About the Company

Nippon Life India Asset Management Limited (NAM India) is the asset manager of Nippon India Mutual Fund (NIMF). Nippon Life Insurance Company is the promoter of NAM India and currently holds 75 of its total issued and paid-up equity share capital while Reliance Capital holds 0.93% of shares in the company. Equity Shares of NAM India are listed on BSE Limited and the National Stock Exchange of India Limited​.​​​

Q4FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
  Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 335 142 135.92% 374 -10.43% 1326 1134 16.93%
PBT 207 37 459.46% 257 -19.46% 843 561 50.27%
PAT 157 12 1208.33% 202 -22.28% 649 412 57.52%

 

Consolidated Financials (In Crs)
  Q4FY21 Q4FY20 YoY % Q3FY21 QoQ % FY21 FY20 YoY%
Sales 362 150 141.33% 399 -9.27% 1419 1193 18.94%
PBT 218 27 707% 269 -18.96% 877 560 56.61%
PAT 167 4 4075% 212 -21.23% 679 416 63.22%

Detailed Results

  1. Revenues were up >100% YoY in Q4. Profits rose for the company with Q4 PAT rising from Rs 4 Cr last year to Rs 167 Cr in Q4FY21. All performance rise has been a lot in relative terms as last year’s base was very small.  
  2. FY21 revenues showed healthy growth with a 19% YoY rise and PAT grew 63% YoY.  
  3. The company also posted its highest ever yearly PAT at Rs 679 Cr.  
  4. As of 31st Mar 2021, AUM was at Rs 3.52 trillion.  
  5. Mutual Fund AUM was at Rs 2,218 billion which was up 33% YoY.  
  6. NIMF added over 9 lac unique Investors & 1.4 million ETF folios in FY21. It also added 350 institutional investors as customers in the year.  
  7. Equity assets grew to 41% of total AUM. Retail Assets were at Rs 643 bn.  
  8. Fixed income (Debt + Liquid) assets have grown 10% YoY and account for 43% of total AUM.  
  9. The company added 5 new funds in the passive space in Q4 and added a total of 9 new funds in FY21.  
  10. Digital transactions now account for 53% of total purchases. Digital SIP registrations contributed to 59% of the total new SIPs registered in FY21.   
  11. The company enjoyed a market share of 13% in ETF space with an AUM of Rs 373 bn. It also has a volume share of 72% and a 42% share of folios in the ETF space.  
  12. Retail AUM accounts for 28% of total assets which is the highest in the industry.  
  13. B30 assets accounted for 17.9% of overall MF AUM vs industry average of 16.3%.  
  14. The overall distribution mix was 54% direct and 46% distributed assets. In distributed assets, Banks were at 22%, National Distributors were at 21% and IFAs were at 57%.  
  15. Individual AUM accounted for 83% of distributed assets which is 46% of the total MF AUM.  
  16. The offshore business has an AUM of Rs 103 bn.  
  17. NIAIF has raised commitments of Rs 37 bn as of Mar ’21.  
  18. It also launched and closed 2 new schemes- one being a long-only equity scheme and the other an offshore real estate scheme.  
  19. NAM India signed LoI with Cathay SITE, Taiwan’s largest asset manager, in April 2021.   
  20. The company announced a final dividend of Rs 5 per share bringing the total dividend for the year to Rs 8 per share. 

Investor Conference Call Highlights

  1. SIP and STP for the full year rose by more than 1.1 million for NAM.  
  2. The operating expenses have remained high despite a drop in other expenses due to COVID-19 as the company has incurred one-off expenses to set up its digital infrastructure.  
  3. The management is confident that the slide in market share in the last 2 years has finally come to an end and the company is now witnessing a good comeback.  
  4. The company has been leveraging its parent Nippon Life and has been able to launch 2 real estate funds in Japan and a digital innovation fund with it. It has also been able to sign the tie-up with Cathay because of Nippon Life.  
  5. Employee costs and other expenses have remained almost flat YoY.  
  6. The management assures that the company is determined to maintain good liquidity in ETFs as it is an essential part of the appeal for ETFs.  
  7. The company is aiming to build volumes as ETF is a volume game according to the management and thus it will be looking to maintain competitive pricing. The blended yield on ETFs is around 19 bps.  
  8. The share of the banca channel has gone down as the competition and preference for other products like insurance are gaining greater importance for the channel. This is primarily due to lower realization per product for MF as compared to others.   
  9. Another reason for the fall is the rise of the direct investing channel in the MF industry and the rise of RIAs.  
  10. The management sees further room for improvement in the HNI space where recovery has been the slowest.  
  11. The management doesn’t see the lack of a dedicated bank as an issue as it helps NAM maintain a widely distributed channel base with a major focus on IFAs.  
  12. The management maintains that brand image is important in attracting more investors than a startup AMC; at the size and scale level of NAM, it is not too big of a differentiator for the branded part of the industry.  
  13. The management states that although the average SIP size for NAM is lower than the industry average, it is better for them as it enhances stickiness.    
  14. There is massive potential in ETFs as developed markets have around 40% of funds in ETFs while this number in India is only 10%.  
  15. The management maintains that reaching out to small town IFAs and supporting on-ground distributors in B30 locations is key to expansion in this segment.  
  16. The net yield including expenses in ETFs is around 11-12 bps. 

Analyst’s View

Nippon India Life Asset Management is one of the leading asset managers in the country. The company has done well to bounce back after the rebranding last year. The company saw good performance in Q4 & FY21 with profits rising as high as 64% YoY in FY21 despite sales rising only 18% YoY. The company continues to have a good hold in the IFA space with this channel being the largest distribution channel for the company and has seen good participation in its recent NFOs. It has strengthened its hold in the passive space by launching 5 new passive funds in Q4. It continues to bring in old customers who are now looking to restart their relationship post the rebranding which is expected to the primary reason behind adding 9 lac unique customers in FY21. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space and how the overall economy and market sentiments will be affected by the 2nd wave of COVID-19. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space. 

 


Q3FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 374 342 9.36% 302 23.84% 990 992 -0.20%
PBT 257 189 35.98% 186 38.17% 636 524 21.37%
PAT 202 144 40.28% 141 43.26% 492 400 23.00%

 

Consolidated Financials (In Crs)
Q3FY21 Q3FY20 YoY % Q2FY21 QoQ % 9MFY21 9MFY20 YoY%
Sales 399 361 10.53% 322 23.91% 1057 1044 1.25%
PBT 269 194 38.66% 191 40.84% 659 532 23.87%
PAT 212 149 42.28% 145 46.21% 513 412 24.51%

Detailed Results

  1. Revenues were up 10% YoY in Q3. Profits rose for the company with Q3 PAT rising 42% YoY.
  2. 9M revenues were almost flat YoY while profits were up 24.5% YoY.
  3. As of 31st Dec 2020, AUM was at Rs 3,52 trillion.
  4. Mutual Fund AUM was at Rs 2,207 billion which was up 35% since Q4FY20.
  5. Total Operating expenses were down 22% YoY in Q3. Employee costs fell by 18% YoY.
  6. NIMF added over 150,000 folios in Q3. NIMF has 6.2 million Unique Investors which represents 29% of the MF industry market share.
  7. Digital transactions now account for 52% of all transactions.
  8. The company saw 4.1 lac SIP registrations in Q3.
  9. Equity assets grew to 39% of total AUM. Retail Assets were at Rs 586 bn which 26% of the total AUM vs an industry average of 20%.
  10. Fixed income (Debt + Liquid) assets have grown 12.8% YoY and account for 46% of total AUM.
  11. Successfully launched Nippon India ETF Nifty CPSE Bond Plus SDL – 2024 Maturity & Nippon India Passive Flexicap FoF in Q3.
  12. From Oct 2020, NAM India began to manage investments of POLIF and RPOLIF.
  13. The company enjoyed a market share of 13% in ETF space with an AUM of Rs 312 bn. It also has a volume share of 76% and 31% share of folios in the ETF space.
  14. B30 assets accounted for 17.5% of overall MF AUM vs industry average of 16%.
  15. The overall distribution mix was 55% direct and 45% distributed assets. In distributed assets, Banks were at 25%, National Distributors were at 20% and IFAs were at 55%.
  16. Individual AUM accounted for 82% of distributed assets which is 45% of the total MF AUM.
  17. The offshore business has an AUM of Rs 102 bn.
  18. NIAIF has raised commitments of Rs 35 bn as of Dec ’20.
  19. The company announced an interim dividend of Rs 3 per share.

Investor Conference Call Highlights

  1. Nippon India Mutual Fund added 233,000 SIPs and STP folios.
  2. NIMF onboarded 260 institutional investors in 9MFY21.
  3. The overall rise in equity AUM was MTM while the debt AUM rose due to net additions majority of which was from institutional investors.
  4. The management doesn’t see any return to pre-covid levels of fixed expenses and has stated that the current levels are sustainable and can stay on even after the pandemic goes away.
  5. The company had SIP collections of Rs 660 Cr in Dec.
  6. The management has acknowledged that the company is open to acquisitions in the mutual fund, AIF, PMS, or strategic fintech space.
  7. Overall equity has been lower in Q3 while fixed income has risen somewhat while ETFs have continued their growth momentum in terms of market share.
  8. The increase in other income is from the rise in MTM of the company’s investments into its own equity & ETF schemes.
  9. Although debt investors have been moving from long term to short term funds in the past 6-9 months due to the overall risk-off mood, the management believes that this will start getting reversed as economic normalcy comes back.
  10. The management is crediting the rise in new SIP to digital SIP registration.
  11. From an overall yield perspective, equity yields have fallen 15% YoY while debt yields have fallen due to migration of funds from long term (higher yield) to short term (lower yield).
  12. The management admits that there will indeed be outflows since markets are at all-time highs but in overall small investors are expected to stay invested and the main stickiness in equity is expected to be from SIPs.
  13. The company is indeed working with parent Nippon Life to bring various foreign funds to India and is exploring areas for collaboration here.
  14. Although ETF market share has gone up, the corresponding effect on yield was not enough to mitigate the fall in yield from other sectors. This is because ETFs are inherently low realization products.
  15. Barring increments, employee costs shall remain the same for the near future.
  16. The company will not be opening any new branches but will be looking to service more than 1000 cities and towns through its 230+ branches with the hub and spoke model.
  17. The management has stated that HNIs are indeed coming back to the company and more than 25 of the top 100 companies in India have restarted their relationship with the company since the brand change. Thus the company is gaining market share slowly in the MNC space in India.
  18. The brand acceptance of the Nippon Life brand is very high among institutional and HNI investors.
  19. The company will have 2 new fund managers joining in soon. One will be in debt and the other will be fixed income.
  20. Nippon’s contribution to the offshore fund is at 50% currently.
  21. Employee count has indeed gone down due to various office functions getting automated and due to the company only making new hires to replace old ones going out.

Analyst’s View

Nippon India Life Asset Management is one of the leading asset managers in the country. The company has done well to bounce back after the rebranding last year. The company saw good performance in Q3 with profits rising as high as 42% YoY despite sales rising only 10% YoY. The company continues to have a good hold in the IFA space with this channel being the largest distribution channel for the company and has seen good participation in its recent NFOs. It is also looking to maintain its growth momentum in the ETF space and bring in new investors to this asset class. It continues to bring in old customers who are now looking to restart their relationship post the rebranding. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space and whether it will be able to maintain its growth momentum going forward. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.

 


Q2FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 302 307 -1.63% 314 -3.82% 617 650 -5.08%
PBT 186 157 18.47% 192 -3.13% 378 335 12.84%
PAT 141 134 5.22% 150 -6.00% 290 257 12.84%

 

Consolidated Financials (In Crs)
Q2FY21 Q2FY20 YoY % Q1FY21 QoQ % H1FY21 H1FY20 YoY
Sales 322 323 -0.31% 336 -4.17% 659 683 -3.51%
PBT 191 158 20.89% 200 -4.50% 391 339 15.34%
PAT 145 137 5.84% 156 -7.05% 301 262 14.89%

Detailed Results

  1. Revenues were flat YoY in Q2. Profits rose for the company with Q2 PAT rising 6% YoY.
  2. As of 30th Sep 2020, AUM was at Rs 2.77 trillion.
  3. Mutual Fund AUM was at Rs 1,929 billion
  4. Total Operating expenses were down 20% YoY in Q2. Employee costs fell by 21% YoY.
  5. NIMF added over 151,600 folios in Q2. NIMF has 6.2 million Unique Investors which represents 29% of the MF industry market share.
  6. Digital transactions now account for 48% of all transactions.
  7. The company saw 3.12 lac SIP registrations in Q2.
  8. Equity assets grew to 39% of total AUM. Retail Assets were at Rs 520 bn which 26% of total AUM vs an industry average of 20%.
  9. Fixed income (Debt + Liquid) assets have grown 12% YoY and account for 47% of total AUM.
  10. Successfully launched Nippon India Multi-Asset Fund, Nippon India ETF Nifty IT & Nippon India Nifty Smallcap 250 Index Fund in Q2.
  11. The company enjoyed a market share of 13% in ETF space with an AUM of Rs 286 bn. It also has a volume share of 70% and 33% share of folios in the ETF space.
  12. B30 assets accounted for 18.2% of overall MF AUM vs industry average of 16.1%.
  13. Tenure of SIP book was > 5 years for 84% and >10 years for 79% of the SIP book.
  14. The overall distribution mix was 53% direct and 47% distributed assets. In distributed assets, Banks were at 26%, National Distributors were at 20% and IFAs were at 54%.
  15. Individual AUM was at Rs 753 billion which accounted for 79% of distributed assets which is 47% of total MF AUM.
  16. The offshore business has AUM of Rs 93 bn.
  17. NIAIF has raised commitments of Rs 34 bn as of Sep ’20.

Investor Conference Call Highlights

  1. NAM India received a mandate to manage Post Office Life Insurance and rural post office insurance funds.
  2. Nippon India Digital Innovation Fund has committed funds in excess of USD 100 billion and has initiated investment activities.
  3. The company added over 400 IFAs in this quarter to take the IFA base to over 77,000.
  4. The fall in yields is mainly from the change in the mix in the fixed income category and the decline of the credit risk & long duration segments which were big margin generators.
  5. The company has seen both additions of fund managers & realignment of portfolios, which have been implemented with the feedback of Nippon Life on the risk management side from Japan.
  6. The company has started issuing ESOPs as variable pay and this has led to a fall in employee costs.
  7. The management admits that there is a slowdown in equity flows in the industry currently.
  8. The management remains confident of attracting investors with the launch of the new products in the year so far.
  9. The post office mandate is expected to add Rs 50,000-60,000 Cr to the company’s AUM. Out of this, around 10% is in equity schemes and 90% is in debt.
  10. On the international mandates, the company expects to see a drawdown of $100 million from the Indo-Japanese Tech Fund in the AIF segment in the next 2-3 years.
  11. Realization in debt has fallen from 22 bps in Q1 to 20.5 bps in Q2.
  12. The rise in other income in Q2 was mainly due to the reversal of the company’s investment in its own equity and ETF schemes which yielded losses in Q4FY20.
  13. The share of equity in total AUM has risen due to the rise in markets in Q2.
  14. The company has almost 40% market share ex of EPFO money in the ETF space. It has 19 products spread across equity, both domestic and foreign, sectoral, and also fixed-income in the ETF segment currently.
  15. The company is looking to launch more ETFs in Q3. It has already got SEBI approval for certain more ETFs.
  16. The company sees opportunities in asset management arising from strategic partnerships in the financial industry.
  17. The management stresses that execution is going to be the key for the company to enhance its market share and add newer investors.
  18. The company is not looking to push to capture temporary market share by paying extra incentives. It is looking to provide a complete package of products, uniqueness of product, performance, and execution capability.
  19. The management has stated that investors in India are warming up to ETFs especially family offices. A major factor behind the growing preference for ETFs over regular MFs is the liquidity and the absence of the exit load.

Analyst’s View

Nippon India Life Asset Management is one of the leading asset managers in the country. The company has done well to bounce back after the rebranding last year. This was evident from the number of investor additions in Q2FY21 as well as the launch of new products like Nippon India Multi-Asset Fund, Nippon India ETF Nifty IT & Nippon India Nifty Smallcap 250 Index Fund. The company continues to have a good hold in the IFA space with this channel being the largest distribution channel for the company. It is also looking to capitalize on its expertise on ETFs and will continue to launch ETF products and bring in new investors to this space. It has also done well to win the post office mandate which cements its credentials as an institutional asset manager. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space and whether it will be able to maintain its growth momentum going forward. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.

 


Q1FY21 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 314 343 -8.45% 142 121.13%
PBT 192 179 7.26% 37 418.92%
PAT 150 123 21.95% 12 1150.00%

 

Q1FY21 Q1FY20 YoY % Q4FY20 QoQ %
Sales 336 360 -6.67% 150 124.00%
PBT 200 181 10.50% 27 640.74%
PAT 156 126 23.81% 4 3800.00%

 


Detailed Results

    1. Revenues declined 6.67% YoY. Profits rose for the company with Q1 PAT rising 24% YoY.
    2. As of 31st March 2020, AUM was at Rs 2,55,265 Cr or $34 billion.
    3. Operating expenses were down 24% YoY in Q1.
    4. NIMF added almost 220,000 folios in Q1 while ETF folios rose by over 117,000 which was more than the total number of investors added in the whole of FY20.
    5. Total AUM as of 30th June 2020 was at Rs 2,73,701 Cr or $36.5 billion. Average AUM in Q1 was at Rs 1,80,061 Cr or $24 billion.
    6. Equity assets grew to 38% of total AUM. Retail Assets were at Rs 44,429 Cr which 24% of total AUM vs an industry average of 19%.
    7. B30 assets were at Rs 32,923 Cr accounting for 17.3% of overall MF AUM vs industry average of 15.4%.
    8. Individual AUM was at Rs 91,211 Cr or $12.2 billion which accounted for 48% of MF AUM.
    9. The company enjoyed a market share of 15% in ETF space with AUM of Rs 25,765 Cr.
    10. As of March 31, 2020, NIMF has over 91 lakh investor folios. Out of these, over 34 lakh were SIP folios, with an annualized SIP book of approx. Rs 8,400 Cr or $1.1 billion.
    11. Digital purchase transactions grew 43% QoQ and digital channel now contributes to 56% of total new purchases.

Investor Conference Call Highlights

  1. Since the transition in October 2019, NAM has gained more than 120 institutional investors per quarter. In addition, 75 new HNI and family offices and presently, 26 out of the top 100 corporates of India have started to reinvest in Nippon India Mutual Fund.
  2. NIMF has one of the highest market shares of unique mutual fund investors in the industry at 29%.
  3. New digital SIP registrations have grown 116%.
  4. In Q1, the company launched Corporate Solutions Suite, a distant last full-spectrum digital asset for the institutional investor segment.
  5. NIMF has a 76% share in ETF volumes on MSE and BSE.
  6. As of June 2020, Nippon India AIF has raised commitments of INR 34 billion across all funds.
  7. Direct channel contributed 52% of the mutual fund AUM. Of the distributed AUM, the share of IFAs was 55% and 76% of the distributed assets have been contributed by individual investors.
  8. The employee expenses have declined 13% QoQ and are at Rs 72+ Cr. The management has stated that this level of employee expenses will be sustained in the future.
  9. With the increase in digital business, the management is expecting the cost of operations to go down in the long term.
  10. The overall realization is at 46 bps. The realization in equity is at 95-100 bps. The company shares around 50-70% of its TER with its distribution partners with 50% for IFAs and 70% for key partners like banks, etc.
  11. The company’s equity assets account for 70-75% of total fees.
  12. The management has stated that the reason that the bank channel is low compared to competitors is that the IFA channel is significantly high and is more difficult to replicate for competitors.
  13. The company has around 12% of its financial assets in equity and ETFs as seed capital.
  14. The net reversal in MTM since Q4 has resulted in another income of Rs 99 Cr in Q1.
  15. The management fees charged in both physical and digital transactions are the same but the difference comes in the physical cost of transacting.
  16. Overall Liquid fund AUM was at Rs 35,000+ Cr while debt was at Rs 52,000+ Cr.
  17. The company has only Rs 320 Cr in credit risk funds.
  18. The Board had taken the decision to not invest in any security below AA rating to stay conservative in the future.
  19. The company has seen redemptions in offshore funds from some institutional investors.
  20. THE average SIP size in Q1 was at Rs 2200.
  21. The debt and fixed deposits have contributed to 35-40% of other income while the rest is MTM from equity.
  22. The management has stated that the company will be selling Indian investment products globally with the help of Nippon’s global network and will also look to incorporate global practices into Indian operations. Some of these companies from Nippon’s global network include TCW from the USA, DWS in EU and MLC in Australia.
  23. The management has stressed on the fact that the AMC space is a volumes game where AUM needs to be rising and costs need to be kept low.
  24. 16% of direct equity inflows for the company are through NAM India.
  25. 16% of business is direct while 84% of the business through distributed assets.

Analyst’s View

Nippon India Life Asset Management is one of the leading asset managers in the country. The company has done well to bounce back after the rebranding last year. This was evident from the number of investor additions in Q1FY21 which exceeded the number of investors who joined in the whole of FY20. The company continues to have a good hold in the IFA space with this channel being the largest distribution channel for the company. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space and whether it will be able to maintain its growth momentum going forward. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.


 

Q4FY20 Updates

Financial Results & Highlights

Standalone Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 141.9 380.1 -62.67% 341.9 -58.50% 1134.3 1589.0 -28.62%
PBT 37.3 206.6 -81.95% 188.7 -80.23% 561.4 686.7 -18.25%
PAT 11.9 144.9 -91.79% 143.9 -91.73% 412.3 475.2 -13.24%

 

Consolidated Financials (In Crs)
Q4FY20 Q4FY19 YoY % Q3FY20 QoQ % FY20 FY19 YoY%
Sales 149.6 397.5 -62.36% 360.6 -58.51% 1193.2 1649.9 -27.68%
PBT 27.4 212.1 -87.08% 193.6 -85.85% 559.8 700.2 -20.05%
PAT 4.1 151.7 -97.30% 149.3 -97.25% 415.8 487.1 -14.64%


Detailed Results

    1. Revenues declined 62% YoY mainly due to Other income coming in at Rs (125) Cr. Profits remained subdued for the company with Q4 PAT falling 97% YoY and FY20 PAT falling 14.6% YoY.
    2. As of 31st March 2020, AUM was at Rs 2,55,265 Cr or $34 billion.
    3. Equity assets grew to 42% of total AUM. Retail Assets were at Rs 44,429 Cr which 24% of total AUM.
    4. B30 assets were at Rs 32,101 Cr accounting for 17.4% of overall MF AUM.
    5. Individual AUM was at Rs 90,738 Cr which accounted for 49% of MF AUM.
    6. The company enjoyed a market share of 16% in ETF space with AUM of Rs 29,456 Cr.
    7. As on March 31, 2020, NIMF has over 87 lakh investor folios. Out of these, over 32 lakh were SIP folios, with an annualized SIP book of approx. Rs 9,700 Cr.
    8. Digital purchase transactions grew31% YoY and digital channel now contributes to 45% of total new purchases.
    9. Nippon India AIF has now had a total commitment of Rs 3200 Cr as of 31st March 2020.
    10. The board has announced a final dividend of Rs 2 per share.

Investor Conference Call Highlights

  1. New SIP registration has gone up by 56% YoY.
  2. The company has a total of 76,200 distributors right now with no single distributor contributing more than 5% of the AUM.
  3. Operating expenses declined 34% YoY in Q4.
  4. The negative other income is mainly M2M loss from fall in NAV of the company’s investments into its own equity and ETF schemes which fell in March with the general market fall. The overall portfolio declined by 26% then.
  5. The management has clarified that the company has no exposure to Reliance Capital or any other Reliance group company.
  6. More than 80% of the company’s SIPs are for more than 5 years.
  7. The management has mentioned that the company will continue to incur expenses of around Rs 150 Cr every quarter.
  8. The management has stated that other than credit funds, no other funds have witnessed any major hits.
  9. The company has started to operate under the new tax rate of 25%.
  10. The management maintains that the IFAs remain the biggest channel for the company.
  11. The company is seeing funds moving from credit funds and to high-quality low duration funds.
  12. The other expenses have fallen from Rs 60+ Cr to Rs 40 Cr mainly due to greater automation efficiencies and lower discretionary spending.
  13. The management is focused on profitable growth and profitability rather than market share.
  14. Operating profit for Q4 was at 29 bps while the figure for FY20 was 27 bps vs 21 bps a year ago.

Analyst’s View

Nippon India Life Asset Management is one of the leading asset managers in the country. The company has gone through a painful rebranding process in the last 12 months which saw the AUM for the company especially from institutional investors and HNIs decline. The company has finished its rebranding process in October The company continues to hold a commanding presence in the retail ETF space and has been expanding into the AIF space. This helps the company diversify and grow into alternate revenue streams that are not dependent on the domestic market. The Q4 results have been disappointing for the company mainly due to the negative other income which has depressed profits for the company in Q4. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space and how it may capitalize on investor behaviour change due to COVID-19. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.


 

 

Q3 2020 Updates

Financial Results & Highlights

Consolidated Financials (In Crs)
Q3FY20 Q3FY19 YoY % Q2FY20 QoQ % 9MFY20 9MFY19 YoY%
Sales 360.64 403.97 -10.73% 322.6 11.79% 1043.65 1252.43 -16.67%
PBT 193.64 163.32 18.56% 168.28 15.07% 532.46 488.16 9.07%
PAT 149.3 109.74 36.05% 136.73 9.19% 411.63 335.41 22.72%


Detailed Results

    1. Revenues declined 11% YoY but showed good growth of 12% QoQ. Profits remained buoyant for the company with Q3 PAT rising 36% YoY and 9M PAT growing 23% YoY.
    2. The company saw AUM growth resuming after 4 quarters of AUM decline with 5% QoQ growth to Rs 2,04,370 Cr.
    3. Equity assets grew to 44% of total AUM. Retail Assets were at Rs 54,630 Cr which 26% of total AUM.
    4. B30 assets were at Rs 38,676 Cr accounting for 19% of overall MF AUM. B30 cities contributed to 27% of total AUM showcasing good penetration in these areas.
    5. Individual AUM was at Rs 1,10,232 Cr which accounted for 53% of MF AUM.
    6. The company enjoyed a market share of 16% in ETF space in terms of QAAUM. The company also has a 42% market share in ETF space in terms of folios and 76% in terms of volume share.
    7. Equity AUM rose 9% YoY while fixed income AUM fell 32% YoY.
    8. SIP inflows remained stable YoY but the number of equity transactions grew 14% YoY to 3.3 million transactions per month in Q3. Over 80% of incremental SIPs have a tenure of more than 5 years.
    9. The company added 600 new distributors in Q3 bringing the total up to 76000.
    10. Around 55% of all distributors are IFAs showcasing the strong reach of the company in the IFA community. No single distributor contributes to > 5.3% of AUM.
    11. Digital transactions rose 38% YoY with lumpsum purchases growing 32% YoY and digital SIP registrations grew 27% YoY.
    12. The company’s offshore business has a total AUM of Rs 11,600 Cr as of Dec ’19.
    13. The board has announced an interim dividend of Rs 3 per share.
    14. Nippon India AIF has a commitment around Rs 2700 Cr across all schemes.

Investor Conference Call Highlights

  1. The management mentions that the company has received a good response after the rebranding process was completed in October and the company is seeing HNIs and institutional investors returning to the company.
  2. Over 170 SMEs have started to invest with the company after the rebranding.
  3. The company has received an equity mandate of $500 million from a sovereign wealth fund in the last quarter.
  4. The company has also launched a venture capital fund of funds and has received commitments of $100 million from various investors in Japan.
  5. The management has stated that the exposure to Reliance subsidiaries is around Rs 320 Cr and the company has already written off this amount.
  6. The total exposure to Reliance Capital is only Rs 130 Cr while the balance sheet of the AMC does not contain any exposure to Reliance subsidiaries.
  7. The company earns around Rs 10 Cr currently from AIF and offshore business. The margin on the offshore business is around 33 to 50 bps.
  8. The management has stated that fixed income AUM for the industry has been falling but the management expects the AUM to stabilize in the coming quarters.
  9. The company has around 9 lac customers and the majority of the investment comes from institutional investors. The management is confident that the retail inflows into ETFs are going to rise going forward.
  10. The company has 3 funds in Japan (2 bond funds and 1 equity fund) which account for $1.2 billion.
  11. The management feels that the company stands to gain a lot from foreign capital inflows in the future due to the influence and pedigree of the promoting entity of Nippon Life.
  12. The management has reiterated that the company has a mandate of distributing 60% to 90% of its earnings every year as dividends for the last 5 years and this is expected to stay stable.
  13. The management expects to leverage Nippon Life’s influence to increase the size of alternative investments under the company.
  14. The management has clarified that there have been no major managerial exits from the company in the rebranding process and the top management remains committed to the company.
  15. The management has the company has reinvested almost all the surplus back into the company’s mutual funds and FDs.

Analyst’s View

Nippon India Life Asset Management is one of the leading asset managers in the country. The company has gone through a painful rebranding process in the last 12 months which saw the AUM for the company especially from institutional investors and HNIs decline. The company has finished its rebranding process in October and has also seen its AUM rising in the last quarter. The company has a very good reach and market positioning in the retail market which is evident from the company’s retail assets and its reach in the IFA community. The company also holds a commanding presence in the retail ETF space and has been expanding into the AIF space. This helps the company diversify and grow into alternate revenue streams that are not dependent on the domestic market. The company stands to gain a lot from its association with its promoter Nippon Life which should help the company attract foreign inflows much better than other domestic rivals. It remains to be seen whether the company will be able to match the pace of growth of its prime competitor HDFC AMC in this space. Nonetheless, given the company’s market positioning and its competitive advantage in the ETF and AIF space, Nippon Life India Asset Management is a must-watch stock for every investor interested in the AMC space.

 

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