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1Q12 was a operationally weak qtr with market share loss in life
insurance, margin pressure for the lending business and flat AUMs in
the AMC business. Valuations are reasonable currently and factor in the
cyclical headwinds. Consummation of the Nippon life deal looks more
likely by CY11 and would be a strong stock catalyst in the near term.
Also Reliance capital is a potential candidate for new bank licenses but
group related issues may cap possible upsides.
Life insurance: The Nippon life deal is likely to get approval before
CY11 given the final stake transfer guidelines issued by IRDA.
Operationally, 1Q12 was a weak qtr with WRP volumes down 59%
YTD and reliance Life loosing ~350bps market share. Focus on
productivity continues with 11% y/y decline in agency force reflected in
operating costs coming off by ~37% y/y. NBAP margins have been
under pressure over last 2-3 qtrs but we expect long term NBAP margins
to stabilize at ~13%.
Asset Management: AUMs was flat sequentially and with weak capital
markets, we expect the trend to continue in the near term. Sequential
revenues trend was muted due to seasonality. Incremental regulatory
newsflow has been positive with SEBI allowing AMCs to charge Rs100
per transaction for investments >Rs10000.
Lending business: Growth continues to remain robust with ~28% y/y
growth in AUM with strong growth across categories including
mortgages and SME. Credit charges continued to remain low but margin
pressure and high opex impacted PBT for the lending business.
Maintain Overweight: Stock has under performed given weak capital
markets impacting both volumes and investor sentiment given beta
nature of the stock. Valuations are reasonable now and both the
approval of the Nippon Life deal and new bank license guidelines could
be strong catalysts in the near term.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
1Q12 was a operationally weak qtr with market share loss in life
insurance, margin pressure for the lending business and flat AUMs in
the AMC business. Valuations are reasonable currently and factor in the
cyclical headwinds. Consummation of the Nippon life deal looks more
likely by CY11 and would be a strong stock catalyst in the near term.
Also Reliance capital is a potential candidate for new bank licenses but
group related issues may cap possible upsides.
Life insurance: The Nippon life deal is likely to get approval before
CY11 given the final stake transfer guidelines issued by IRDA.
Operationally, 1Q12 was a weak qtr with WRP volumes down 59%
YTD and reliance Life loosing ~350bps market share. Focus on
productivity continues with 11% y/y decline in agency force reflected in
operating costs coming off by ~37% y/y. NBAP margins have been
under pressure over last 2-3 qtrs but we expect long term NBAP margins
to stabilize at ~13%.
Asset Management: AUMs was flat sequentially and with weak capital
markets, we expect the trend to continue in the near term. Sequential
revenues trend was muted due to seasonality. Incremental regulatory
newsflow has been positive with SEBI allowing AMCs to charge Rs100
per transaction for investments >Rs10000.
Lending business: Growth continues to remain robust with ~28% y/y
growth in AUM with strong growth across categories including
mortgages and SME. Credit charges continued to remain low but margin
pressure and high opex impacted PBT for the lending business.
Maintain Overweight: Stock has under performed given weak capital
markets impacting both volumes and investor sentiment given beta
nature of the stock. Valuations are reasonable now and both the
approval of the Nippon Life deal and new bank license guidelines could
be strong catalysts in the near term.
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