Reliance Nippon AMC could become group's largest post-listing
Another sector will join the Indian stock market on Monday with the listing of Reliance Nippon Life Asset Management, the first among 42 Sebi-registered mutual funds. The insurance sector joined the stock market in 2016 with the listing of ICICI Prudential Life Insurance Company and it has been followed by five more insurance IPOs so far, including HDFC Standard Life Insurance issue opening on Tuesday.
The success of the Reliance Mutual Fund IPO has enthused other top mutual funds to plan their IPOs. HDFC Mutual Fund will be launching its IPO next year, said HDFC chairman Deepak Parekh recently while launching the HDFC Standard Life Insurance IPO.
Government-owed UTI Mutual Fund has also been planning a public issue for long and could take plunge now. ICICI Mutual Fund and SBI Mutual Fund are other likely candidates to hit the market as their promoters may look to monetise these assets at premium valuations.
AMCs and insurance companies are now getting listed as there is a regulatory push, since they have small investors' money parked with them.
Pranav Haldea, managing director, Prime Database Group, said, "AMCs or insurance companies are public institutions, which have small investors' money parked with them. For better governance and transparency, it is prudent for them to be listed. There has also been a regulatory push for such institutions to get listed."
Formerly known as Reliance Capital Asset Management, Reliance Nippon Life Asset Management started its mutual fund operations in 1995 as the asset manager for Reliance Mutual Fund. The company managed assets worth Rs. 2,22,964 crore and had 7.01 million investor folios as of June 30, 2017. Reliance Mutual Fund managed 55 open-ended mutual fund schemes, including 16 ETFs and 174 closed ended schemes as on June 30.
It has a pan-India network of 171 branches and approximately 58,000 distributors, including banks, financial institutions, national distributors and independent financial advisors (IFAs), as of June 30, 2017.
Interestingly, after Monday's listing, the asset management company may become the largest firm in the Anil Ambani-led Reliance Group, surpassing the valuation of Reliance Capital, the holding company, and other group companies like Reliance Infrastructure and Reliance Power, given their market-cap has been trending lower over the past few years.
Reliance Capital's market capitalisation as on Friday stood at Rs 14,859.41 crore, Reliance Infrastructure's market cap stood at Rs 12,899.66 crore while that of Reliance Power stood at Rs 11,515.04 crore.
Reliance Nippon IPO diluted 10 per cent stake to raise Rs 1,542 crore, valuing the company at Rs 15,420 crore. There is a good chance that the asset management company will be listed at a premium, taking its market cap above Rs 15,420 crore.
Given the huge response to the first mutual fund IPO, which was subscribed 81.54 times in the price band of Rs 247- Rs 252 a share, with strong demand from qualified institutional buyers (subscribed 118.40 times) and non-institutional or high net worth individuals (209.44 times) and retail individual investors category (5.65 times), the stock could go up after listing.
In the grey market shares of the company were commanding a premium of Rs 25 per share, or 9.92 per cent, a broker said.
At such a premium, the Reliance Nippon Asset Management would clock a market cap of around Rs 17,000 crore post-listing.