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S t a k e s a l e p r o v i d e s v a l u a t i o n m o m e n t u m …
Nippon Life Insurance has agreed to buy a 26% stake in Reliance Capital
AMC at | 1450 crore ($290 million). Reliance Capital AMC is the second
largest AMC in India with an AUM of | 83,206 crore as on January 12,
2012. The AMC continues to be a top contributor with 86% share in the
consolidated PBT (| 75 crore in Q2FY12) of Reliance Capital as other
businesses continue to make marginal profits or have losses. As of now,
Reliance Capital has 93% ownership in Reliance AMC whereas 5% is held
by Eton Park, acquired in 2007.
Nippon Life manages assets of over $600 billion. It is one of the largest
FDI in the Indian mutual fund sector till date and its second investment
after deploying funds in Reliance Life in 2011.
We maintain our BUY rating on the stock with a target price of | 466.
ƒ Valuation seems attractive …
The valuation done at ~| 1450 crore for a 26% stake in the AMC
pegs the company’s worth at | 5600 crore ($1.1 billion). The current
market capitalisation of the consolidated Reliance Capital entity is |
8142 crore, pegging the AMC’s business share at 68% of the current
total market cap and | 211 per share of Reliance Capital.
Nippon Life seems to have valued Reliance Life at 6.7% of the
current AUM, which is higher than deals done in the recent past. We
believe that as Reliance AMC’s equity proportion is higher at 32%,
the valuations are fair. The Nomura-LIC AMC and L&TCholamandalam deals were fairly cheap between1.5% and 5.7% of
AUM due to their lower equity proportions and smaller AUM sizes.
We have assumed an 18% increase in FY13E AUM to | 1,05,948
crore, against a 12% dip in FY12E AUM from FY11 AUM of |
1,01,600 crore. Based on FY13E estimates, we have valued the AMC
at 5% of AUM to | 200 per share.
Exhibit 1: AMC P&L
Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 YoY (%) QoQ(%)
Gross Income 164.2 177.3 177.3 185.7 167.4 163.1 -8.0 -2.6
PBT 57.7 70.0 91.3 52.6 70.9 65.6 -6.3 -7.4
Source: Company Quarterly Presentation, ICICIdirect.com Research
We expect Reliance AMC to report a profit | 211 crore for FY13E and |
178 crore for FY12E based on expected AUMs. We have not factored in
capital gains arising from the current AMC stake sale as the transaction is
subject to regulatory approvals and there remains uncertainty of year in
which gains will be booked.
Exhibit 2: Deal at current AUM levels (12
th
January,2012 – closing AUM)
(| crore)
Current AUM' 83206
Value for 26% stake 1450
Value derived for 100% stake 5577
Valuation as a % oF AUM 6.7
Value per share of Reliance Capital (Rs) 211
Source: Company, ICICIdirect.com Research
V a l u a t i o n
We expect the operational performance to improve gradually with life
insurance also turning profitable and expected to get merged soon.
Capital gains from both life insurance and expected AMC stake sale to
Nippon Life should boost the FY12E PAT. We believe valuations remain
attractive at these levels and maintain our BUY rating on the stock with a
target price of | 466.
Exhibit 6: Valuations
Business Segment FY13E |/share
Reliance Life 175
Reliance general insurance 12
Reliance broking 16
Reliance AMC 200
Reliance consumer finance & others 63
Value per share of Rcap 466
Source: ICICIdirect.com Researc
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
S t a k e s a l e p r o v i d e s v a l u a t i o n m o m e n t u m …
Nippon Life Insurance has agreed to buy a 26% stake in Reliance Capital
AMC at | 1450 crore ($290 million). Reliance Capital AMC is the second
largest AMC in India with an AUM of | 83,206 crore as on January 12,
2012. The AMC continues to be a top contributor with 86% share in the
consolidated PBT (| 75 crore in Q2FY12) of Reliance Capital as other
businesses continue to make marginal profits or have losses. As of now,
Reliance Capital has 93% ownership in Reliance AMC whereas 5% is held
by Eton Park, acquired in 2007.
Nippon Life manages assets of over $600 billion. It is one of the largest
FDI in the Indian mutual fund sector till date and its second investment
after deploying funds in Reliance Life in 2011.
We maintain our BUY rating on the stock with a target price of | 466.
ƒ Valuation seems attractive …
The valuation done at ~| 1450 crore for a 26% stake in the AMC
pegs the company’s worth at | 5600 crore ($1.1 billion). The current
market capitalisation of the consolidated Reliance Capital entity is |
8142 crore, pegging the AMC’s business share at 68% of the current
total market cap and | 211 per share of Reliance Capital.
Nippon Life seems to have valued Reliance Life at 6.7% of the
current AUM, which is higher than deals done in the recent past. We
believe that as Reliance AMC’s equity proportion is higher at 32%,
the valuations are fair. The Nomura-LIC AMC and L&TCholamandalam deals were fairly cheap between1.5% and 5.7% of
AUM due to their lower equity proportions and smaller AUM sizes.
We have assumed an 18% increase in FY13E AUM to | 1,05,948
crore, against a 12% dip in FY12E AUM from FY11 AUM of |
1,01,600 crore. Based on FY13E estimates, we have valued the AMC
at 5% of AUM to | 200 per share.
Exhibit 1: AMC P&L
Q1FY11 Q2FY11 Q3FY11 Q4FY11 Q1FY12 Q2FY12 YoY (%) QoQ(%)
Gross Income 164.2 177.3 177.3 185.7 167.4 163.1 -8.0 -2.6
PBT 57.7 70.0 91.3 52.6 70.9 65.6 -6.3 -7.4
Source: Company Quarterly Presentation, ICICIdirect.com Research
We expect Reliance AMC to report a profit | 211 crore for FY13E and |
178 crore for FY12E based on expected AUMs. We have not factored in
capital gains arising from the current AMC stake sale as the transaction is
subject to regulatory approvals and there remains uncertainty of year in
which gains will be booked.
Exhibit 2: Deal at current AUM levels (12
th
January,2012 – closing AUM)
(| crore)
Current AUM' 83206
Value for 26% stake 1450
Value derived for 100% stake 5577
Valuation as a % oF AUM 6.7
Value per share of Reliance Capital (Rs) 211
Source: Company, ICICIdirect.com Research
V a l u a t i o n
We expect the operational performance to improve gradually with life
insurance also turning profitable and expected to get merged soon.
Capital gains from both life insurance and expected AMC stake sale to
Nippon Life should boost the FY12E PAT. We believe valuations remain
attractive at these levels and maintain our BUY rating on the stock with a
target price of | 466.
Exhibit 6: Valuations
Business Segment FY13E |/share
Reliance Life 175
Reliance general insurance 12
Reliance broking 16
Reliance AMC 200
Reliance consumer finance & others 63
Value per share of Rcap 466
Source: ICICIdirect.com Researc
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