Reliance Nippon Life Asset

Management RELL.NS RNAM IN

EQUITY: FINANCIALS

Stable quarter Global Markets Research

30 July 2019
Market share loss in debt/liquid restricts us from
Rating
turning positive despite reasonable valuations Remains Neutral
Target Price
Action: Valuing now on EPS; TP increased to INR260/share Increased from 210 INR 260
RNAM’s 1Q20 PAT was in line our expectation, with a beat on core EBIT
Closing price
netted off by lower other income. Core EBIT/AUMs improved to 26bp vs 23bp 29 July 2019 INR 227
in FY19 given the benefit of ~300bp q-q improvement in equity mix and lead-
lag benefit of the removal of upfront commissions. That said, RNAM has lost Potential upside +14.3%
300-350bp of market share in debt/liquid AUMs since Sep-18 (AUMs down 30-
35% since Sep-18), and the fall seems to us likely to continue.
Anchor themes
With Nippon taking over RNAM, the market share loss in debt/liquid could get We remain positive on the large
arrested, but equity AUMs may see some impact. This restricts us from turning opportunity for AMCs to continue
positive on the stock despite what we view as reasonable valuations and a to gain share in financial savings
large valuation gap vs HDFC AMC. We increase our TP to INR260/share from and expect AUM growth to
INR210, led by: 1) valuing now on PAT vs valuing core earnings and remain strong at +15% over
investment book separately (as highlighted in our previous note - link); 2) FY19-21F, but expect near-term
factoring in repayment of ICDs; 3) rolling over our valuation to Sep-21; and 4) earnings to remain under
1-2% increases in our EPS estimates. We continue to value the stock at 26x pressure given recent TER cuts.
forward earnings.
 Stable quarter: Core EBIT/AUM of 26bp was higher than our expectations, Nomura vs consensus
benefitting from lead-lag of the removal of upfront commissions and ~300bp We build in a higher TER cuts-
q-q improvement in equity mix. While RNAM has been able to pass on 80- related impact for AMCs vs the
90% of the cut in TERs, we believe the hit is higher in new business and the Street.
benefit of removal of upfront commissions will normalise. We expect core
EBIT/AUMs of 25-26bp over FY20-22F and expect PAT growth of 10% Research analysts
CAGR to lag our AUM CAGR expectations of 13%.
India Banks
 Change in promoter positive but market share loss remains key
Amit Nanavati - NFASL
monitorable: A change in promoter and repayment of ICDs as a part of the amit.nanavati@nomura.com
deal is a key positive, from a valuation perspective. That said, market share +91 22 4037 4361
loss for RNAM has been severe in debt/liquid segments and change in brand Adarsh Parasrampuria - NFASL
may bring near-term impact on equity flows as well, and any positive surprise adarsh.parasrampuria@nomura.com
on that could be the key trigger to turning more positive on the stock. +91 22 4037 4034
Tanuj Kyal - NFASL
Year-end 31 Mar FY19 FY20F FY21F FY22F
tanuj.kyal1@nomura.com
Currency (INR) Actual Old New Old New Old New +91 22 40374220
Revenue (mn) 16,499 15,429 14,847 16,190 15,716 17,662
Reported net profit (mn) 4,861 5,133 5,202 5,624 5,706 6,544
Normalised net profit (mn) 4,861 5,133 5,202 5,624 5,706 6,544
FD normalised EPS 7.94 8.39 8.50 9.19 9.32 10.69
FD norm. EPS growth (%) 2.4 5.6 7.0 9.6 9.7 14.7
FD normalised P/E (x) 28.6 N/A 26.8 N/A 24.4 N/A 21.3
EV/EBITDA (x) 18.8 N/A 17.1 N/A 15.6 N/A 13.6
Price/book (x) 5.4 N/A 5.3 N/A 5.2 N/A 5.1
Dividend yield (%) 3.1 N/A 3.4 N/A 3.7 N/A 4.2
ROE (%) 19.4 19.8 20.0 21.2 21.5 24.1
Net debt/equity (%) net cash net cash net cash net cash net cash net cash
Source: Company data, Nomura estimates

Key company data: See next page for company data and detailed price/index chart. Production Complete: 2019-07-30 00:52 UTC

See Appendix A-1 for analyst certification, important disclosures and the status of non-US analysts.
Nomura | Reliance Nippon Life Asset Management 30 July 2019

Key data on Reliance Nippon Life Asset Management

Relative performance chart Cashflow statement (INRmn)
Year-end 31 Mar FY18 FY19 FY20F FY21F FY22F
EBITDA 6,643 7,103 7,796 8,550 9,788
Change in working capital -1,506 947 -765 -662 -611
Other operating cashflow 2,693 -3,680 -571 -4,564 -5,224
Cashflow from operations 7,829 4,371 6,460 3,323 3,953
Capital expenditure 922 -1,319 -2,075 1,425 1,256
Free cashflow 8,752 3,051 4,385 4,748 5,210
Reduction in investments
Net acquisitions
Dec in other LT assets
Inc in other LT liabilities
Adjustments
CF after investing acts 8,752 3,051 4,385 4,748 5,210
Source: Thomson Reuters, Nomura research Cash dividends -3,058 -3,714 -4,333 -4,691 -5,144
Equity issue
Notes: Debt issue
Convertible debt issue
Others
CF from financial acts -3,058 -3,714 -4,333 -4,691 -5,144
Performance Net cashflow 5,694 -663 52 57 66
(%) 1M 3M 12M Beginning cash 397 6,091 5,428 5,480 5,537
Absolute (INR) 2.8 12.3 -10.1 M cap (USDmn) 2,022.0 Ending cash 6,091 5,428 5,480 5,537 5,603
Absolute (USD) 2.9 13.9 -10.4 Free float (%) 0.1 Ending net debt -6,091 -5,428 -5,480 -5,537 -5,603
Rel to MSCI India 7.8 18.5 -6.7 3-mth ADT (USDmn) 3.8
Balance sheet (INRmn)
Income statement (INRmn) As at 31 Mar FY18 FY19 FY20F FY21F FY22F
Year-end 31 Mar FY18 FY19 FY20F FY21F FY22F Cash & equivalents 6,091 5,428 5,480 5,537 5,603
Revenue 17,486 16,499 14,847 15,716 17,662 Marketable securities
Cost of goods sold Accounts receivable
Gross profit 17,486 16,499 14,847 15,716 17,662 Inventories
SG&A -10,930 -9,497 -7,353 -7,498 -8,240 Other current assets 3,948 2,141 2,462 2,831 3,256
Employee share expense Total current assets 10,038 7,569 7,942 8,368 8,859
Operating profit 6,556 7,002 7,494 8,218 9,423 LT investments 9,934 12,900 16,069 15,674 15,387
EBITDA 6,643 7,103 7,796 8,550 9,788 Fixed assets 2,603 2,568 2,697 2,831 2,973
Depreciation -87 -101 -302 -332 -366 Goodwill
Amortisation Other intangible assets
EBIT 6,556 7,002 7,494 8,218 9,423 Other LT assets 4,650 4,722 1,128 1,241 1,365
Net interest expense Total assets 27,225 27,758 27,836 28,115 28,584
Associates & JCEs Short-term debt
Other income Accounts payable
Earnings before tax 6,556 7,002 7,494 8,218 9,423 Other current liabilities 2,918 2,058 1,615 1,322 1,135
Income tax -1,984 -2,132 -2,281 -2,502 -2,869 Total current liabilities 2,918 2,058 1,615 1,322 1,135
Net profit after tax 4,572 4,871 5,213 5,716 6,554 Long-term debt
Minority interests -15 -10 -10 -10 -10 Convertible debt
Other items Other LT liabilities
Preferred dividends Total liabilities 2,918 2,058 1,615 1,322 1,135
Normalised NPAT 4,558 4,861 5,202 5,706 6,544 Minority interest
Extraordinary items Preferred stock 0 0 0 0
Reported NPAT 4,558 4,861 5,202 5,706 6,544 Common stock 6,120 6,120 6,120 6,120 6,120
Dividends -3,714 -4,333 -4,691 -5,144 -5,899 Retained earnings
Transfer to reserves 843 528 511 561 645 Proposed dividends
Valuations and ratios Other equity and reserves 18,187 19,580 20,101 20,673 21,328
Reported P/E (x) 29.3 28.6 26.8 24.4 21.3 Total shareholders' equity 24,307 25,700 26,221 26,793 27,448
Normalised P/E (x) 29.3 28.6 26.8 24.4 21.3 Total equity & liabilities 27,225 27,758 27,836 28,115 28,584
FD normalised P/E (x) 29.3 28.6 26.8 24.4 21.3
Dividend yield (%) 2.7 3.1 3.4 3.7 4.2 Liquidity (x)
Price/cashflow (x) 17.1 31.8 21.5 41.9 35.2 Current ratio 3.44 3.68 4.92 6.33 7.80
Price/book (x) 5.7 5.4 5.3 5.2 5.1 Interest cover na na na na na
EV/EBITDA (x) 20.0 18.8 17.1 15.6 13.6 Leverage
EV/EBIT (x) 20.3 19.1 17.8 16.3 14.2 Net debt/EBITDA (x) net cash net cash net cash net cash net cash
Gross margin (%) 100.0 100.0 100.0 100.0 100.0 Net debt/equity (%) net cash net cash net cash net cash net cash
EBITDA margin (%) 38.0 43.1 52.5 54.4 55.4
EBIT margin (%) 37.5 42.4 50.5 52.3 53.3 Per share
Net margin (%) 26.1 29.5 35.0 36.3 37.1 Reported EPS (INR) 7.76 7.94 8.50 9.32 10.69
Effective tax rate (%) 30.3 30.4 30.4 30.4 30.4 Norm EPS (INR) 7.76 7.94 8.50 9.32 10.69
Dividend payout (%) 81.5 89.1 90.2 90.2 90.1 FD norm EPS (INR) 7.76 7.94 8.50 9.32 10.69
ROE (%) 21.1 19.4 20.0 21.5 24.1 BVPS (INR) 39.72 41.99 42.85 43.78 44.85
ROA (pretax %) 31.6 32.2 33.5 36.6 41.4 DPS (INR) 6.07 7.08 7.67 8.41 9.64
Growth (%) Activity (days)
Revenue 21.8 -5.6 -10.0 5.8 12.4 Days receivable 0.0 0.0 0.0 0.0
EBITDA 10.9 6.9 9.8 9.7 14.5 Days inventory na na na na
Normalised EPS 13.2 2.4 7.0 9.7 14.7 Days payable na na na na
Normalised FDEPS 13.2 2.4 7.0 9.7 14.7 Cash cycle 0.0 na na na na
Source: Company data, Nomura estimates Source: Company data, Nomura estimates

2
Nomura | Reliance Nippon Life Asset Management 30 July 2019

1Q20 highlights and conference call takeaways

• TER impact and commissions: Of the 12-13bp total expense ratio (TER) impact on
equity AUMs, management indicated that it was able to pass on 80-90% to distributors,
with an overall impact of just 2-3bp to be absorbed by RNAM. On incremental flows,
management indicated that it was working on a TER-sharing mechanism, and hence
we believe the TER hit on incremental flows for RNAM will be higher than back book.
• Revenue growth declined by 5% q-q despite 300bp q-q improvement in equity mix, as
RNAM has seen large outflows in debt/liquid AUMs. Debt AUMs were down 14% q-q
and liquid AUMs were down 24% q-q. This, in addition to the TER cut impacting
revenues in 1Q20, led to a revenue decline. While the TER cut related impact is
relatively smaller for RNAM, we do not expect the market share loss in debt/liquid to be
arrested, and equity AUMs may see a one-time impact of the change in the brand,
which is difficult to ascertain, and hence we would like to see this stabilising before
turning positive on the shares.
• Opex (ex-depreciation) declined 15% q-q, led by lower upfront commissions of
INR250mn vs INR630mn in 4Q19. Management indicated that it had INR500mn of
unamortised upfront commission at the start of the year with only INR250mn pending to
be recognised in 2Q20 while from there on only upfront commissions on PMS-related
business will be reflected in the profit and loss statement. Employee expenses were
higher during the quarter at 8% q-q, led by pay hikes and ESOP-related costs.
Excluding employee expense, depreciation and upfront commissions opex growth
(administrative and other marketing expenses) was 4% q-q, highlighting that cost
rationalisation has peaked.
• Core EBIT improved to 26bp, led by a 300bp q-q improvement in equity mix and the
benefit from the removal of upfront commissions. We believe the TER impact on new
flows will be higher than back book and the benefit from the removal of upfront
commissions to normalise as it flows though trail commissions over the next few years.
Hence, we expect core EBIT/AUMs to remain in the 25-26bp range over FY20-22F.
Fig. 1: Core profitability improves on better equity mix
RoA Tree 1Q18 2Q18 3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20
Revenue/ AUM 0.65% 0.66% 0.66% 0.72% 0.66% 0.64% 0.59% 0.59% 0.58%
Management fees 0.64% 0.65% 0.64% 0.65% 0.64% 0.62% 0.58% 0.58% 0.57%
Advisory fees 0.02% 0.02% 0.02% 0.07% 0.02% 0.02% 0.02% 0.02% 0.02%
Other income 0.05% 0.09% 0.12% 0.00% 0.05% 0.05% 0.09% 0.09% 0.06%
Total revenue 0.71% 0.75% 0.77% 0.72% 0.71% 0.69% 0.68% 0.68% 0.65%
Opex 0.47% 0.45% 0.46% 0.47% 0.44% 0.43% 0.41% 0.32% 0.32%
Employee expense 0.11% 0.10% 0.10% 0.13% 0.11% 0.12% 0.13% 0.13% 0.15%
Admin expense 0.13% 0.13% 0.13% 0.14% 0.14% 0.12% 0.10% 0.08% 0.08%
Marketing expense 0.22% 0.21% 0.21% 0.22% 0.17% 0.17% 0.16% 0.14% 0.08%
Depriciation 0.01% 0.01% 0.01% -0.03% 0.01% 0.01% 0.02% -0.03% 0.01%
EBIT 0.25% 0.32% 0.33% 0.22% 0.28% 0.28% 0.29% 0.34% 0.32%
Core EBIT 0.19% 0.23% 0.21% 0.22% 0.23% 0.23% 0.20% 0.24% 0.26%
PBT 0.23% 0.31% 0.31% 0.25% 0.27% 0.26% 0.28% 0.36% 0.32%
Tax 0.08% 0.10% 0.10% 0.06% 0.08% 0.08% 0.09% 0.10% 0.10%
PAT 0.16% 0.21% 0.21% 0.19% 0.19% 0.18% 0.19% 0.26% 0.23%

Source: Company data, Nomura research

3
Nomura | Reliance Nippon Life Asset Management 30 July 2019

Fig. 2: Revenue yields decline - partly by regulatory changes Fig. 3: Core EBIT/AUMs improve on higher equity mix
and due to large outflows in debt AUM
Core EBIT
Revenue/ AUM 0.30%
0.26%
0.80% 0.72% 0.23% 0.23% 0.24%
0.25% 0.23%
0.70% 0.65%
0.66% 0.66% 0.66% 0.64% 0.21% 0.22% 0.20%
0.59%0.59% 0.58% 0.19%
0.60% 0.20%
0.50%
0.15%
0.40%
0.30% 0.10%
0.20% 0.05%
0.10%
0.00%
0.00%

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20
1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20
Source: Company data, Nomura research
Source: Company data, Nomura research

Fig. 4: Stable quarter; core profitability better on higher equity mix

INRmn 1Q19 4Q19 1Q20 y/y q/q
Revenue 3,940 3,432 3,251 -17.5% -5.3%
Management fees 3,840 3,365 3,151 -17.9% -6.3%
Advisory fees 100 100 100 0.0% 0.0%
Other income 300 543 353 17.7% -35.0%
Total revenue 4,240 3,975 3,604 -15.0% -9.3%
Opex 2,620 1,854 1,799 -31.3% -3.0%
Employee expense 680 768 825 21.3% 7.5%
Admin expense 852 450 473 -44.6% 5.0%
Marketing expense 1,000 800 425 -57.5% -46.9%
EBIT 1,708 1,957 1,805 5.7% -7.8%
Core EBIT 1,408 1,415 1,452 3.2% 2.7%
PBT 1,620 2,121 1,805 11.4% -14.9%
Tax 500 604 549 9.9% -9.1%
PAT 1,120 1,517 1,256 12.1% -17.2%
Minority interest (10) 4 (2)
PAT after minority interest 1,110 1,521 1,254 13.0% -17.5%

AUM Mix
Total MF AUM 2,404,454 2,336,168 2,225,757 -7.4% -4.7%
Equity 884,965 913,544 933,660 5.5% 2.2%
Debt (Liquid) 360,961 432,253 337,418 -6.5% -21.9%
Debt (Others) 1,029,899 779,085 684,443 -33.5% -12.1%
ETF 104,670 187,577 247,317 136.3% 31.8%
Gold 23,960 23,709 22,918 -4.3% -3.3%

Managed AUM 1,669,436 1,885,322 2,080,853 24.6% 10.4%

Total 4,073,890 4,221,490 4,306,610 5.7% 2.0%

Mutual Fund AUM Mix (%)

Equity 36.8% 39.1% 41.9% 5.1% 2.8%
Debt (Others) 42.8% 33.3% 30.8% -12.1% -2.6%

Retail Mix (%) 32.4% 38.5% 38.8% 6.3% 0.3%

Source: Company data, Nomura research

4
Nomura | Reliance Nippon Life Asset Management 30 July 2019

Fig. 5: AUM mix has turned favourable for RNAM, reflecting Fig. 6: Retail mix stable at 39% of AUMs
in better profitability
40% Retail Mix (%)
Debt (Others) Equity + Debt
90% 79.6% 38.5% 38.8%
77.7% 77.5% 76.0% 75.7%
80% 75.0% 73.6% 72.5% 72.7% 35%
35.1%
70%
30% 32.4%
31.9%
60%
29.9%
29.1%
50%
27.5%
25% 26.5%
40% 46.1% 46.7%
43.8% 42.8%
40.4%
30% 38.2%
35.4% 33.3%
30.8%
20%

1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20
20%
1Q18

2Q18

3Q18

4Q18

1Q19

2Q19

3Q19

4Q19

1Q20
Source: Company data, Nomura research
Source: Company data, Nomura research

Fig. 7: Market share loss in debt and liquid has been very high for RNAM and remains our key worry
Product Trailing Since
market share FY15 FY16 Mar-18 Jun-18 Jul-18 Aug-18 Sep-18 Dec-18 Mar-19 May-19 Jun-19 12m Aug-18
Total Equity
HDFC AMC 18.9% 15.3% 16.1% 15.9% 15.5% 15.7% 15.7% 15.3% 15.7% 15.5% 15.9% 0.0% 0.2%
ICICI Pru 13.4% 14.2% 14.9% 14.2% 14.5% 14.4% 14.6% 14.4% 14.4% 14.1% 14.2% 0.0% -0.2%
Reliance 12.2% 11.4% 9.1% 9.2% 9.0% 9.1% 9.2% 9.1% 8.9% 8.6% 8.6% -0.6% -0.5%
SBI 6.0% 6.8% 7.9% 8.4% 8.4% 8.5% 8.6% 8.7% 8.9% 8.8% 9.0% 0.6% 0.5%
Aditya Birla 7.1% 7.6% 9.1% 9.2% 9.1% 9.1% 9.0% 8.7% 8.8% 8.5% 8.5% -0.7% -0.6%
Top - 5 57.6% 55.2% 57.1% 56.9% 56.5% 56.7% 57.1% 56.2% 56.8% 55.6% 56.1% -0.8% -0.6%

Debt
HDFC AMC 13.0% 13.1% 12.9% 12.5% 12.6% 13.1% 13.5% 13.1% 13.4% 0.3% 0.9%
ICICI Pru 13.2% 13.1% 12.9% 12.7% 12.7% 13.0% 13.0% 13.6% 13.9% 0.8% 1.1%
Reliance 12.2% 12.3% 12.2% 12.3% 12.3% 11.5% 10.4% 9.2% 8.8% -3.5% -3.4%
SBI 8.1% 8.0% 8.0% 8.1% 8.1% 8.7% 9.6% 10.0% 10.3% 2.3% 2.2%
Aditya Birla 13.5% 12.9% 13.1% 13.0% 12.9% 12.9% 12.5% 12.4% 12.5% -0.4% -0.5%
Top - 5 60.0% 59.3% 59.1% 58.6% 58.6% 59.2% 59.0% 58.3% 58.9% -0.4% 0.3%

Liquid
HDFC AMC 12.0% 11.3% 11.5% 9.5% 10.7% 19.0% 18.4% 16.5% 18.8% 7.5% 9.3%
ICICI Pru 14.5% 12.8% 12.8% 11.5% 11.7% 14.0% 14.8% 13.3% 14.2% 1.4% 2.8%
Reliance 12.3% 9.8% 10.2% 9.0% 9.5% 8.4% 8.6% 5.3% 5.5% -4.3% -3.5%
SBI 10.8% 10.7% 10.7% 10.6% 11.4% 11.9% 13.3% 11.2% 11.9% 1.2% 1.3%
Aditya Birla 14.1% 13.9% 14.3% 12.7% 12.8% 12.9% 14.3% 12.4% 12.8% -1.1% 0.1%
Top - 5 63.7% 58.6% 59.5% 53.3% 56.1% 66.2% 69.4% 58.6% 63.2% 4.6% 9.9%
Source: Company disclosures, Nomura research

Valuations: TP increase to INR260/share

We continue to expect EPS growth to lag AUM growth for the next two years for RNAM
given the impact of TER cuts, normalisation of profitability and removal of upfront
commissions getting absorbed by higher trail commissions. Hence, we expect an EPS
CAGR of 10% vs a 13% AUM CAGR over FY19-22F. We increase our PAT estimates by
1-2% for FY20F/21F to factor in better core profitability.
With the change in the promoter and lower risk of cash leakages, we now move to
valuing RNAM on EPS vs valuing core earnings and assign 1x to its investment book
(adjusting for INR3.8bn of intercorporate deposits) previously. This contributes to a 15%
increase in our TP as highlighted earlier (link). We also roll our valuation forward to Sep-
21 to arrive at our TP of INR260/share, while retaining our target multiple of 26x Sep-21F
EPS.
While the valuation gap vs HDFC AMC has expanded materially over the past six
months, market share loss for RNAM has been our key worry, restricting us from turning
more positive, but it remains a key upside risk, in our view.

5
Nomura | Reliance Nippon Life Asset Management 30 July 2019

Fig. 8: Our TP of INR260/share implies 26x Sep-21F EPS

INRmn FY19 FY20F FY21F FY22F CAGR Sep-21
PAT 4,871 5,213 5,716 6,554 10.4%
EPS 7.96 8.52 9.34 10.71 10.4% 10.02
AUMs (INRbn) 2,278 2,451 2,846 3,244 12.5% 3,045

PT at 26x EPS 260

Implied Price/AUM 5.2%
Source: Nomura estimates

Fig. 9: We expect PAT/AUMs to remain stable at 22bp growing at a 10% CAGR over FY19-22F

ROA tree on core AUM FY15 FY16 FY17 FY18 FY19 FY20F FY21F FY22F
Revenue 0.76% 0.87% 0.75% 0.74% 0.65% 0.56% 0.54% 0.53%
Management fees 0.73% 0.84% 0.72% 0.72% 0.63% 0.55% 0.52% 0.51%
Advisory fees 0.02% 0.03% 0.02% 0.02% 0.02% 0.02% 0.02% 0.02%
Other income 0.10% 0.08% 0.07% 0.07% 0.08% 0.06% 0.06% 0.05%
Total revenue 0.85% 0.95% 0.82% 0.81% 0.73% 0.63% 0.59% 0.58%
Opex 0.44% 0.57% 0.49% 0.51% 0.42% 0.31% 0.28% 0.27%
Employee expense 0.14% 0.14% 0.11% 0.12% 0.13% 0.14% 0.14% 0.13%
Admin expense 0.16% 0.16% 0.15% 0.14% 0.12% 0.10% 0.10% 0.09%
Marketing expense 0.13% 0.27% 0.22% 0.25% 0.17% 0.06% 0.04% 0.03%
Brokerage, incentives and others 0.08% 0.23% 0.15% 0.17% 0.13% 0.03% 0.01% 0.01%
Depriciation 0.01% 0.00% 0.01% 0.00% 0.00% 0.01% 0.01% 0.01%
Diminution in value of long term investments -0.01% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
EBIT 0.41% 0.38% 0.33% 0.31% 0.31% 0.32% 0.31% 0.31%
Core EBIT 0.32% 0.30% 0.26% 0.23% 0.23% 0.25% 0.25% 0.26%
PBT 0.41% 0.38% 0.33% 0.31% 0.31% 0.32% 0.31% 0.31%
Tax 0.10% 0.09% 0.10% 0.09% 0.09% 0.10% 0.09% 0.09%
PAT 0.32% 0.29% 0.23% 0.21% 0.21% 0.22% 0.22% 0.22%
Source: Company data, Nomura estimates

Fig. 10: We expect net revenues (ex of commissions) to Fig. 11: We expect core EBIT of 25-26bp over FY20-22F
stabilise at 50bp on AUMs
0.35% Core EBIT
0.70% 0.32%
Net management fee 0.30%
0.65% 0.30%
0.65%
0.61% 0.26% 0.25% 0.25% 0.26%
0.60% 0.58% 0.25% 0.23% 0.23%
0.56%
0.55% 0.20%
0.52% 0.51%
0.50% 0.50%
0.50%
0.15%
0.45%
0.10%
0.40% FY15 FY16 FY17 FY18 FY19 FY20F FY21F FY22F
FY15 FY16 FY17 FY18 FY19 FY20F FY21F FY22F
Source: Company data, Nomura estimates
Source: Company data, Nomura estimates

Fig. 12: Key changes to our estimates

New Old Variance
INRmn
FY20F FY21F FY22F FY20F FY21F FY22F FY20F FY21F FY22F
Revenue 13,322 14,219 16,185 13,686 14,480 16,467 -2.7% -1.8% -1.7%
Core EBIT 5,969 6,721 7,946 5,651 6,390 7,617 5.6% 5.2% 4.3%
Other Income 1,525 1,497 1,477 1,743 1,710 1,686 -12.5% -12.5% -12.4%
PAT 5,213 5,716 6,554 5,143 5,634 6,471 1.4% 1.5% 1.3%

Core AUM INRbn 2,451 2,846 3,244 2,588 2,965 3,390 -5.3% -4.0% -4.3%
Source: Nomura estimates

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Nomura | Reliance Nippon Life Asset Management 30 July 2019

Appendix A-1
Analyst Certification
We, Amit Nanavati and Adarsh Parasrampuria, hereby certify (1) that the views expressed in this Research report accurately
reflect our personal views about any or all of the subject securities or issuers referred to in this Research report, (2) no part of
our compensation was, is or will be directly or indirectly related to the specific recommendations or views expressed in this
Research report and (3) no part of our compensation is tied to any specific investment banking transactions performed by
Nomura Securities International, Inc., Nomura International plc or any other Nomura Group company.

Issuer Specific Regulatory Disclosures

The terms "Nomura" and "Nomura Group" used herein refers to Nomura Holdings, Inc. and its affiliates and subsidiaries, including Nomura
Securities International, Inc. ('NSI') and Instinet, LLC('ILLC'), U. S. registered broker dealers and members of SIPC.

Materially mentioned issuers

Issuer Ticker Price Price date Stock rating Sector rating Disclosures
Reliance Nippon Life Asset
Management RNAM IN INR 227 29-Jul-2019 Neutral N/A

Reliance Nippon Life Asset Management (RNAM IN) INR 227 (29-Jul-2019) Neutral (Sector rating: N/A)
Rating and target price chart (three year history)
Date Rating Target price Closing price
19-Sep-18 Neutral 188.95
19-Sep-18 210.00 188.95
03-Aug-18 Buy 268.60
03-Aug-18 315.00 268.60

For explanation of ratings refer to the stock rating keys located after chart(s)

Valuation Methodology Our TP of INR260 implies 26x Sep-21F esrnings. Nifty is the benchmark for the stock.

Risks that may impede the achievement of the target price Significant slowdown in net inflows and compression in yields is
the key downside risk. Market share loss for RNAM is a key worry for us and restricts us from turning more positive, but will
remain a key upside risk.

Important Disclosures
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Nomura | Reliance Nippon Life Asset Management 30 July 2019

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As at 30 June 2019.
*The Nomura Group as defined in the Disclaimer section at the end of this report.
** As defined by the EU Market Abuse Regulation

Distribution of ratings (Instinet, LLC)

The distribution of all ratings published by Instinet, LLC Equity Research is as follows:
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investment banking services to 0% of companies with this rating within the previous 12 months.
42% have been assigned a Neutral rating which, for purposes of mandatory disclosures, is classified as a Hold rating; Instinet LLC has provided
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Nomura | Reliance Nippon Life Asset Management 30 July 2019

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