Nippon Life India Asset Management Ltd Earnings Call Highlights

Q4FY21 Financial Highlights: Nippon Life Financial Statements

• AMC has reported many folds in its consolidated net profit at Rs 166.77 crore for the Q4FY21 compared to Rs 3.72 crore for the Q4FY20. 

• The company’s total income reported 2- fold jump at Rs 361.96 crore for Q4FY21 compared to Rs 149.56 crore for Q4FY20. 

• For the quarter ended 31st March 2021, the AUM was Rs.228586 cr surged 12% year on year.

FY21 Highlights: Nippon Life Small Cap Fund & Nippon Life Large Cap Fund

• For the year ended March 31, 2021, profit after tax was Rs. 6.8 billion - an increase of 64%

• As of March 31, 2021, AUM was Rs. 2,218 billion - an increase of 36% against March 2020

• Overall operating expenses decreased by 14% to Rs. 5.4 billion. Consistent focus on cost optimisation and rationalisation over the last two years reduced cost across all segments.

• Operating expenses, as a ratio of average assets and the management operating expenses ent, were reduced from 30 basis points in FY2020 to 26 basis points in FY2021.

• Board proposed a final dividend of Rs. 5 per share. Including the interim dividend of Rs. 3, this is the highest ever dividend payout.

• NAM launched 8 NFOs in FY21, of which 5 NFOs were launched in Q4.

Industry highlights: Nippon Life Fund Factsheet

• Overall industry assets grew rapidly in FY2021, driven by a rise in equity markets and increased retail participation. 

• AMC expects the industry to maintain positive momentum in the next three years to five years. 

Growth Numbers: Reliance Nippon Life Review & Nippon Life Benefits Review

• In FY2021, AMC added over 9 lakh unique investors compared to 20 lakh for the industry and increased market share to 30%.

• SIP and STP folios rose by more than 1.1 million on a gross basis

• AMC on-boarded 350 institutional investors in FY21. 

• AMC continued to have one of the largest retail AUM’s in the country at Rs. 643 billion. The contribution of retail AUM to total AUM is amongst the highest in the industry at 28% compared to 22%.

• The annualised systematic transaction book is at Rs. 79 billion. During Q4, new digital SIP registration grew by 46%

Passive Category: NIPPON LIFE Stock Price

• Nippon India Mutual Fund offers the industry-best suite of products in the passive category.

• AMC consolidated its portfolio through the launch of 8 NFOs in FY2021, including 5 in Q4. With the passive assets gradually gaining prominence, Nippon India Mutual Fund is ready with its ecosystem in this segment and is far ahead of the industry regarding investor base and mind share.

• Post consolidation in the next few years, AMC expects to grow its existing funds and expand into new categories of AIF and PMS.

• Along with the government mandates, AMC managed assets of Rs. 1.3 trillion in non-mutual fund segments.

Digital growth:

• Robust infrastructure enabled Nippon India Mutual Fund to come out of the COVID-19 crisis as a stronger and tougher digital business entity. 

• Nippon India Mutual Fund is now moving towards being a Digitech incubator from being a digital leader in the AMC space. 

• The goal is to drive class lending digital innovation to create a competitive advantage and disrupt the investment space with solutions that keep today’s digital-savvy millennium consumers at heart.

• Nippon India Mutual Fund has three proprietary applications and seamless integration with over 100 partners, including fintech players and traditional brokers, who use their APIs for investor onboarding and transactions.

• With IBM being their strategic technology partner and tie-ups with other best-in-class service providers, AMC has a strong digital ecosystem in place.

• Digital assets contributed to 53% of total new purchase transactions. 1.8 million Purchases were executed through digital assets - an increase of 31%.

ETF & AIF segment: Nippon Life Share Chart

• Nippon India’s share in Industry’s ETF folio stands at 42%. 

• In this segment, AMC manages assets of Rs. 373 billion. Excluding ETF allocations which go to 2 PSU on mutual funds, AMC would be the largest ETF player in the country. 

• The gold ETF is the largest fund in the category, with over Rs. 54 billion in assets. 

• In FY2021, AMC added 1.4 million investors in the segment against 97,000 in the previous year.

• The AMC has a 72% share of ETF volumes on the stock exchanges. Nippon India ETF’s average daily volumes across key categories are by far the highest in the industry. 

• In AIF business, AMC manages category 2 and category 3 AIF across various asset classes. In addition, Nippon India Digital Innovation Fund has committed funds of USD 100 million and has initiated investment activities. 

• As of March 2021, Nippon India AIF has raised commitments over Rs. Thirty-seven billion across all funds.

Mutual Fund Segment: Nippon Life Mutual Fund

• As of March 2021, AMC has approximately 78,400 distributors empanelled with us. The mutual fund distributors base rose to over 78,100

• The AMC is going to tie-ups with over 20 prominent digital partners.

• Direct channel contributed to 54% of the MF AUM. On the other hand, the share of mutual fund distributors was 57% of the distributed assets. Thus, 83% of the distributed assets are contributed by individual investors.

• AMC continues to review its existing branch operations and future expansion plans. Additionally, given the new normal marketing efforts are increasingly focused more on digital channels, which are more cost-effective as against offline.

Future strategy: 

• The AMC will continue to focus on four pillars to execute a profitable growth strategy with its core “investor first” philosophy. 

• The focus areas include superior fund management, comprehensive product offerings, business de-risking through a higher share of non-mutual fund segments, and robust Digitech architecture that provides broad reach and world-class customer service.

• Leveraging Nippon Life’s global network, AMC will continue to ramp up its international presence. They have signed a Letter of Intent during May month for an exclusive strategic collaboration with Cathay SITE, Taiwan’s largest asset manager. Nippon Life is the only asset management company to offer investment opportunities to Indian investors in Japan, Hong Kong, and Taiwan.

• The AMC will continue to create such “expressways” and offer domestic and foreign investors more value accretive avenues to diversify risk and generate sustainable returns.

• AMC grows organically through its physical and online channels inactive, passive, and non-mutual fund segments. Additionally, AMC remains open to evaluating investments for inorganic opportunities and strategic partnerships to enhance mutual funds, alternate segments, and distribution.

• Due to the non-availability of inorganic opportunities at the appropriate valuations, which could complement NAM’s existing business, no actual acquisition could be made during the last year.

• The non-mutual fund segment saw slow growth heightened by slower economic growth and COVID. Given this situation, AMC will not push into expanding the available resources unless they see an opportunity to add profitability and complement its existing businesses, and ultimately is in the interest of the minority shareholders.

• NAM India has initiated becoming a signatory to PRI world’s largest voluntary corporate sustainability initiative and adopting ESG processes across investments, funds, and the company as a whole.

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