Reliance Capital Blog

Reliance Capital, India's Berkshire Hathaway

Monday, March 29, 2010

Reliance Life may sell 26 pct to Swiss Re-report

Reliance Life Insurance Co. Ltd., a unit of the Anil Dhirubhai Ambani Group controlled Reliance Capital , may sell a 26 percent stake to Zurich-based re-insurer Swiss Re for at least 7 billion rupees ($154.9 million), the Mint newspaper reported on Monday.

Talks on the stake sale by the only private sector insurer in India that does not have an overseas stakeholder yet, have reached the final stage and an announcement is likely in April, the paper said citing three people familiar with the development.

Indian laws allow a foreign entity to own up to 26 percent in a domestic insurance firm.

UBS Securities and Deutsche Bank AG are advising Reliance Life on the deal, while Ernst & Young Pvt Ltd has been hired to conduct due diligence, the report said.

Tuesday, March 02, 2010

Will be interested in banking licence: Reliance Capital

Finance Minister did his bit for the Indian banking system on the Budget day. He said that Reserve Bank of India (RBI) is considering giving some additional banking licenses to private sector players. Non Banking Financial Companies (NBFCs) could also be considered, if they meet the RBI's eligibility criteria. Reliance Capital was the first stock to shoot up when the finance minister made that statement.

Talking about the same, Sam Ghosh, Chief Executive Officer of Reliance Capital, said that if a banking opportunity arises, the company would like to get into banking. “We have to await detail guidelines on banking license,” he added.

Here is a verbatim transcript of an exclusive interview with Sam Gosh on CNBC-TV18. Also watch the accompanying video.

Q: Would you be interested in becoming a bank?

A: At this point, we have to await RBI’s (RBI) detailed guidelines, only then can we think about which way to go forward. Obviously it is a good sign that finance minister raised the issue at the Budget. It is positive for non-banking financial companies (NBFCs). There is an opportunity to get into it but until RBI comes out with the guidelines, as you know the devil is in the details. Let us wait and see what happens there.

Q: IDFC flatly refuses to become a bank. Does Reliance Capital want to become a bank?

A: You may have heard our Chairman’s statement sometime back at the AGM. He had mentioned that certainly if a banking opportunity arises, we would like to get into banking.

Q: Does Reliance Capital already have some kind of letter pending with the RBI in seeking that kind of a license?

A: No, we don’t at this stage. Some of the corporates already have one, but we certainly haven’t applied for anything.

Q: There seems to be one loophole which is that the RBI frowns upon large corporate houses getting into banking as a space. How do you think that might be circumvented even if the government relaxes norms for NBFCs to go the bank way?

A: That is why I mentioned that we have to wait for RBI’s guidelines. Unless we know exactly which way that goes forward then only can we decide can we apply for a banking license or not.
Q: There are two basic criteria. One is that the minimum networth should be Rs 300 crore and that eventually the no single body can own more than 10%. Would you be comfortable on these two? Would you be comfortable in bringing your stake down to 10% over a period of time but still lending your name to a bank?

A: The capital issue is not a major issue. The more important issue is let us see how RBI comes out with guidelines of 10% or not and then until we get the entire details of what is required. Then only we can be go forward and think whether we want to go ahead with a banking license.

Q: As part of the Anil Dhirubhai Ambani Group (ADAG) can I ask you an unrelated question on the position of shares that Reliance Capital has been doing in Fame from the market?

A: I don’t think I should be answering that question because this is purely an investment opportunity. If that investment opportunity comes along, Reliance Capital may take a share in it, but ultimately it is the entertainment’s team decision.

Q: Put it more from strategic to management control because you have been inching up stake. Are you getting quite close to the point where you may have about 15% in the company?

A: I think you need to talk to the entertainment team. If they feel that this is the right way forward then that will be the right way forward.

Q: We heard Uday Kotak a couple of days back pointing out that in terms of companies in line seeking banking licenses it could actually be in triple digits. What is your own sense of how many NBFCs may want to convert themselves to banks if given the opportunity?

A: Looking at the NBFC space, a number of them would be looking at converting themselves into banks certainly some of the large corporate houses. However, until the details come out from RBI, RBI guidelines come out then only we will find out exactly how many are interested in applying for a banking license.

Q: There is a lot of talk in the market about Reliance Life and Reliance Asset Management being in advance stages with strategic partners for a stake sale and that could be important in ascribing some kind of benchmark valuation to that space as well. Can you confirm this?

A: On the Reliance Life side, we have already mentioned that we would be looking at an initial public offering (IPO) as and when we get the opportunity obviously. We are awaiting Insurance Regulatory and Development Authority’s (IRDA) disclosure norm requirements as well as Securities & Exchange Board of India’s (SEBI) final comments on that so that we know how we can go forward so that has been stated for sometime.

On the asset management side, no comments have been made on this front at this point. We are however as a group open if there is opportunity available. We will certainly look at it but at this stage made no comments on whether we are going to find a strategic partner or not.

Q: On the Reliance Life IPO, our understanding was that things have got a bit delayed because of the IRDA nod, which has prompted the group to look at the option of a strategic partner. Is there any truth to that?

A: No, IRDA has more or less finalized the disclosure norms and it should be going to SEBI or it has gone to it. Once that comes through, then we can go forward on that front. Suddenly there has been a delay. We were expecting this three-four months back but IRDA obviously has time to go through it as well as the Actuarial Society has given its comments on it.

Q: By when do you expect to do your IPO?

A: As soon as SEBI in the next couple of months will come out with the final disclosure norms required for life insurance company, we will decide when we want to file our DRHP, etc. This will be the next stage.