InvestorQ : Reliance Nippon Asset Management (RNAM) has given good results in this quarter. Is the stock worth buying at current prices?
Rutuja Nigam made post

Reliance Nippon Asset Management (RNAM) has given good results in this quarter. Is the stock worth buying at current prices?

Answer
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1 year ago
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Reliance Asset Management is the AMC that manages the Reliance Mutual fund, one of India’s leading mutual fund players. RNAM is one of the two listed AMCs in India, the other b eng HDFC AMC.

What did the Q4 results look like for RNAM?

The company saw a 34% jump in net profits to Rs.151 crore for the fourth quarter ended March 2019. The AMC manages a corpus of nearly Rs.4.22 trillion as of the end of the March quarter. The revenues of the AMC come largely from fees collected from the unit holders for the management of the funds in the form of management fees.

Should you buy the stock at current prices?

If one were to look at purely in valuation terms as a percentage of AUM, then RNAM surely are more reasonably priced compared to HDFC AMC, the other listed asset manager. However, there are other concerns. Firstly, the exposure to debt of sub-par quality is expected to be quit high and that is not good news. Secondly, with SEBI focusing on reducing the cost of transacting for mutual fund unit holders, the revenues will gradually reduce over time even with rising AUMs. We have been cautious on HDFC AMC also as a business model and suggest staying away from RNAM. More so; after 2 of its group ADAG companies recently got downgraded to Default status.

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