Reliance Nippon Life Asset Management (RNAM), asset management arm of the Anil Ambani-promoted Reliance Capital, filed documents on Friday with the Securities and Exchange Board of India (Sebi) for an Initial Public Offer of equity (IPO).
According to sources, the IPO size could be between Rs 1,800 and Rs 2,000 crore and would lead to 10 per cent dilution. The issue would comprise a new equity component and an Offer for Sale by both Reliance Capital and Nippon Life Insurance. The aim is to launch the IPO in this financial year.
RNAM will issue 24.5 million new shares, Nippon Life will offer around 25.5 mn and Reliance Capital 11.2 mn. A source said the fresh component will be worth Rs 720-800 crore, while the Nippon Life and Reliance Capital stake sale will be worth Rs 330 crore and Rs 750 crore, respectively.
Currently, Reliance Capital and Nippon Life hold 51 per cent and 44.57 per cent in RNAM. The IPO could lead to dilution of Reliance Capital's and Nippon Life's holding by 1.8 per cent and 4.2 per cent, respectively.
The IPO is being managed by JM Financial, CLSA, Nomura and Axis Capital.
For the financial year (FY) 2016-17, RNAM, which manages assets worth nearly Rs 3.6 lakh crore, had profit of Rs 581 crore. For the quarter ended June, income was Rs 395 crore and net profit Rs 108 crore.
According to industry players, an asset manager is valued at five per cent of its assets or 30 times its profit. Recently, IIFL Asset Management acquired 2.6 per cent stake in RNAM for Rs 385 crore, valuing the asset manager at Rs 14,865 crore.
Reliance MF is the third-biggest mutual fund house in the country, after ICICI Prudential MF and HDFC MF in terms of asset size.
In the past 10 years, RNLAM has seen its assets under management (AUM) grow from Rs 51,084 crore to Rs 3.62 lakh crore. About Rs 2.2 lakh crore of these assets are under Reliance MF, while the rest are across pension funds, managed accounts, alternative investments and offshore funds. RNLAM has seen its profit grow from Rs 72 crore in FY07 to Rs 581 crore in FY17, making it the second most profitable asset manager after HDFC MF.
The IPO comes when domestic MFs are seeing healthy growth in investor flow and AUM.