

-

20

40

60

80

100

120

FY14 FY15 FY16 FY17 Feb-18

T 15 B 15

6 4

109

28 22 15 14

28

0

20

40

60

80

100

120

140

FY13 FY14 FY15 FY16 FY17

Equity ETF (Rs bn) Gold ETF (Rsbn)

Share of ETFs in MF AUM can

rise to 8% by FY20E

saket.karan

Highlight




Exhibit 55: End of period AUM breakup

Particulars (Rs mn) FY13 FY14 FY15 FY16 FY17 Q3FY18

Mutual funds (including ETFs) 8,14,730 9,44,890 12,94,000 14,61,420 20,35,870 22,46,000

% growth NA 16.0 36.9 12.9 39.3 17

% of AUM 50.9 51.2 54.6 53.1 58.0 57.9

Managed accounts 7,22,550 8,51,090 10,14,860 12,46,950 14,52,630 16,02,000

% growth NA 17.8 19.2 22.9 16.5 16.5

% of AUM 45.1 46.1 42.8 45.3 41.4 41.3

-AIF 0 0 5,290 9,530 13,180 17,000

% growth NA NA NA 80.2 38.3 29.0

% of AUM 0.0 0.0 0.2 0.3 0.4 0.4

Offshore funds and advisory mandates 63,170 49,700 60,390 43,270 19,050 31,000

% growth NA -21.3 21.5 -28.3 -56.0 19

% of AUM 3.9 2.7 2.5 1.6 0.5 0.8

Total end of period AUM 16,00,450 18,45,680 23,69,250 27,51,640 35,07,550 38,78,000

Growth % yoy NA 15.3% 28.4% 16.1% 27.5% 17%





Financial Analysis: Strong operating metrics

SEBI has been rationalizing fees charged to the investors and over the years has brought in

significant reforms in the AMC business. Discontinuation of entry loads of schemes, discouraging

churn by brokers through abolition of exit load, and a shift to TER (total expense ratio) regime

has made investing in MFs transparent. The TER, as noted below has been defined based on

corpus of the schemes. All these measures have brought stability to earnings outlook of AMCs.

We therefore expect stable investment management fee yield for RNAM. Improving AAUM with

a higher equity mix and stable yield should deliver a secular increase in PAT at 24% CAGR

FY17-FY20E.

Exhibit 56: Investment mgt. fees to improve with rising equity AUM


Exhibit 57: Total revenues / AAUM to have upside bias


Exhibit 58: Expenses / AAAUM to stay stable


Exhibit 59: PAT margin also PAT CAGR of 24%


Exhibit 60: SEBI expense ratio guidelines

Types Expense Ratio

Fund of Fund 2.5% of daily net assets

Index Fund or ETF 1.5% of daily net assets

Equity

2.5% for first Rs1bn

2.25% for next Rs3bn

2% for the next 3bn

1.75% thereafter

Debt Scheme investing in bonds shall be less by an at least 0.25% of daily net assets


Exhibit 61: RNAM: Trend in average expense ratio (%)

Category Regular Direct

2016 2017 2016 2017

Equity Diversified 2.51 2.44 1.62 1.55

Equity Balanced 2.52 2.47 1.53 1.3

Debt-liquid 0.27 0.26 0.13 0.1

Debt-Other 1.45 1.44 0.74 0.72

Source: Company, Emkay Research, ICRA

0.66

0.76

0.67

0.700.71

0.72

0.64

0.68

0.72

0.76

0.80

0.84

-

5

10

15

20

25

30


Invt. Mgt Fees (Rs bn)

Invest. Management fees/AAAUM (%)

0.77

0.86

0.76

0.780.78

0.79

0.75

0.77

0.79

0.81

0.83

0.85

0.87

-

5

10

15

20

25

30


Total Revenues (Rsbn) Total Revenues/AAAUM(%)

0.39

0.52

0.45 0.46 0.46 0.46

0.35

0.40

0.45

0.50

0.55

-

5.0

10.0

15.0

20.0


Total Expenses (Rsbn) Total Expenses/AAAUM (%)

0.28 0.26

0.21 0.21 0.22 0.22

0.10

0.20

0.30

0.40

0.0

2.0

4.0

6.0

8.0

10.0


PAT (Rsbn) PAT/AAAUM (%)




Strong operating metrics

Despite not enjoying a captive bank distribution channel like bank owned AMCs, RNAM has

maintained a high Revenue/MAAUM at 67bps and PAT/MAAUM at 19bps in FY17. Among the

large players, ICICI Prudential MF and HDFC MF have higher proportion of (equity+ balanced)

mix in the total assets under management (ICICI has 47% and HDFC MF has 52% as of Feb-

18).

Exhibit 62: RNAM generates amongst highest inv. mgt. fees


Note: We have used the MAAUM for comparing yields as it is easily available in AMFI

reporting format.

Exhibit 63: RNAM has highest revenue yield amongst large AMCs


Since there is some level of heterogeneity in the way opex is presented in financials by AMCs,

we have looked at the PBT and PAT margin for comparison. RNAM’s PBT and PAT margins are

amongst the best in the peer group, given the fact it is not backed by a bankassurance channel.

Exhibit 64: PBT/ MAAUM amongst the best


Note: We have used the MAAUM for comparing yields as it is easily available in AMFI

reporting format.

Exhibit 65: PAT / MAAUM amongst the best


0.60 0.59

0.47 0.45 0.44

-

0.10

0.20

0.30

0.40

0.50

0.60

0.70

HDFC RelianceNippon

ICICI Birla Sunlife SBI

Invt. Mgt Fees/MAAUM(%) (FY17)

0.67 0.66

0.54 0.51 0.48

-

0.10

0.20

0.30

0.40

0.50

0.60

0.70

0.80

RelianceNippon

HDFC ICICI Birla Sunlife SBI

Revenue/MAAUM(%) (FY17)

0.33 0.30

0.27

0.20 0.17

-

0.10

0.20

0.30

0.40

HDFC ICICI RelianceNippon

SBI Birla Sunlife

PBT/MAAUM (%) (FY17)

0.23

0.19 0.19

0.14 0.11

-

0.05

0.10

0.15

0.20

0.25

HDFC ICICI RelianceNippon

SBI Birla Sunlife

PAT/MAAUM(%) (FY17)




Valuation & Outlook

Valuing AMCs: Valuations under AUM approach

In India, valuations of most of the deals in AMC space in past have been reported based on the

size of AUM and a specified value ascribed to the AUM based on equity and debt mix. This value

was typically higher, 5-6% for equity AUM and a lower 3-4% for the debt AUM. RNAM’s current

market capitalization indicates a valuation of 3.6% on the FY18E AUM Rs4.2tn. Using 6% / 3%

value for equity / debt AUMs respectively yields a value of 4.6% of AUM or a target market

capitalization of Rs200bn compared to RNAM’s current market capitalization of Rs159bn. For

balanced funds, we use mid-range values (4.5%) and for managed assets, an even lower, ad-

hoc value of 2%.

DDM approach

Though a regulated business, AMCs are not leveraged entities requiring regulatory capital. With

reinvestment needs limited to branch expansion, mature AMCs like RNAM can pay out

substantial portion of their net profit as dividends. RNAM’s dividend payout ratio has been 60%

(75% including dividend distribution tax). We have kept it unchanged in our explicit estimates.

Constructing a dividend discount model based on profit growth that dovetails to terminal growth

rate of 4% over 20 years and a dividend payout ratio that rises to 95% as business stabilizes,

we arrive at a valuation of Rs208bn for RNAM. We use a uniform CoE of 13%.

Initiate coverage with BUY; TP Rs340

Our FY19E/FY20E EPS Rs10.0/12.5 discounts the target price 34x / 27x respectively. RNAM

currently trades at 26x / 21x FY19E / FY20E EPS. The TP yields an upside of 31% over CMP.

For a business aligned to the stock market performance, the target multiples may appear high

compared to the index multiples. Nevertheless, RNAM’s profit CAGR of 24% FY17-FY20E and

a RoE of 26% in FY20E appear to justify the target multiples.




Risk Factors

Poor market returns can moderate equity flows and earnings

Our thesis on RNAM assumes a continued popularity of and buoyancy in mutual funds which in

turn would benefit RNAM due to its strong distribution reach and past credibility. The period post-

demonetization has been unique in the way the flows have sustained leading to increasing

assumptions of a) maturing equity culture, and b) a substitution effect wherein bank term deposits

have been replaced by mutual funds.

Given the relatively unattractive nominal rates on bank term deposits (though real rates are

150bps on 1Y TDs), the higher nominal returns on equity schemes appear to be attracting

investors to them. This is borne out by following charts, which show a strong positive correlation

of equity inflows to index performance. The overall flows into MFs show a nil correlation to index

returns. This appears logical since overall flows would also constitute inflows to debt schemes.

Most investor education adverts call upon investors to build discipline and invest in a sustained

manner over long periods. How well this message is accepted may be tested in coming days if

equity / index performance stays weak. Recent flows appear to have moderated in-line with the

volatility witnessed in the markets.

Exhibit 66: Equity flows and index performance strongly correlated


Exhibit 67: Stronger correlation of balanced funds with index perf.


Exhibit 68: Nil correlation of overall flows with index performance


25,000

28,000

31,000

34,000

37,000

-

50

100

150

200

250

Oct-

16

Nov-1

6

Dec-1

6

Jan

-17

Fe

b-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Fe

b-1

8

Monthly Net inflows (Equity) (Rsbn) S&P BSE Sensex

Correlation 0.7

25,000

28,000

31,000

34,000

37,000

-

50

100

150

200

250

300

350

Oct-

16

Nov-1

6

Dec-1

6

Jan

-17

Feb-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Fe

b-1

8

Monthly Net inflows (Equity+Balanced) (Rsbn)

S&P BSE Sensex

Correlation 0.8

25,000

28,000

31,000

34,000

37,000

-2,000 -1,500 -1,000

-500 -

500 1,000 1,500 2,000

Oct-

16

Nov-1

6

Dec-1

6

Jan

-17

Fe

b-1

7

Ma

r-17

Ap

r-17

Ma

y-1

7

Jun

-17

Jul-1

7

Au

g-1

7

Se

p-1

7

Oct-

17

Nov-1

7

Dec-1

7

Jan

-18

Feb-1

8

Monthly Net inflows (Rsbn) S&P BSE Sensex

Nil correlation




Company Background

RNAM started mutual fund operations in 1995 as Reliance Mutual Fund. Today, it is the third

largest asset management company in India and offers investment products in mutual fund

schemes across equity, fixed Income, money market, and ETF categories. RNAM had an AUM

of Rs3,878bn as of Q3FY18 with ~12% market share. RNAM is also the second largest ETF

player with a 19% market share and an AUM of ~Rs132bn. It had an AUM of Rs1,572bn under

managed accounts category where it acts as an asset manager for assets like PMS, EPFO, AIF,

NPS etc. In the offshore funds category, RNAM manages offshore funds through subsidiaries in

Singapore, Mauritius and a representative office in Dubai. The international funds as of Q3FY18

were Rs84bn, of which, Rs54bn were advisory mandates.

RNAM has three subsidiaries:

Reliance AIF Management Company Ltd. – subsidiary managing AIFs,

Reliance Asset Management (Singapore) Pte Ltd. – managing offshore funds,

Reliance Asset Management (Mauritius) Ltd. – managing offshore funds

Nippon Life first became a shareholder in RNAM in Mar’12 and following subsequent stake

purchase, Reliance Mutual Fund was renamed to Reliance Nippon Life Asset Management

during FY17.

Management profile

RNAM has an experienced top management and investment team that has been with the AMC

for a fairly long time. The stability in the top management and investment team brings the much

desired credibility for a large AMC.

Exhibit 69: Management background

Management Team

Sundeep Sikka

Executive Director & CEO

Mr. Sikka joined RNAM in 2003 and has risen through the ranks to become the CEO. He has handled various

positions through which he has been instrumental in building domestic and international operations of the company.

He has held both Vice-Chairman and Chairman positions of the industry body AMFI. He is a MBA from the

University of Pune. Prior to joining RNAM, Mr. Sikka had worked with ICICI Bank Limited for over four years.

Himanshu Vyapak

Deputy CEO

Mr. Vyapak joined RNAM in 2003. He is actively involved in various industry level initiatives and is also a member

on the ARN Committee of Association of Mutual Funds in India (AMFI), Advisory Committee of FLAB India. He is

an MBA (Gold Medalist) and a Graduate in Economics (Hons) from Delhi University. His career spans over 19

years across varied businesses in the BFSI sector.

Manish Gunwani

CIO-Equity Investments

Mr. Gunwani joined RNAM in Sep’17. Prior to joining RNAM, he worked with ICICI Prudential Asset Management

Company Limited. Mr. Gunwani is a B.Tech from IIT, Madras and MBA from IIM, Bangalore.

Amit Tripathi

CIO- Fixed Income Investments

Mr. Tripathi joined RNAM in 2003. He has successfully managed various fixed income and hybrid funds which have

been recognized for superior performance both nationally and internationally. He leads a team of 20 highly

motivated and experienced fixed income professionals.

Prateek Jain

CFO

Mr. Jain joined as CFO of RNAM in 2013. He has over 16 years of experience in finance. Prior to joining RNAM,

he worked with AIG Global Asset Management Company as CFO & Head - Risk Management. He has also been

associated with organizations like Howden Insurance Brokers India Pvt Ltd. and ICICI Lombard General Insurance

Company Ltd.


saket.karan

Highlight




Exhibit 70: Investment Performance of select equity funds

Top Equity Schemes MAAUM

(Rsbn)

CAGR %

1 Year Return 3 Years Return 5 Years Return

Scheme Benchmark Scheme Benchmark Scheme Benchmark

Reliance Regular Savings Fund - Balanced Option 121 18.1 14.7 11.1 9.0 17.6 13.7

Reliance Tax Saver (ELSS) Fund 104 19.9 19.8 8.3 8.2 23.3 15.3

Reliance Equity Opportunity Fund 102 24.0 19.8 6.9 8.2 17.9 15.3

Reliance Top 200 Fund 80 22.0 20.6 9.4 9.3 18.9 16.4

Reliance Arbitrage Advantage Fund 77 6.3 6.7 6.6 7.4 7.5 8.1

Reliance Growth Fund 70 22.2 19.8 11.7 8.2 20.5 15.3

Reliance Small cap fund 65 41.8 33.3 23.2 18.0 36.7 25.2

Reliance Vision Fund 36 20.5 19.8 7.5 8.2 18.8 15.3

Reliance Mid & Small Cap Fund 33 21.6 29.2 12.8 17.5 26.4 23.4

Reliance Regular savings fund-Equity option 33 25.1 19.8 11.2 8.2 19.2 15.3

Reliance Banking Fund 29 22.2 20.9 12.0 9.7 19.1 16.8

Reliance Equity Savings Fund 24 12.2 10.3 NA NA NA NA

Reliance Diversified Power Sector Fund 20 33.7 3.2 15.5 0.7 18.6 7.0

Reliance Pharma Fund 20 3.7 -7.7 3.4 -2.6 17.1 13.2

Reliance focused large cap fund 14 13.7 19.8 7.0 7.2 16.1 14.4


Exhibit 71: Continuing Interest in the existing MF schemes as on June, 2017

Particulars No of

Schemes

Total

Investment

(Rsmn)

Open Ended Close Ended

Minimum MF continuing

interest as per regulation (Rsmn)

Actual MF continuing interest

by the company (Rsmn)

Actual MF continuing interest

by the company (Rsmn)

Debt 30 3,594 74 2,466 1,054

Debt-Liquid 3 427 18 409 -

Equity 24 2,222 191 1,878 153

ETF 16 744 744 - -

Gold 1 59 5 54 -

Total 74 7,047 1,033 4,807 1,207





Key Financials (Consolidated)

Income Statement

Y/E Mar (Rsmn) FY16 FY17 FY18E FY19E FY20E

Total Revenue from Operations 12,001 13,075 16,693 20,700 25,650

-Investment Management Fees 11,581 12,676 16,177 20,092 24,932

Other income 1,137 1,284 1,348 1,456 1,575

Total Revenue 13,138 14,359 18,040 22,156 27,225

Operating Expenses 7,914 8,546 10,642 12,979 15,830

Profit before tax 5,224 5,813 7,398 9,177 11,395

Tax 1,260 1,786 2,441 3,028 3,760

Tax rate (%) 24 31 33 33 33

Profit after tax 3,964 4,028 4,957 6,149 7,635

Balance Sheet

Y/E Mar (Rsmn) FY16 FY17 FY18E FY19E FY20E

Equity 115 115 6,120 6,120 6,120

Reserves & Surplus 17,504 18,511 19,888 21,596 23,717

Net worth 17,619 18,626 26,008 27,716 29,837

Preference Shares 300 300 - - -

Minority Interest 89 - - - -

Provisions 110 216 259 264 269

Other current liabilties 1,190 1,372 1,509 1,660 1,826

Total Liabilities 19,307 20,513 27,775 29,640 31,932

Net fixed assets 119 2,511 2,763 3,039 3,343

Investments 9,108 9,465 10,601 11,873 13,298

Other assets 10,081 8,536 14,412 14,728 15,292

Total assets 19,308 20,513 27,775 29,640 31,932

AAAUM

Y/E Mar (Rsbn) FY16 FY17 FY18E FY19E FY20E

Equity 490 534 774 1,006 1,308

Debt 1,024 1,301 1,478 1,680 1,910

ETF 18 57 65 141 231

Total AAAUM 1,533 1,892 2,317 2,827 3,449

End of period AUM

Y/E Mar (Rsbn) FY16 FY17 FY18E FY19E FY20E

Mutual funds 1,461 2,036 2,493 2,997 3,701

Managed accounts 1,247 1,453 1,714 2,023 2,387

Offshore funds and advisory mandates 43 19 23 27 33

Key Ratios (%)

Y/E Mar (%) FY16 FY17 FY18E FY19E FY20E

Invest. Management fees/AAAUM 0.76 0.67 0.70 0.71 0.72

Revenue from operations/ AAAUM 0.78 0.69 0.72 0.73 0.74

Total Revenue/ AAAUM 0.86 0.76 0.78 0.78 0.79

Marketing Expense/AAAUM 0.24 0.21 0.20 0.20 0.20

Operating Expenses/AAAUM 0.52 0.45 0.46 0.46 0.46

PBT/AAAUM 0.34 0.31 0.32 0.32 0.33

PAT/AAAUM 0.26 0.21 0.21 0.22 0.22

ROE 23.8 21.9 22.1 22.9 26.5




Per Share Data (Rs) FY16 FY17 FY18E FY19E FY20E

EPS 6.5 6.6 8.1 10.0 12.5

BVPS 29.3 30.9 42.5 45.3 48.8

DPS 2.4 4.0 4.9 6.0 7.5

Valuations (x) FY16 FY17 FY18E FY19E FY20E

PE 39.8 39.2 31.9 25.7 20.7

P/BV 8.8 8.3 6.1 5.7 5.3

Mkt cap/AUM (%) 10.3 8.4 6.8 5.6 4.6

Dividend yield (%) 0.9 1.6 1.9 2.3 2.9

Growth (%) FY16 FY17 FY18E FY19E FY20E

Investment Management fees 41.2 9.5 27.6 24.2 24.1

Total Revenue 37.6 9.3 25.6 22.8 22.9

Operating Expenses 61.1 8.0 24.5 22.0 22.0

PAT 11.8 1.6 23.1 24.0 24.2

AAAUM 23.1 23.4 22.5 22.0 22.0

Shareholding Pattern (%) Dec-16 Mar-17 Jun-17 Nov-17 Dec-17

Promoters - - - 85.8 85.8

Public & Others - - - 14.3 14.3




Emkay Rating Distribution

BUY Expected total return (%) (Stock price appreciation and dividend yield) of over 25% within the next 12-18 months.

ACCUMULATE Expected total return (%) (Stock price appreciation and dividend yield) of over 10% within the next 12-18 months.

HOLD Expected total return (%) (Stock price appreciation and dividend yield) of upto 10% within the next 12-18 months.

REDUCE Expected total return (%) (Stock price depreciation) of upto (-) 10% within the next 12-18 months.

SELL The stock is believed to underperform the broad market indices or its related universe within the next 12-18 months.

Completed Date: Dissemination Date:

Sources for all charts and tables are Emkay Research unless otherwise specified.

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Ravikant Bhat, MBA

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+91-22-266242430

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