Reliance Capital Blog

Reliance Capital, India's Berkshire Hathaway

Tuesday, January 20, 2009

R-Money scouts for SME stock exchange partner

Reliance Money, a Reliance Capital subsidiary and a part of the Anil Dhirubhai Ambani Group (ADAG), is planning to float a stock exchange for small and medium enterprises (SMEs), with 26 per cent stake. It is also scouting for partners to start the venture in about a year’s time.

The company is also mulling to enter the currency futures space through the exchange.

Recently, the Securities and Exchange Board of India (Sebi) had issued guidelines for SME exchanges, and had set a minimum net worth criteria of Rs 100 crore for entity willing to start it.

“We are looking at starting SME exchange, and currency futures can be a part of it. We had discussions with Sebi in this regard. We will apply to the regulator for starting the exchange,” said Sudip Bandyopadhyay, director and chief executive officer of Reliance Money.

To start with, the company will have 26 per cent stake in the exchange, which will come down to 15 per cent, in accordance with the guidelines, he added. The company is also in discussions with Nigeria-based non-resident Indian business group, Chellaram, for starting a stock exchange in Nigeria. The company is also eying to partner government agencies to start the exchange.

“The biggest attraction for us in Nigeria is that it is is the largest country in Africa, sixth largest producer of oil and rich in minerals. The government there is also keen to set up an exchange, Chellarams are already our partners in the distribution business, so we will be happy to partner them for the exchange. We can start it with 100 per cent equity, but our idea is to get relevant government agencies as partner. Our stake in it could be around 26 per cent,” said Bandyopadhyay.

Reliance Money has been active in the exchange business for quite some time, as recently it had pick up 15 per cent stake in Hong Kong Mercantile Exchange (HKMX).

This apart, it has a 10 per cent stake in National Multi-Commodity Exchange (NMCE), which would go up to 26 per cent, said Bandyopadhyay.

The company has also forayed into spot exchange business with the launch of new company, Reliance Spot Exchange Infrastructure, which has a paid-up capital of Rs 3 crore. The company is planning to start spot exchange for agri-commodities, as well as non-agri ones such as metals, including, steel, copper and zinc.

The spot exchange is likely to begin operations in three months, and has got approvals for state governments of Rajasthan and Gujarat.

Reliance Capital Q3 net up 11% at Rs 131.5 cr

Helped by its mutual fund, life insurance, brokerage and financial products distribution businesses, Reliance Capital on Tuesday posted a 11 per cent rise in its net profit to Rs 131.5 crore, for the third quarter of this fiscal. The company had a net profit of Rs 118.1 crore in the year-ago quarter.

The total operating income of the Anil Ambani group's financial services arm jumped 36 per cent to Rs 1,572.9 crore in the quarter ended December 31, 2008, from Rs 1,155.6 crore in the year-ago period.

Among its various group companies, Reliance Mutual Fund recorded a net profit growth of 36 per cent to Rs 26 crore for the quarter under review as against Rs 19 crore in the year ago period. However, the assets under management of Reliance Mutual Fund recorded a decrease of 11 per cent at Rs 70,230 crore as on December 31, from Rs 78,906 crore a year ago.

In the life insurance segment, Reliance Life Insurance registered robust growth of nearly 57 per cent as the policyholders funds under management increased to Rs 4,495 crore as against Rs 2,286 crore last year.

Meanwhile, Reliance Money has generated revenue of Rs 102 crore for the quarter ended December 31, as against Rs 64 crore for the corresponding previous period, an increase of 60 per cent. As on December 31, the net worth of the company stood at Rs 7,24 9.6 crore making the company one of the top three private sector financial services groups in terms of net worth.

Sunday, January 11, 2009

R-ADAG in talks to sell a stake in insurance distribution biz to UK co

Reliance ADAG is in talks to sell a minority stake in its insurance distribution business to the UK-based insurance broking firm THB
for Rs 250-300 crore.

A person with direct knowledge of the negotiations said Reliance ADAG is talking to four international firms including Lockton, Howden and Tyser to sell a stake in Standard Composite Insurance Brokers (SCIB), ADAG’s insurance distribution company, but THB is the lead contender for the stake purchase.

A senior executive at an insurance brokerage firm, who is close to the negotiations said: “Reliance Money is looking to build a strong presence in the distribution of reinsurance products and in risk assessment vertical, where it is a small player. It plans to bring in strategic expertise from foreign partners who are specialists in the reinsurance business.” The other big international players in the Indian re-insurance distribution business are Aon Global and Marsh.

THB is an independent UK-based insurance broker, established in 1968. It provides insurance broking, risk management and underwriting services to wholesale and retail clients. The firm, which floated the Alternative Investment Market of London Stock Exchange in 2002, acquired Lloyd’s broking interests last year.

According to an executive close to the development, Reliance Money is looking at either giving a minority stake in the existing insurance broking firm to the foreign partner or forming a company which would house the reinsurance and risk assessment businesses where the foreign partner would own more than 50%.

SCIB is a subsidiary of Reliance Money, the stock brokerage and financial products distribution company of Reliance Capital. Reliance Capital is the public listed financial services firm promoted by Reliance ADAG.

When contacted Reliance Money CEO Sudip Bandyopadhyay, declined to comment on the developments. He, however, said: “Our insurance broking business has been growing very fast and we are looking at all options to scale it up further.”

The company undertook business worth Rs 130 crore in the first nine months of 2008-09, which is 200% more than the same period last year. It is likely to touch Rs 300 crore by March ’09 as the last quarter is usually the peak period for selling insurance products.

Another person with knowledge of the negotiations between Reliance and THB said the valuations would be more than two times the revenues. Given that Reliance Money is targeting Rs 300 crore for FY09, SCIB should be valued around
Rs 600-700 crore.

SCIB works with multiple insurance companies including Tata AIG, Reliance Life Insurance, Kotak Mahindra Old Mutual, Birla Sun Life in the life insurance space and Royal Sundaram, IFFCO-TOKIO in the general insurance business. It sells insurance products through more than 10,000 outlets in India.

Reliance Money, FTIL plan to set up their own stock exchanges

Reliance Money, the broking arm of Reliance Capital and Financial Technologies India (FTIL), which operates one of the world`s largest exchange networks are pondering over the idea to setup their own stock exchanges, reports Business Standard.

Both the companies see a huge scope in this business as only 5% of Indian households invest in equities compared to the international average of up to 50%. The companies also have plans to enter the rapidly growing business of equity derivatives, which are basically instruments whose value is at least partly derived from one or more underlying equities.

Currently National Stock Exchange enjoys a virtual monopoly in equity derivatives with daily average volumes at Rs 100 billion in the spot segment. In comparison, the Bombay Stock Exchange has daily average volume of just Rs 40 billion. The NSE`s daily average volume in derivative segment is Rs 400 billion.

Reliance Money is already a big player in commodities exchange space after picking up 10% in the National Multi Commodity Exchange (NMCE). Now the company wants to increase its holding to 26%. NMCE has applied to the Securities and Exchange Board of India (SEBI) to set up a currency futures exchange.

Reliance Money`s spot exchange for agriculture commodities is also expected to start trading next month.

The FTIL group which has interests in a currency futures exchange, commodity futures, power exchange and spot exchange for agricultural commodities and plans to set up an exchange for SMEs.

Reliance Cap joins race to manage private sector pension fund

Anil Dhirubhai Ambani Group-led Reliance Capital would join the race for managing pension fund for the unorganised sector under the
New Pension System (NPS) for which the regulator PFRDA invited applications on Friday.

"We will participate in the Expression of Interest (EoI) invited by the Pension Fund Regulatory and Development Authority (PFRDA)," said Reliance Capital Asset Management CEO Vikrant Gugnani.

Without specifying which of the group entities will be filling the EoI, Gugnani, who has recently been appointed as the President and CEO of the international business division, said one of the group companies will participate.

The regulator is planning to launch NPS scheme for the unorganised sector from April 1, 2009.

In addition to Reliance Capital, several other public and private sector entities including banks, insurance companies and financial institutions SBI, ICICI, HDFC and LIC are eligible to manage pension funds for the sector.

In pursuance of the pension sector reforms, PFRDA today invited EoI from eligible entities for sponsoring pension funds. The interested parties can submit their bids to PFRDA by January 9, the authority said.

The government had already introduced the new pension system for the central government (excluding armed forces) with effect from January 1, 2004.

The sponsors of the funds, the authority said, would be required to "manage the assets of citizens to be covered by the new pension system on voluntary basis."

In addition to public and private sector financial firms, the central and state government companies will also be eligible to participate in the bid provided they have been managing assets worth Rs 8,000 crore during the last one year.

To manage funds under NPS applicable to the central and state government employees, PFRDA has appointed SBI, LIC and UTI Mutual Fund.

The three fund managers have already incorporated their pension funds as new companies under the Companies Act.

According to advertisement, joint ventures among the eligible groups can also apply, provided these come under the jurisdiction of the RBI, SEBI or IRDA.

The firms would be incorporated as separate companies in which foreign investment, direct or indirect, should not exceed 26 per cent of the paid-up share capital.

Each pension fund will offer standard payment options including a default option with asset allocation prescribed by PFRDA, it said.

The regulator added that the fund manager will be appointed for a period of three years on the basis of a technical and financial bid.

The subscribers will be given a unique Permanent Retirement Account Number (PRAN) and all accretion to the accounts will be used for providing him a pension.