Reliance Mutual Fund IPO covered nearly five times on first day
Photo Credit: Manni Das/VCCircle

Reliance Nippon Life Asset Management Co Ltd’s initial public offering—the first by an Indian mutual fund manager—was covered nearly five times on the first day of the issue on Wednesday after receiving full subscription within five minutes of opening.

The offering of 42.84 million shares, excluding the anchor allotment, received bids for 198.87 million shares on the first day, stock-exchange data showed.

The portion set aside for qualified institutional buyers (QIBs) was subscribed 6.12 times. Bulk of the shares were bid by domestic banks, besides a diverse group of foreign portfolio investors, said two people aware of the matter said.

ICICI Bank Ltd placed a bid for shares worth Rs 300 crore, one person said on the condition of anonymity.

An email sent to ICICI Bank for its comment on the investment did not yield an immediate response.

The non-institutional investors’ category—comprising high net-worth individuals and corporate bodies—was subscribed nearly 11.5 times. Retail investors, whose bid value cannot exceed Rs 2 lakh per application, bid for 90% the shares on offer, the data showed.

Several domestic brokerages advised their clients to subscribe to the public offering.

Brokerage house Asit C. Mehta said that Indian mutual fund industry is largely concentrated around top 10 asset management companies even though the number of players has risen over the years.

“Given the underpenetrated nature of MF industry, coupled with the first-mover advantage followed by well-diversified suite of products and multi-channel distribution network, we believe the company is set to benefit in the long run,” Dhiral Shah, analyst at Asit C. Mehta, said in a client note on 18 October.

JM Financial, Nomura, CITIC CLSA and Axis Capital are the global coordinators and book running lead managers to the IPO. Edelweiss, IIFL, SBI Caps and Yes Securities are the other merchant bankers.

Reliance Nippon Life, a joint venture between industrialist Anil Ambani-led Reliance Group and Japan’s Nippon Life, is seeking Rs 15,422.4 crore ($2.36 billion) in valuation through the IPO.

On Tuesday, India’s third-largest mutual fund manager raised Rs 462.67 crore ($71.08 million) by selling shares to a bunch of anchor investors ahead of its IPO. It allotted 18.36 million shares at the upper end of the Rs 247-252 price band, according to a stock-exchange filing.

The anchor investors included the sovereign wealth funds of Abu Dhabi and Kuwait. Abu Dhabi Investment Authority bought shares worth Rs 35 crore ($5.37 million) while Kuwait Investment Authority purchased Rs 10 crore of shares.

Reliance Nippon Life, a joint venture between industrialist Anil Ambani-led Reliance Group and Japan’s Nippon Life, is seeking Rs 15,422.4 crore ($2.36 billion) in valuation through the IPO. The total IPO size is pegged at Rs 1,542.24 crore at the upper end of the price band. The issue will result in a 10% stake dilution on a post-issue basis.

The IPO comprises a fresh issue of 24.48 million shares and a sale of 36.72 million shares by promoter entities.

Nippon will sell 25.49 million shares while Reliance Capital will offload the remaining. The IPO would bring parity to the holding of both partners at 42.88% each. Currently, Nippon holds a 49% stake.

Nippon had originally picked up a 26% stake in the Indian asset management firm for $290 million in 2012, valuing it at Rs 5,600 crore ($920 million then). It bought 9% more in 2014 and an additional 14% the following year.

The promoters will get three years from the date of listing to meet the 25% minimum public shareholding norms by the capital markets regulator.

Reliance Nippon Life had filed its draft red herring prospectus on 18 August. It received regulatory approval for the IPO on 5 October. VCCircle had first reported the company’s plans to go public as well as merchant banker appointments.

The company joins a list of more than two dozen firms that are awaiting regulatory approval for their IPOs or already have an approval to launch their public issues.

Reliance Nippon Life acts as the adviser for India-focussed equity funds and fixed-income funds in Japan and Korea. It also manages offshore funds through its subsidiaries in Singapore and Mauritius, catering to investors across Asia, the US and Europe.

The company’s assets under management grew 25% to Rs 3.59 trillion ($55.1 billion) in the year through March 2017. This includes mutual fund AUM of Rs 2.11 trillion. Its total income rose 9% to Rs 1,436 crore and profit before tax increased 16% to Rs 581 crore in 2016-17.

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