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Reliance Nippon hires Nomura, JM Financial, CLSA to manage IPO

LiveMint logoLiveMint 02-08-2017 Reghu Balakrishnan

Mumbai: Reliance Nippon Life Asset Management Ltd (formerly Reliance Capital Asset Management Ltd), India’s third-largest mutual fund manager, has shortlisted investment banks to manage its upcoming initial public offering (IPO), according to two persons aware of the development.

Nomura Financial Advisory and Securities (India) Pvt. Ltd, JM Financial Institutional Securities Ltd and CLSA India Pvt. Ltd have been hired by Reliance Mutual Fund to manage its share sale, the two added , asking not to be identified.

Reliance Mutual Fund plans to sell shares amounting to a 10% stake initially, and another 15% over the next four years, adding up to a 25% stake by 2021, chief executive Sundeep Sikka said last month. The company will be valued at around Rs18,000 crore, one of the two people said.

Reliance Nippon is the asset manager of Reliance Mutual Fund schemes which includes mutual funds, pension funds, managed accounts, alternative investments and offshore funds. “The DRHP (draft red herring prospectus) will be filed in a couple of weeks,” said the second person.

Reliance Nippon, a subsidiary of Reliance Capital Ltd (RCL), managed Rs3.58 trillion of assets as on 31 March. Reliance Capital owns 51% stake while its strategic partner Nippon Life Insurance Co. holds 49%.

Spokespersons for Reliance, Nomura and JM Financial did not respond to emails seeking comment; a CLSA spokesperson declined comment.

In June, the board of directors at Reliance Nippon Life approved plans to list the equity shares of the company.

In the year ended 31 March 2017, the company announced a year-on-year increase of 25% in its assets under management to Rs3.6 trillion ($55.1 billion); an increase of 9% in its total income to Rs1,436 crore ($221 million) and a 16% increase in its profit before tax to Rs581 crore ($90 million).

According to one expert, the structural shift of savings pattern towards financial savings has increased the focus on capital market-linked instruments.

“The sharp increase in inflows in equity-oriented mutual funds reflects this trend, with net inflows over the last two years being greater than the cumulative inflows over the previous ten years. We believe there is potential for up to $600 billion to flow into capital market-linked savings instruments over the next five years, nearly three times the amount of inflows over the last five years,” said Ausang Shukla, managing director of Ambit Corporate Finance.

Two foreign funds have picked up 4.5% stake in Anil Ambani-led Reliance Group’s mutual fund arm for $100 million, Press Trust of India reported last month. The shares have been bought from US-based hedge fund firm Eton Park Capital Management at a valuation of Rs15,000 crore, the report added.

Reliance Nippon acts as the advisor for India-focused equity and fixed income funds in Japan (launched by Nissay Asset Management) and Korea (launched by Samsung Asset Management). It also manages offshore funds through its subsidiaries in Singapore and Mauritius, catering to investors across Asia, West Asia, UK, US, and Europe, according to a company statement.

Reliance Mutual Fund competes with ICICI Prudential Asset Management (assets under management of Rs2.4 trillion), HDFC Asset Management Co. Ltd (Rs2.3 trillion), Birla Sun Life Asset Management Co. Ltd (Rs1.9 trillion) and SBI Funds Management (Rs1.5 trillion).

Besides Reliance MF, several small mutual fund companies such as UTI Mutual Fund are considering an IPO.

The positive growth outlook for mutual funds presents an attractive investment opportunity for investors, Shukla added.

Reliance Group companies have sued HT Media Ltd, Mint’s publisher, and nine others in the Bombay high court over a 2 October 2014 front-page story that they have disputed. HT Media is contesting the case.

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