Reliance Capital, part of the Anil Ambani group, saw a fall in Q4 profits on a year-on-year basis due to a one time gain in the corresponding quarter last year. However, Sam Ghosh, CEO of Reliance Capital says Q4 was operationally strong and he expects FY14 to be better than the previous fiscal. He expects a pick up in most business lines including insurance and adds falling interest rates will help the company keep cost of funds in check. Excerpts:
Fourth quarter profit was down year-on-year. What reasons would you attribute?
In the fourth quarter of FY13, we had a profit of R255 crore. In the fourth quarter of FY12, we had a profit of R329 crore, including a one-time profit booked at about R80 crore. So, our profit in the quarter was slightly up after excluding the one-time item recorded in the corresponding quarter last year. And if you look at our asset management business, there has been increase in profit, while life insurance has seen a slight fall of R30-40 crore compared with the corresponding period. On commercial finance business, the book size is now about R16,379 crore, a growth of about 9% for the whole year and the profit stood at R342 crore, up about 35%.
How is your general insurance business doing? What has been the progress in terms of finding a partner for the segment?
The general insurance business is now showing profit. In the fourth quarter we showed a R17-crore profit compared with a loss of about R248 crore in Q4 last year. In the previous two quarters also, we had reported a profit. We are no longer seeing losses in the third-party segment. We are still in talks with a couple of partners, so we will see if we can close it within a couple of quarters.
Can you give us some guidance for FY14?
AUMs have grown about 21% y-o-y and we expect the AUM growth to continue at a similar pace this financial year too. Profits in the business will start flowing from next year. Life insurance business has seen growth in this fiscal against de-growth in the last few years. April-May onwards, we have seen growth in the life insurance segment. Also, if you look at the new business margins for the life insurance segment closed at 20.2% on March 31. We are writing more traditional products, which have high margins and we expect to continue at least for the first six months. In the general insurance business, we have grown our new business premium by about 16% in FY13, we expect that to grow at 20-25% in the current financial year. On our commercial finance business, I expect profit to be better than FY13 because we expect interest rates to come down.
On the commercial business side are there any asset quality issues?
Our NPAs were at 1.7% against 1.9%. At this point we don’t see any issues in terms of asset quality. We have actually written fully secured books for last 4-5 quarters so our book is secured. Our book is mainly focused on SME, and loans against property.
Are you seeking clarification from RBI on the new bank licence guidelines?
Like everyone else we have also put in a few questions that are a concern for us. I will leave it at that. RBI will start to clarify the questions after they bunch all of them together.
