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Nippon Life India Asset Management Ltd>
  • CMP : 660.1 Chg : 7.10 (1.09%)
  • Target : 270.0 (14.41%)
  • Target Period : 12-18 Month

27 Apr 2023

Steady performance; regulatory uncertainty overhang

About The Stock

Nippon Life India AMC is among the largest asset managers in India with an AUM size of ₹ 3.63 lakh crore. The company has a strong distribution network with 91000+ distributors.

  • Market share as on Q4FY23 was at 7.2%
  • Strong presence in B-30 cities that contribute to 19% of total AUM

Steady quarter with a stable market share.

  • QAAUM was at ₹ 293200 crore, up 3% YoY and flat QoQ. Market share was steady at ~7.2%                             
  • Revenue declined 2% QoQ at ₹ 348 crore; YoY it was up 3% mainly due to steady yields at ~47 bps
  • Lower other income led to 3% QoQ decline in PAT at ₹ 198 crore
What should Investors do?

Nippon Life India AMC’s share price has remained volatile in the recent past due to subdued movement in industry AUM and uncertainty related to regulatory change.

  • We maintain our HOLD rating on the stock
Target Price and Valuation

Steady market share provides comfort. However, regulatory change may impact yields and result in lower earnings. Thus, we value Nippon AMC at ~4.7% FY25E AUM and revise our target price from ₹ 300 to ₹ 270 per share.

Key Triggers for future price performance
  • Better performance is expected to aid a gradual improvement in market share and, thus, AUM growth
  • Significant presence in ETF segment (vs. peers) and focus on non-MF business is seen to improve operational capabilities and earnings growth
  • Uncertainty on revision in TER rates, structure to remain an earnings risk. Fresh flows in debt schemes, after tax amendments, needs to be watched
Alternate Stock

Apart from Nippon Life, in our coverage we like MCX.

  • MCX is the leader in commodity derivatives exchanges in India with ~96.8% market share in terms of commodity futures turnover
  • BUY with a target price of ₹ 1700

Key Financial Summary

Particulars FY20 FY21 FY22 FY23 3 Year CAGR(FY20-FY23) FY24E FY25E 2 Year CAGR (FY23-FY25E)
Net Profit (| crore) 415.4 679.4 743.4 722.0 20.2 786.3 856.4 8.9
EPS (|) 6.8 11.0 12.0 11.6 19.6 12.6 13.8 8.9
P/E (x) 34.8 21.4 19.7 20.3 - 18.7 17.1 -
AUM /share (|) 3,347.4 3,708.0 4,554.5 4,713.7 - 5,279.3 5,912.8 -
RoE (%) 14.1 18.7 17.0 14.2 - 15.4 16.8 -
DPS (|) 5.0 8.0 11.0 11.5 - 11.6 12.7 -
P/AUM (%) 7.1 6.4 5.2 5.0 - 4.5 4.0 -
Source: Company, ICICI Direct Research

Variance Table

| crore Q4FY23 Q4FY22 YoY Q3FY23 QoQ Comments
Revenue from Operations 348.3 338.0 3% 353.8 -2% Subdued revenue growth led by flattish AUM & steady yields
Revenue/AUM 0.48 0.48 -1bps 0.48 -1bps Stable market share led to steady yield
Other Income 39.7 34.5 15% 61.9 -36% MTM loss impacted other income
Net Total Income 388.0 372.4 4% 415.7 -7%  
Staff Cost 71.2 74.5 -5% 74.7 -5%  
Other Operating Expenses 77.7 63.5 22% 74.7 4%  
Total Expenses 148.8 138.1 8% 149.4 0% Opex largely flat with no offs
PBT 239.2 234.4 2% 266.4 -10%  
Tax Outgo 41.5 59.5 -30% 61.6 -33%  
PAT 198.0 174.8 13% 205.2 -3% Lower other income led to QoQ decline in PAT
MF- AAUM 293200 283300 3% 292800 0% Overall market share steady at 7.2%


Q4FY23 Earnings Conference Call highlights

  • Industry AAUM growth steady with 0.5% QoQ uptick at | 40.51 lakh crore. SIP contribution for FY23 at | 1.56 lakh crore with growth of 25% YoY. Debt segment witnessed an outflow of | 1.5 lakh crore on account of a rise in interest rates. ETF flows were healthy during the year
  • NAM India AUM growth was flat with stable market share. The management aims to increase equity market share, going ahead
  • Individual AUM (mix of retail & HNI) forms 56% of total MF AUM. HNI AUM grew 25% YoY and market share increased 66 bps
  • SIP grew 52% YoY to | 1115 crore. Total 60% of SIP AUM continued for five years vs. 24% for the industry. Total 15% of SIP folios continued for five years vs. 11% industry average
  • Share in industry ETF folio is 61%. ETF daily volume across funds remains higher compared with industry. Have AIF commitment of | 5,615 crore across various schemes
  • Yields were largely steady due to replacement of old assets vs. new assets (cost of acquisition of new assets is high compared with old assets) and due to increase in size. Management aim to maintain yields at current levels
  • Payout ratio to distributor has moderated vs. last year and, hence, able to maintain yields at current levels. Expense growth is in range of 6-7% and will continue to grow in that range. Effective tax rate to be 22-23% vs. 25%
  • Employee cost down due to moderation in PLI provisions. Other income fell due to MTM impact (carry | 2200 crore of net worth in fixed income schemes)
  • Just 30% of assets are now at the old pricing, rest already being churned. More than three years old assets are 30% of total equity assets and most of it is a part of continuing SIP book




I/We, Kajal Gandhi, CA, Vishal Narnolia, MBA and Pravin Mule, MBA, M.com, Research Analysts Research Analysts, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. It is also confirmed that above mentioned Analysts of this report have not received any compensation from the companies mentioned in the report in the preceding twelve months and do not serve as an officer, director or employee of the companies mentioned in the report.     


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