Reliance Capital Blog

Reliance Capital, India's Berkshire Hathaway

Tuesday, August 11, 2009

Reliance Capital net profit down 55 per cent

The Anil Ambani-led Reliance Capital Friday reported a 55.6 percent fall in net profit to Rs 153.29 crore for the quarter ended June 30
as against Rs 345.3 crore in the like period last year.

The company's total income for the first quarter stood at Rs 1,468.12 crore, down 3.05 per cent from Rs 1,514.40 crore in the corresponding quarter the previous fiscal.

Reliance Capital has interests in asset management, mutual funds, life and general insurance, private equity and proprietary investments among other financial services.

The earnings per share fell to Rs 6.15 in the June quarter from Rs 13.97 a year ago.

Reliance Capital eyes banking; public offer for insurance arm

Reliance Capital plans to enter the investment banking business over the next year, even as the company is looking to sell part stake in
the insurance business to unlock shareholder value, its chairman Anil Ambani said here Tuesday.

"At Reliance Capital, we continually scan the horizon for new business avenues. Over the next 12 months, we plan to take our first steps in the world of investment banking," Ambani told the company's annual general meeting here.

"Given the scale and magnitude of our relationships across corporate India and the sheer size and reach of our distribution network, we're ideally positioned to create a significant presence in the investment banking business," he added.

The chairman said the group's insurance business now ranked among the top four in the country and that it was considering options to unlock shareholder value by going for a public issue, find a strategic partner or a stake sale.

"A final decision in this matter will be taken shortly, driven by the sole objective of maximising returns for our shareholders," Ambani said.

According to him, in the four years that Reliance Capital has been functioning, the revenues went up up 14 fold, net profits rose 28 times, total assets grew nine fold, and net worth expanded five times.

"It is noteworthy that this growth is purely organic - and made entirely in India."

He also said the group was looking at expanding the private equity operations with an underlying philosophy of addressing the needs of the under-served domestic investors, before setting out overseas

"The focus of our private equity investment will be on growth capital, buyouts, minority investment and acquisition financing. We will put money in sunrise and growth sectors alike."

Ambani also wrote a preparatory letter for the meeting to shareholders where he listed the future plan of action and options before the company. These include:

-Increase the distribution reach from 5,000 to 25,000 cities and towns

-Increase the number of business partners from 500,000 to one million

-Enter the banking sector when regulations permit

-Globalise operations

-Expand asset management, insurance, broking operations across Asia, Africa and the Middle East