Reliance Nippon Life Asset Management Limited (Reliance AMC) is all set to enter the primary markets with its initial public offer (IPO) of Rs. 1,542 crore. The issue is getting opened for subscription from Wednesday, October 25 and will remain open for three days to close on October 27. This IPO is a mix of fresh issue of about 2.45 crore equity shares by the company and an offer for sale (OFS) of around 3.67 crore equity shares by the promoters.
The company has fixed its price band in the range of Rs. 247-252 a share and no discount has been offered to the retail investors. The offer would constitute 10% of the company’s post-offer paid-up equity share capital.
Here are some of the salient features of this issue:
Size of the Issue – This IPO is a combination of an offer for sale (OFS) of 3.67 crore shares by the promoters, Reliance ADAG and Nippon Life Asset Management Limited and a fresh issue of 2.45 crore shares by the company. This makes it a Rs. 1,542 crore IPO at the upper end of the price band i.e. Rs. 252.
Price Band – Reliance AMC has fixed its IPO price band to be between Rs. 247-252 a share and the company has decided not to offer any discount to the retail investors.
Retail Allocation – 35% of the issue has been reserved for the retail individual investors (RIIs), 15% for the non-institutional investors (NIIs) and the remaining 50% shares will be allocated to the qualified institutional buyers (QIBs).
No discount for Retail Investors or Employees – The company has decided not to offer any discount to any of its investors or to its employees either.
Bid Lot Size & Minimum Investment – Investors need to bid for a minimum of 59 shares in this offer and in multiples of 59 shares thereafter. So, a retail investor would be required to invest a minimum of Rs. 14,868 at the upper end of the price band and Rs. 14,573 at the lower end of the price band.
Maximum Investment – Individual investors investing up to Rs. 2 lakh are categorised as retail individual investors (RIIs). As a retail investor, you can apply for a maximum of 13 lots of 59 shares each @ Rs. 252 a share i.e. a maximum investment of Rs. 1,93,284. At Rs. 247 per share, you can apply for a maximum of 13 lots of 59 shares, thus making it Rs. 1,89,449.
Listing – The shares of the company will get listed on both the stock exchanges i.e. National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) within 6 working days after the issue gets closed on October 27th. Its shares are expected to get listed on November 6th.
Here are some other important dates as the issue gets closed on October 27:
Finalisation of Basis of Allotment – On or about November 1, 2017
Initiation of Refunds – On or about November 3, 2017
Credit of equity shares to investors’ demat accounts – On or about November 3, 2017
Commencement of Trading on the NSE/BSE – On or about November 6, 2017
Financials of Reliance Nippon Life AMC
(Note: Figures are in Rs. Crore, except per share data & percentage figures)
Should you invest in Reliance AMC IPO or Not @ Rs. 252?
Like most of the IPOs that have hit the streets in the last six months or so, this IPO too seems to seek a high premium for its shares on offer. At Rs. 252 a share, the company is valued at 36.79 times its FY17 earnings and 8.97 times based on its book value as on June 30, 2017. For a company which is facing a tough competition from the existing as well as new entrants in the asset management business and seeing a consistent decline in its financial health, these valuations are not attractive for either listing gains, or for long term wealth creation.
The company reported profit after tax (PAT) of Rs. 402.76 crore during FY17, as against Rs. 396.43 crore in FY16 and Rs. 354.46 crore in FY15. This translates into a growth of just 1.6% in the last year’s profits and 6.6% CAGR in the last two years’ profits. This growth is not upto the mark if you consider this 2-year period to be a bumper one for the growth in the AUMs of the mutual fund industry as a whole.
Despite of the fact that Reliance AMC is one of the better companies in the ADAG group of companies, I think the company is seeking valuations way higher than what it deserves for the kind of growth it has been able to deliver. Personally I would avoid this IPO at these valuations and wait for it to correct to reasonably attractive valuations before making an entry into it.