Reliance Capital Chairman Anil Ambani today said the company is looking at unlocking value by divesting across its businesses and is in "advanced stage" of talks to sell a stake in its asset management and mutual funds business to Nippon Life of Japan.
Speaking to the shareholders at the company's AGM here, Ambani also informed that Reliance Capital will explore all possible opportunities to enter the banking sector and announced that the banking entity of the group could be called Reliance Bank.
The comments came in the backdrop of the company sitting on a huge debt of Rs 18,483 crore as of June quarter. In the quarter to June, its assets stood at Rs 25,511 crore with a net profit of just Rs 138.7 crore against Rs 229 crore in the year-ago period and had net sales of Rs 703.6 crore against Rs 1,809 crore year-on-year.
The Reserve Bank had come out with the draft guidelines for new bank licences last month in which it had said that the companies having a significant exposure to broking and real estate businesses would not be entertained.
Reliance Capital has a broking arm. When asked by a shareholder about the banking foray, Ambani said, "at an appropriate time when the RBI decides the
actual process, we will pursue a banking licence."
Citing its recent divestment of 26 percent in Reliance Life Insurance to Japan's Nippon Life, Ambani said, "this is an outstanding showcase of value creation and I am confident that we'll replicate that in each of our businesses
as we move forward."
He said the company has recovered Rs 3,000 crore capital it had invested in the life insurance business by selling 26 percent to the Japanese company. Reliance Capital, which has signed a memorandum of understanding with Nippon Life for exploring collaboration opportunities earlier this month, is in the "advanced stage" of discussion to sell a stake in its asset management and mutual fund business to the Japanese partner, Ambani said.
"We are at an advanced stage of discussion with our new partner Nippon Life (which wants) to take an equity stake in Reliance Capital Asset Management and the Reliance Mutual Fund. We hope that over the next few months, we will have definitive news on that entire exercise," he said.
Besides this, potential investors have also shown interest in picking up a stake in the general insurance business, Ambani said. "We are likely to follow a similar model to Reliance Life to unlock value in Reliance General Insurance," he said. At the AGM, shareholders also approved a proposal for
sale of up to 25% stake in the company to institutional investors through qualified institutional placement.
The Reliance Capital scrip was trading 1.32 percent up at Rs 394.50 on the Bombay Stock Exchange in the afternoon trade, in line with the market sentiment, while the benchmark Sensex was 2.95 percent up at 16,524 points.
The company is already present in lending business through a non-banking finance company, while its other areas of operations include wealth management and a private equity practice. Outlining its plans for the next five years, Rel Cap Group Chief Executive Sam Ghosh said it is targeting to increase its customer base to 5 crore from the present 2 crore, distributor strength to 25,000 from the 5,000 and double the business partners to 10 lakh.
Reliance Capital is also looking at expanding its asset management business to other emerging markets, expand its private equity and wealth management practices and looking at asset reconstruction company and bourses businesses, Ghosh said.
Ambani said, "we want to be among the top three in terms of market share, in terms of number of customers, in terms of profitability in whatever we do." The company will be taking a conservative line in its debt profile, Ambani said, adding that the Rs 3,000 crore from Nippon expected in the next few weeks will be used to repay debt.
He also assured shareholders that he will be taking their requests of a special dividend and a bonus issue to the company board.
Source: www.moneycontrol.com
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