Reliance Capital Blog

Reliance Capital, India's Berkshire Hathaway

Friday, September 29, 2006

Reliance plans USD 500 million private equity fund

Reliance Capital Ltd. plans to raise USD 500 million from foreign institutional investors by March 2007 for a private equity fund, a company official said on Monday, reports Reuters.

"We have already had successes with private equity. This is the first time we will be raising funds from external investors for private equity investment," the official, who did not want to be named, said.He said the company was in talks with JP Morgan and Deutsche Bank for the private equity fund, first reported by The Economic Times onMonday.

The company is a part of the Anil Dhirubhai Ambani group, which also has interests in telecommunications and power. It was formed last year after the Reliance group was split between Anil and his brother, Mukesh Ambani, who controls Reliance Industries Ltd.

Last month, Matrix Partners, a US-based private equity firm, said it had set up a USD 150 million fund with an Indian partner. JM Financial Ltd. said in August it had teamed up with US-based Old Lane Partners LP to launch a private equity fund of USD 150-175 million.

Private equity deals have increased in India as companies seek capital to fund growth, acquisitions and expansions. A booming stock market has added to deal making.

Private equity deals rose sharply to USD 3.5 billion across 146 transactions in the first half of 2006, compared with USD 795 million through 67 deals in the same period last year, according sector tracking firm Venture Intelligence.

Source: Moneycontrol

R-Cap eyeing Bank Stock?

Anil Ambani's banking on plastic money! His company Reliance Capital is launching debit cards. Debit cards that have no underlying savings account or a bank deposit. That's what sources tell CNBC-TV18. So how's Ambani hoping to pull this off?

By treating a liquid fund like a savings account and to begin with this facility is being offered internally to over a 100 Reliance Mutual Fund employees. The liquid fund debit card is like a bank ATM or debit card and can be swiped anytime anywhere.

So a Reliance Mutual Fund deposit could act like a savings account. Except that it might earn you more. That's because a liquid fund offers an average annual return of 5 to 6% and a savings account an average 3.5% per annum.

Will banking customers bite Reliance Capital's bait? The company is betting they will because globally such cash management products are quite popular. In fact, Reliance's debit card is modelled on the lines of ML's CMA or cash management account.

Where does this take Reliance Capital? On its way to Bank Street perhaps say industry experts! Reliance capital is already in the business of mutual funds and insurance. The company is soon expected to launch R Money,it's forex, commodities and equities trading platform. And some say personal finance is not far away.

Saturday, September 23, 2006

Rate war erupts among online brokers!

Rs 12 per equity trade, that's the fee at Reliance Capital's brokerage, Even though one might argue that other brokerages offer competitive fees, the difference lies in the numbers.

Sources say that Reliance is considering Rs 800 as joining fees and either no monthly charge, or a nominal charge. Kotak charges Rs 499 a month and Rs 9 a transaction.

Motilal Oswal's joining fee is Rs 1,500 and a paisa per Rs 100 per F&O trade. ICICI Direct offers packages with monthly broking fees of Rs 299, Rs 599 or Rs 999 and Rs 750 as joining fees. The rates are applicable to online trades for a minimum value or volume of trade.

Kotak offers flat rates on delivery-based transactions worth Rs 5,000 or its multiples and squaring-off transactions worth Rs 50,000 and its multiples.

Motilal's one paisa F&O fee per Rs 100 is lower than the industry's 4 or 5 paise. But it's applicable on volumes of at least Rs 2 crore a day or Rs 50 crore a month.

ICICI Direct charges Rs 299 a month on a quarterly turnover of Rs 1.5 lakh, Rs 599 a month on a quarterly turnover of Rs 3,00,000 and Rs 999 on a quarterly turnover of Rs 6 lakh.

Sources say that Reliance might not relate its fees to transaction volumes or value. They say that it will place thousands of kiosks with its distributors, where trading will be as easy as an ATM transaction.

As Reliance Capital plans its big discount broking splash, other players like State Bank of India, Citibank and Goldman Sachs plan to open brokerages as well. Analysts predict the rate war will give way to casualties.

Source: Moneycontrol

Thursday, September 21, 2006

Reliance Capital retrieves NEPC unit buyout deal from the edge

It’s a case that nearly turned sour. NEPC India Ltd, the beleaguered Chennai-based company, had signed a deal to sell its wind energy division to Southern Wind Farms, an entity controlled by Reliance Capital Ltd, in January this year. On Monday, a couple of high networth investors of NEPC called for an emergency board meeting on Thursday to review the sale - only to retract by Tuesday evening after “matters were amicably sorted out”.

The proceeds of the sale were to be paid to bank creditors, and make the company — among the earliest entrants into the civil aviation and wind energy segments in India — into a debt-free entity.

A senior official from Reliance Capital is stationed in Chennai, trouble-shooting for the new investors in Southern Wind Farms. Reliance Capital holds close to 51% in the company.

The stakes are huge: the Indian wind energy industry, the fourth-largest in the world, is poised to quadruple in size in six years.

The NEPC board meeting was slated to discuss and review the progress of the “slump sale agreement” of wind energy division dated January 16, 2006, with Southern Wind Farms (owned by Reliance Capital, Tarun Jain and Nimesh Shah) and to discuss the
issues particularly with respect to non-fulfillment of various obligations by Southern Wind Farms as per agreement.

Reliance Capital paid Rs 92 crore to acquire 51% stake in the NEPC division. The bone of contention between the seller and the purchaser included non-receipt of payments from Southern Wind Farms. For a consideration of Rs 153.59 crore, NEPC India was to transfer the entire business - tower manufacturing and assembly facilities in Pondicherry.

Of the consideration, Rs 135 crore was to be paid directly to NEPC India’s secured and unsecured creditors. NEPC officials confirmed that the meeting has been postponed after it received assurances from the buyers that the balance amount will be paid within two months.

The shareholders of NEPC India will get 12.5 shares in the newly formed special purpose vehicle, Southern Windfarms Pvt Ltd, for every 100 shares held in NEPC India.

Southern Wind Farms is said to own a muster of employees far more than its needs. This was among the sore points in the whole affair. NEPC officials declined to comment on this.

Instead, they said, the first installments of the remainder sum will start flowing in within two weeks. The amount is believed to be in the region of Rs 100 crore, but could not be confirmed. Despite several attempts, Tirupathi Khemka, managing director of NEPC, could not be reached.

His office said he’s in the midst of meetings. After the sale, NEPC India will have only the aviation division.
The company holds two aviation licences, one its own and another when it acquired Damania Airways.

Source: DNA Money

Monday, September 11, 2006

Anil Ambani has big retail plans

Not wanting to be deprived of a slice of the retail pie, Anil Ambani is working on a blueprint for the sector. Retail industry analysts as well as realty sector sources have confirmed that the younger Ambani is looking at his group entering the retail space.

Reliance Communications already has a significant retail presence through its "Reliance WebWorld" outlets. Incidentally, the WebWorld chain of 241 outlets in 105 cities has recently been renamed as Reliance World.

While these outlets mostly offer broadband Internet surfing, video games, e-ticketing, and TV news uplink facilities, they also provide tele-medicine and web shopping facilities. Many outlets are also billed as gourmet coffee shops under the Java Green brand.

Sources said the company was considering conversion of the coffee shops into full-fledged food and beverage outlets. When contacted, a Reliance Anil Dhirubhai Ambani Group spokesperson refused to comment.

The first signs of a retail foray were evident with group firm Reliance Capital investing in Giny & Jony and Vishal Retail, the promoters of Vishal Mega Mart.

Last year, Anil Ambani had spoken of investing in pharmacy chains, said a Delhi-based retail analyst. Ambani had even shown an interest in the consumer durables sector around that time.

In any case, his group was already present in the multiplex (general entertainment services) category, and that could be a launchpad for future growth, he added.

There is also news of Ambani joining hands with Starbucks, the famous coffee retailer. Another analyst said the group was exploring all options, from convenience stores and category-specific outlets to hypermarkets. Ambani was also negotiating with global brands and global retailers, he added.

Yet another expert claimed the junior Ambani had been in serious negotiations with Armani, among other luxury brands.
It was possible that the foray might be confined to top-end single-brand retail, given the presence of players such as Pantaloon Retail and Raheja's Hyper City, and the upcoming Reliance Retail hypermarkets of Reliance Industries in the general multi-brand retail format.

Reliance Mutual Fund

Reliance mutual fund is promoted by the Reliance Anil Dhirubhai Ambani (RADAG) group. The fund house has seen a substantial jump in assets under management and had briefly overtaken Prudential ICICI as the largest private sector fund house earlier this year.

Reliance Equity Fund, launched by Reliance MF in early 2006, is the largest mutual find scheme in the country with a fund size of over Rs5,500 crore.

The sponsor of the fund is Reliance Capital Limited, the financial services arm of RADAG. Reliance Capital Trustee Company Limited acts as the trustee of the fund. Members of the board of trustees include S P Talwar, former deputy governor of RBI and tax consultant A N Shanbagh.

Reliance Capital Asset Management Limited acts as the AMC to the fund. The AMC is fully owned by Reliance Capital. Directors of the company include Amitabh Jhunjhunwala, a senior executive of RADAG. Amitabh Chaturvedi is the managing director of the AMC.

Operations of the AMC are headed by Vikrant Gugnani who serves as its persident. K Rajagopal, chief investment officer, heads fund management while Madhusudhan Kela is the heady of equity investments.

As of end August 2006, the fund has Rs28,753 crore of assets under management.

RBI reluctant over white-label ATMs

The Reserve Bank of India (RBI) stays reluctant to give its go-ahead for setting up white-label (or no name) ATMs by corporates. RBI is of the view that only banks can own ATMs so that the flow of funds can be accounted for, well regulated and monitored.

White-label ATMs are owned and operated by independent entities including corporates, and they do not come under the jurisdiction of the banking regulator.

Also allowing corporates to own ATMs will result in their virtual entry into banking, which goes against the current policies for entry into banking.

Customers of all banks having arrangements with payment service providers like MasterCard of Visa can avail of white-label ATMs but will have to pay usage charges.

Technology services providers such as FSS, e-funds and US-based Euronet and companies like Reliance Capital have evinced interest in setting up white-label ATMs.

ICRA assigns highest rating to Reliance MF schemes

Rating agency ICRA on Thursday assigned highest degree of certainty to the proposed three close-ended schemes of Reliance Mutual Fund.

The conditional MFAAA(SO) rating has been assigned to Reliance Capital protected fund- 3 year plan, 4 year plan and 5 year plan, ICRA said in a release.

The rating indicates highest degree of certainty for payment of face value of the mutual fund units on maturity to the unit holders.

However, the rating should not be looked upon as an indication of expected returns, prospective performance of the mutual fund scheme, NAV or of volatility of its returns, it said.

The proposed funds would invest in government securities and securities rated by ICRA. A portion of the corpus would also be invested in the equity and equity linked instruments, it said.

In another such exercise, ICRA retained highest credit quality (a1+) to the short term debt programme of Nicholas Piramal India Ltd (NIPL).

The short term debt programme of the pharmaceutical company has been enhanced to Rs 350 crore from Rs 200 crore.

It has also re-affirmed the LAA (indicating high credit quality) rating for Rs 38.3 crore redeemable preference share programme of the company.

The rating takes into account the progress NPIL has achieved in its contract manufacturing business through a combination of organic and inorganic initiative, it said.

Reliance mutual plans capital protection fund

Reliance Capital Asset Management Ltd. on Friday filed initial papers with market regulator to launch a close-end capital protection oriented fund.

Last month, the market regulator had set rules for such funds.

Reliance Capital Shield Fund would offer three and five year plans, the offer document said.

Under both the plans, the fund would invest at least 30 per cent of the portfolio in fixed income instruments and the rest in equity and related securities.

The fund house managed assets worth 288 billion rupees at the end of August, data from the Association of Mutual Funds in India showed.

Last week, Franklin Templeton Asset Management (India) Pvt. Ltd. had filed papers for a similar fund.

Barriers blow away wind energy potential

The wind energy sector in India is on the threshold of big-time growth. Reliance Energy has tied up with General Electric, US, for wind power projects. Reliance Capital, along with some private investors, has acquired close to 68% controlling stake in Southern Wind Farms Ltd, a sister company of the south-based NEPC group. The Essar group and international player Siemens are planning similar ventures. Suzlon’s success is already known.

Analysts, therefore, feel the time is ripe for large-scale investments. Yet, some market barriers are preventing wind energy from flourishing. “India has a gross potential of 45,000 mw. However, there seems to be little focus on infrastructure. Import duties are high. There is an excise duty on raw materials. India has set itself the target of reaching the 100,000 mw mark by 2010. How the country will manage to reach this target is still not very clear,” says Joseph Chaly, director, (marketing), NEG Micon.

Experts blame the absence of a clear policy framework, problems related to funding, an unfair comparison with conventional power and lack of project financing as stumbling blocks. GM Pillai, director-general, World Institute of Sustainable Energy, blames poor grid penetration, for affecting the growth of wind energy. “The payment situation is pretty bad. Most utilities are in a financial mess. International players are wary because utilities do not pay up in time,” he said.

“Although the new framework favours independent power producers, pushing large-scale projects is still difficult since the purchase policy agreements (PPA) are not considered bankable by investors,” Chintan Shah, MD, Senegy Global said. “Wind energy is looked at with suspicion and, therefore, the tariff applicable to it is higher,” GM Kamath, MD, Karma India Ltd said.