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Reliance Capital
F1Q12: A Weak Quarter
Quick Comment – Reliance Capital reported a profit
of Rs348 million in F1Q12, down 55%YoY. At the
PBT level, profits were about 58% below our
estimates. The key reason for the weak profit was a
loss of Rs422 mn in the finance and investments
segment. However, trends in the other businesses
(AMC, broking and consumer finance) were also
weak sequentially at -25% QoQ (+38% YoY).
The key trends across the various business segments
were as below:
Finance and investments: The key reason for the YoY
decline in profits is a loss of Rs422 mn in the finance,
investments and others segment owing to increased
funding costs.
Life insurance: Market share (APE basis) was lower at
6.7% average in QE June-11 vs. 7.2% in QE Mar-11.
New business premium (NBP, APE basis) was down
59% YoY in QE Jun-11 vs. -58% in QE Mar-11. Renewal
premium growth was at 37% YoY in QE June-11 vs.
21% in QE Mar-11 and 32% average for F2011. The life
insurance business reported a profit of Rs80 mn for
F1Q12 vs. a loss of Rs1.2 bn during F1Q11. Operating
cost declined 37% YoY, leading to an improvement in
opex ratio to 27% in F1Q12 from 38% in F1Q11.
Asset Management: Domestic mutual fund AUM’s
were down 11.5% QoQ and 8.6% YoY. Their market
share was down to 13.6% from 15% as of Mar-11.
Equity AUM proportion was at 35% as compared to 32%
in F4Q11.
PBT was up 23% YoY but down 6% QoQ. Total income
was down 19% QoQ – reflecting the movement in
average AUMs (-11% QoQ). This was partially offset by
operating costs control (-26% QoQ).
Commercial Finance: PBT in the consumer finance
business was at Rs583 mn up 61% YoY but down 37%
QoQ.
The sharp sequential slowdown on QoQ basis was due to
decline in other income (-37% QoQ/ +16% YoY). AUM’s
were at Rs143 bn up 4% QoQ and 28% YoY. NII was up 2%
QoQ and down 3% YoY. NIM’s were down to 4.3% in
F1Q12 compared to 4.5% in F4Q11 and 5.8% in F1Q11.
Avg. cost of borrowings increased to 10.3% in F1Q12
compared to 8.3% for F1Q11 and 8.8% for FY11.
Gross NPL’s continued to decline to Rs1.5bn compared to
Rs1.6bn in F4Q11 and Rs2.7bn as of F1Q11. Provisions
stayed low at 42 bps of loans (annualized) in F1Q12 (36 bps
of loans in the previous quarter). NPL coverage ratio
improved marginally to 82% from 81% in the previous
quarter.
Broking and distribution business: Profits before tax in
this business decreased to Rs57 mn from Rs127 mn in QE
Mar-11 and Rs34 mn in QE June-10. Market share in equity
volumes was stable at 0.9% in QE June-11. PBT margins
decreased to 12% from 17% in QE Mar-11. This compares
to 9% in QE June-10.
General Insurance: The general insurance business
generated a loss of Rs0.3 bn this quarter, down from
-Rs2.2 bn in the previous quarter. Combined loss ratio was
130% for F1Q12 vs. 124% for F1Q11 (and 163% for
F4Q11) mainly due to additional provisioning for third party
commercial motor pool losses. During the qtr, Rs1 bn was
infused into the business. The total capital invested to date
is Rs12.5 bn.
Other subsidiaries: Reliance Capital’s other smaller
subsidiaries (Reliance Exchangenext Ltd., Reliance Spot
Exchange, Quant Capital, Reliance Equity Advisors (India)
Ltd., Reliance Asset Reconstruction and Reliance Venture
Asset Management) generated a profit of Rs57 mn in this
quarter (vs. a loss of Rs447 mn in QE Mar-11 and a profit of
Rs85 mn in QE Dec-10).
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Reliance Capital
F1Q12: A Weak Quarter
Quick Comment – Reliance Capital reported a profit
of Rs348 million in F1Q12, down 55%YoY. At the
PBT level, profits were about 58% below our
estimates. The key reason for the weak profit was a
loss of Rs422 mn in the finance and investments
segment. However, trends in the other businesses
(AMC, broking and consumer finance) were also
weak sequentially at -25% QoQ (+38% YoY).
The key trends across the various business segments
were as below:
Finance and investments: The key reason for the YoY
decline in profits is a loss of Rs422 mn in the finance,
investments and others segment owing to increased
funding costs.
Life insurance: Market share (APE basis) was lower at
6.7% average in QE June-11 vs. 7.2% in QE Mar-11.
New business premium (NBP, APE basis) was down
59% YoY in QE Jun-11 vs. -58% in QE Mar-11. Renewal
premium growth was at 37% YoY in QE June-11 vs.
21% in QE Mar-11 and 32% average for F2011. The life
insurance business reported a profit of Rs80 mn for
F1Q12 vs. a loss of Rs1.2 bn during F1Q11. Operating
cost declined 37% YoY, leading to an improvement in
opex ratio to 27% in F1Q12 from 38% in F1Q11.
Asset Management: Domestic mutual fund AUM’s
were down 11.5% QoQ and 8.6% YoY. Their market
share was down to 13.6% from 15% as of Mar-11.
Equity AUM proportion was at 35% as compared to 32%
in F4Q11.
PBT was up 23% YoY but down 6% QoQ. Total income
was down 19% QoQ – reflecting the movement in
average AUMs (-11% QoQ). This was partially offset by
operating costs control (-26% QoQ).
Commercial Finance: PBT in the consumer finance
business was at Rs583 mn up 61% YoY but down 37%
QoQ.
The sharp sequential slowdown on QoQ basis was due to
decline in other income (-37% QoQ/ +16% YoY). AUM’s
were at Rs143 bn up 4% QoQ and 28% YoY. NII was up 2%
QoQ and down 3% YoY. NIM’s were down to 4.3% in
F1Q12 compared to 4.5% in F4Q11 and 5.8% in F1Q11.
Avg. cost of borrowings increased to 10.3% in F1Q12
compared to 8.3% for F1Q11 and 8.8% for FY11.
Gross NPL’s continued to decline to Rs1.5bn compared to
Rs1.6bn in F4Q11 and Rs2.7bn as of F1Q11. Provisions
stayed low at 42 bps of loans (annualized) in F1Q12 (36 bps
of loans in the previous quarter). NPL coverage ratio
improved marginally to 82% from 81% in the previous
quarter.
Broking and distribution business: Profits before tax in
this business decreased to Rs57 mn from Rs127 mn in QE
Mar-11 and Rs34 mn in QE June-10. Market share in equity
volumes was stable at 0.9% in QE June-11. PBT margins
decreased to 12% from 17% in QE Mar-11. This compares
to 9% in QE June-10.
General Insurance: The general insurance business
generated a loss of Rs0.3 bn this quarter, down from
-Rs2.2 bn in the previous quarter. Combined loss ratio was
130% for F1Q12 vs. 124% for F1Q11 (and 163% for
F4Q11) mainly due to additional provisioning for third party
commercial motor pool losses. During the qtr, Rs1 bn was
infused into the business. The total capital invested to date
is Rs12.5 bn.
Other subsidiaries: Reliance Capital’s other smaller
subsidiaries (Reliance Exchangenext Ltd., Reliance Spot
Exchange, Quant Capital, Reliance Equity Advisors (India)
Ltd., Reliance Asset Reconstruction and Reliance Venture
Asset Management) generated a profit of Rs57 mn in this
quarter (vs. a loss of Rs447 mn in QE Mar-11 and a profit of
Rs85 mn in QE Dec-10).
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