Reliance Capital Blog

Reliance Capital, India's Berkshire Hathaway

Saturday, September 29, 2007

Reliance to use MSCI Barra's risk management tools

Largest fund house Reliance Capital Asset Management Ltd said on Wednesday it will use MSCI Barra's risk management services for investments in equity, fixed income and derivatives across its funds.

The fund house managed assets worth about Rs 67600 crore at the end of August, data from the Association of Mutual Funds in India showed.

Tuesday, September 25, 2007

Reliance Money goes after investor honey!

There were 25,000 mobile phone subscribers in India in the mid-nineties. And tariffs included a charge of about Rs 16 per minute for outgoing and Rs 8 per minute for incoming local calls.

A little over a decade later, the number of mobile subscribers in India has swelled to 200 million while tariffs are now the lowest in the world. About seven million subscribers are being added every month.

Mr Sudip Bandyopadhyay, Director & Chief Executive Officer, Reliance Money Ltd, recites these facts about the transformation in the telecom sector when asked about his company’s strategy. Reliance Money is a new player in broking, distribution and money transfer, and is part of the Anil Ambani group.

The tour-de-force on telecom comes handy in understanding what Reliance Money plans to do. Mr Bandyopadhyay says, “We will do in broking what we have done in telecom!”

Reliance Money, which started operations in April 2007, is adding about 2,000 to 2,500 customers every day. It currently has about 1.65 lakh customers. And the traded volumes have crossed about Rs 1,200 crore.

At the core of their entry strategy in this business is the Reliance group Leitmotif – Expand the market and cut transaction costs to the bone.

When asked about the market share for Reliance Money given the competition from the likes of ICICI Direct, Kotak, Motilal and Geojit, besides others, Mr Bandyopadhyay says, “We haven’t entered this business to take a share in this market. We are going to expand the market.”

Mr Bandyopadhyay explains, “The number of investors in mutual funds is about 30 million going by the folios. The number of individual bank accounts in the country is about 330 million. But the number of demat accounts has stagnated around 5.8 million for the past decade.”

He adds, “We are not looking at this 5.8 million. Just as someone might have looked at those 25,000 subscribers of mobile phones in the mid-nineties and concluded that the market was that small. We are looking at the opportunity for market expansion. We are going to be present in 5,165 tehsils by the end of the year and hope to have about 10,000 outlets by March 2008.”

That would give Reliance Money an all-India presence and a reach that is on a par with what State Bank of India enjoys with about 9,500 branches.

Combine the distribution network with a bold pricing strategy, and it is easy to see why Mr Bandyopadhyay’s claims may have to be taken seriously.

Reliance Money’s key business driver may be its pricing strategy. It has decided to levy a flat charge of Rs 500 per annum for trading volumes of up to Rs 1 crore and slightly higher charges for higher volumes. Currently competing brokerages charge something in the region of 0.5% to 1% on each transaction.

As Mr Bandyopadhyay puts it, “Brokers charge you 1% if you buy 10 shares. They charge someone else 1% of the cost of 100 shares, if they buy 100 shares and similarly 1% of 1,000 shares if you buy 1,000 shares. There is no extra effort involved except punching in an extra zero. Why pay just to punch an extra zero?”

Friday, September 14, 2007

Reliance Money launches financial mobile portal

Reliance Money, the financial services and products distribution company, in association with a web based company ''Webaroo'' has launched mobile financial portal across mobile platforms.

The mobile financial portal will be available in CDMA and GSM network and no service charges will be levied to the subscribers.

Sudip Bandyopadhyay, director and CEO of Reliance Money, said, "This initiative will provide mobile users an opportunity of staying connected with financial markets while on the move."

Reliance Money also has plans to promote the mobile portal as a financial advertising tool targeted towards niche financial segments.

"The service would reach out to millions of telecom users, a sizeable number of whom are either active and potential investors and this platform offers a huge advertising opportunity," added Bandyopadhyay.

Reliance Money plans to expand its over-the-counter offerings

Reliance Money Ltd, an arm of the listed Reliance Capital Ltd, the financial services subsidiary of the Reliance-Anil Dhirubhai Ambani Group, has aggressive plans to expand its over-the-counter business through both organic and inorganic expansions.
Currently, this business vertical, which comprises operations such as money change, money transfer and selling gold coins, accounts for  about 10% of the company’s revenue.

“We are actively looking for an acquisition opportunity in the money-transfer business in India,” said Sudip Bandyopadhyay, chief executive of Reliance Money. It had earlier acquired TravelMate, the money changing business of Kuoni Travel Group. “We also plan to become one of the largest vendors of gold coins in the country,” he said. The company plans to sell low-cost variants of gold coins through its retail units and through the Reliance World outlets, owned by its parent group, across India.

About 10% of the total gold consumed in India is in the form of coins, Bandyopadhyay added. “However, only 5% of this market is under organized players,” he said.
Large private sector banks, such as ICICI Bank Ltd and HDFC Bank Ltd, and the Tata group’s jewellery chain, Tanishq, are among the biggest domestic vendors of gold coins. The firm has stuck an exclusive deal to source gold coins from Switzerland-based Valcambi SA—one of the world’s largest gold refiner, earlier owned by financial major Credit Suisse Group.

ICICI Bank sources gold from Pamp SA, another Swiss refiner.
Reliance Money will expand its retail network from the current 3,237 outlets to more than 10,000 by the end of this financial year to reach 5,645 tehsils in India, said Bandyopadhyay. It also plans to increase the number of its trading kiosks, manufactured by Germany’s Wincor Nixdorf, from 2,500 to 10,000 by March 2008.

In a move to lure investors beyond its retail units, the company has tied up with the Indian Institute of Technology, Bombay-incubated start-up Webaroo Inc. to launch a financial market information portal on the mobile platform. The free service will give users access to market information, stock quotes and research reports. While sister concern, listed Reliance Communications Ltd is a large telecom service provider, Reliance Money has made the mobile application available across operators, in a bid to tap the expanding mobile subscriber base, which already is touching 200 million in the country. Making financial data freely available to a large user base will increase the number of financial transactions in the long run, Reliance Money said.

The company is also keen on enabling financial transactions on the mobile platform, but cannot do so at the moment because of regulatory issues. “We’d like our customers to be able to transact on the portal, but the Securities and Exchange Board of India is not favourable towards capital market transactions on mobile handsets due to security issues,” said Bandopadhyay. The firm has already incorporated features such as security tokens to ensure consumer security is not breached, he added.
It currently allows financial transactions through retail outlets and online platform. More than 50% of the company’s revenue comes from its financial markets vertical.

Wednesday, September 05, 2007

Anil's Reliance ups stake in Saregama to 12.47%

Reliance ADAG has substantially raised its stake in Saregama India Ltd to 12.47 per cent, the largest it has ever held in the Kolkata-based entertainment company.

This is closer to trigerring the takeover code and if Reliance ups its stake to 15 per cent it will have to come out with an open offer to buy a further 20 per cent in Saregama.

Reliance Capital's subsidiary Sonata Investments has picked up 1063299 shares, or 7.24 per cent, of Saregama in an open market transaction at Rs 250 per share. Sonata already holds 5.23 per cent stake in Saregama.

The market is speculating whether Reliance is seriously looking at Saregama as a takeover opportunity. But the promoters of Saregama are adequately protected with an ownership of 50.77 per cent in the company.

"If we look at it historically, Reliance has bought and sold Saregama shares in the market. It looks more like a portfolio investment than an attempt as a business opportunity. The promoters of Saregama are bullish about the company's growth and will not dilute their equity control," says a senior company executive.

Early this year Reliance made an offer to buy 20 per cent in TV Today. This is the only occasion where Reliance has come out with an open offer in the media space, but the pricing was not aggressive and did not find any takers.

Saregama will be a perfect strategic fit for Reliance's rapidly expanding entertainment interests, analysts say. It has a huge music library which can provide exclusive content to Reliance's FM radio and telecom businesses. Besides, Saregama has exclusive partnership with some major Hollywood studios like Paramount, Warner Bros, Universal and Dreamworks for distribution of their home videos in India.

"Saregama has turned around and the promoters are keen to invest rather than part with their equity. The movie plans are in place and digitalisation is in full pace," a company executive says.

In a parallel development, TRowe Price International has sold 1057570 shares, or 7.21 per cent, of Saregama in the open market at Rs 260.

Tuesday, September 04, 2007

R-Money eyes inorganic growth in transfer biz

Anil Ambani Group's financial services distribution arm Reliance Money on Saturday said it is looking for potential acquisition opportunities in the fast growing money changing and money transfer businesses.

The combined market size of money changing and money transfer is estimated at about $34 billion.

Unveiling a new identity here for its money changing and money transfer businesses, the company said it was aiming to double its market share in this segment over next few years.

"We are also looking at inorganic growth opportunities in these businesses for further expansion of these businesses," Reliance Money CEO Sudip Bandyopadhyay told here.

Anil Ambani Group had acquired Travelmate Services, a part of Kuoni Group, in November 2006, which has now become a wholly owned subsidiary of Reliance Capital. Travelmate has been in the Money Transfer Services (MTS) and Full-Fledged Money Changing (FFMC) business in the country since 1993.

The new brand identity for Travelmate Services, which would be now known as Reliance Money Express, was unveiled here by the Reliance Money CEO in the presence of the global MTS giant Western Union worldwide CEO Christina Gold.

Travelmate is already one of the largest Western Union partner in India and now it plans to aggressively expand its reach in non-metro and smaller cities, the company said.

Elaborating on the potential of the MTS business in India, Bandyopadhyay said "India is the largest recipient of global remittance of around $27 billion which is more than 10 per cent of the total global remittance inflow of $240 billion. This is continuously rising due to labour migration and increasing wages."

In addition, money changing market in India is worth $7 billion and is growing at an annual rate of 20 per cent.

Reliance Money Express is operating through a network of 3,400 outlets spread over 800 cities and towns across India and handling close to 100,000 transactions per month with a daily average inward remittance of 1.4 million dollars.

"We see immense potential in these businesses (FFMC) considering that availability of these services is very limited in the country," Bandyopadhyay added.

"Our business plan would be to compete aggressively with the existing established players in these two businesses and provide cost effective, convenient and secure transactions to our customers. We plan to double our existing market share and volumes by next few years, Reliance Money CEO said.

Reliance Money Express would also be forging alliances with various corporate houses and travel firms to take on the established players in this field, he added.

Earlier this week, Reliance Money tied up with New Delhi-based Stic Travel Group, one of the country's leading players in the travel and tourism business.

Under the tie-up, Reliance Money will sell its financial products, ranging from money transfer, foreign exchange, insurance and gold coins through Stic Travel outlets.

While announcing the partnership Stic Travel Chairman Subhash Goyal said, "We have been dealing with foreign players like Thomas Cook and American Express for services like money changing. But Reliance-ADAG came as a natural partner being an Indian MNC."

Reliance Money is planning to set up 10,000 web-enabled retail kiosks across the country, where the consumers would be able to execute their financial transactions.

Reliance Capital picked up 10.2% Stake in Assam Co

Five new foreign institutional investors (FIIs), including Goldman Sachs, Credit Suisse and Merill Lynch Capital Market have picked up stakes, aggregating 3.8 per cent in Assam Company taking the total FII holding in the company to 11.7 per cent. Reliance Capital too has picked up a 10.1 per cent stake in the company. ACL has a paid-up capital of Rs. 22.40 crore in which the promoters have a 57 per cent holding.

Abhay Chawdhry, Chief Financial Officer and Director, told The Hindu that this was the first time that these five Funds have picked up shares in the company. While this investment took place between August 10 and 24, Reliance Capita l picked up its shares earlier this year.ACL reaps a tea harvest of 16 million kg annually from its 15 estates in Assam. It diversified into oil and natural gas and is set to commercialise some of the fields within this fiscal. The company expects an increase in the Rs. 153 crore total income that it had recorded in 2006, Mr. Chawdhry said. For its oil exploration activities in Assam, it has tie ups with Canadian company Canoro Resources and with ONGC.

As part of its efforts to get into the infrastructure sector, Assam Company is set to enter into a majority joint venture with Gujarat State Petroleum Corporation (GSPC) for setting up an SEZ for hydrocarbons. The Rs. 2,000 crore project is targeted for completion by 2010.

Sunday, September 02, 2007

Reliance Money to launch lower variants of gold coins

To cash in on festive fervour, Reliance Money, part of ADAG's financial services unit Reliance Capital, will launch low-end variants of gold coins weighing as low as half a gram.

"We are planning to launch gold coins of 0.5 gm, 1 gm and 2 gm before Diwali to meet the demand from lower-income segments," said Reliance Money CEO Sudip Bandyopadhyay.

A coin weighing half gram would cost Rs 500 per unit while those weighing one gram would cost 1,000, he said.

Currently, Reliance Money offers coins of 5 gm and 8 gm priced at Rs 5,200 and Rs 8,000 respectively excluding taxes.

India is the world's largest gold importer with total demand of about 800 tonne a year, of which 10 per cent or 80 tonne are the in the form of gold coins.

The country's Rs 8,000 crore gold coin market is dominated by unorganised neighbourhood jewellery stores.

Out of the organised market of four tonne, ICICI Bank is the market leader with a share of about 2.5 tonne, while Tata Group's jewellery retail unit Tanishq makes up for 0.75 tonne.

"All the organised players put together account for just four tons worth gold coins, which is five per cent of total imports in a year," Bandyopadhyay said, adding that while it is too early to set an exact target, the company was confident to become the largest organised retailer in this segment.

Reliance Money, will sell its own branded gold coins it is importing from Switzerland through its outlets across India.

Promising to slash margins considerably from the existing market rates, Bandyopadhyay asserted that Reliance Money was here to "make profit and not for profiteering."

Bandyopadhyay said there was huge scope for organised players but the access to branded coins was lacking. This prompted the company to enter this business, he added.

Reliance Pure Gold coins are sold through its over 3,000 outlets across the country. Reliance Money plans to ramp up its outlets to 10,000 by the end of this fiscal.