Profitability more than market share to be Nippon Life’s focus: Hiroshi Shimizu, Nippon Life

Nippon Life Insurance, the 130-year-old Japanese company managing $700 billion in assets, is now the largest shareholder in Reliance Nippon Asset Management with a 75 per cent stake. After the acquisition from Anil Ambani's Reliance Capital, the asset manager has been renamed as Nippon India Mutual Fund. In an interview with Prashant Mahesh, Hiroshi Shimizu, president, Nippon Life Insurance, spoke about the company's business plans in India. Edited excerpts:

In the mutual fund business in India, the company has seen a slip in market share, with some of the local domestic asset management companies gaining ground. How do you plan to change this?

A Nippon India Mutual Fund has seen its market share dip to about 8.5 per cent in the domestic asset management industry, down from 12 per cent three years back. Going ahead we expect to regain lost market share. Nippon Life now holds a 75 per cent stake in the company after this transaction. As India attracts a lot of foreign capital leveraging Nippon Life capability and network, we expect to get a higher share of money coming into India, which will also add to profitability of the company.


Some fixed income schemes of the fund house invested in papers of companies which were downgraded by rating agencies leading to some losses to investors. What are your thoughts?

We strongly believe most of these challenges are behind us as most of the problems that had to surface have already surfaced. We look forward to leveraging on risk management capabilities of Nippon Life to ensure that these challenges do not result in a loss to the unitholder. We will do everything to protect the interest of the unit holders.

Actively managed funds have underperformed in India in the last one year, while the penetration of passive funds is very low. What will be your focus?

India is a very small market for mutual funds now. Only 2 per cent population invests in mutual funds. One out of twelve Japanese people is a holder of policy of Nippon Life. We need to offer all types of products and styles of products. Let the investor decide what is good for him. We have strong capabilities in both active and passive funds. Our acquisition of the passive business of Goldman Sachs has enhanced our capabilities in this space.

Your competitor in India and the only other listed player HDFC AMC commands a market capitalisation of Rs 57,000 crore while Nippon India Mutual Fund has a market capitalisation of Rs 17,000 crore. How important is profitability and market capitalisation to you?

Profitability more than market share will be our focus. Profitability, interest of unitholders and shareholders will be key in the future. We remain committed to giving a good experience to the investors and working in interest of the minority shareholders. We have a policy where 60-90 per cent profits are given back as dividends.

How do you see distribution evolving in mutual funds. There are new players in the online space. Does the absence of a bank network worry you?

Over the last twenty years, the company has been built on the background of independent financial advisers (IFA) network. For any business, it’s the execution capability. We have the largest distribution network and no distributor is more than 4 per cent of our business, which derisks our business. In addition, there are many private sector banks and public sector banks who are our distribution partners.

You plan to launch an Indo-Japan fund for investors in Japan. How big could that be?

We do believe this Indo-Japan fund that we’ll be launching will be extremely important for our partnership between India and Japan. This is going to be the first of a series of funds we will be launching going forward. We are very hopeful that Japanese investors will be investing in this fund. In order to trigger that investment, Nippon life too will be investing in this and we are hoping Japanese investors will follow suit.