Buoyed by a robust 65 per cent profit growth in the third quarter, Reliance Capital expects its profitability to improve across all business segments for the entire fiscal ending next month.
The financial services arm of Anil Ambani-led Reliance Group has posted consolidated net profit of Rs 165 crore for the third quarter ended December 31, helped by good results by commercial finance and asset management businesses.
"We have grown significantly in the October-December quarter of this fiscal. The overall performance in the current fiscal would be better than that of the previous year. Our main endeavour for the current quarter and FY 2014-15 will be to sustain the growth and remain profitable," Reliance Capital CEO Sam Ghosh told PTI.
The company, which is present across a range of financial services businesses including mutual fund, insurance, brokerage and non-banking finance, recorded a consolidated net profit of Rs 812 crore in the last fiscal, 2012-13.
Ghosh said Reliance Capital recorded profits in all business segments, including mutual funds, life and general insurance, commercial and home finance and wealth management in the quarter ended December 31, 2013.
During the quarter, its revenue rose by 10 per cent to Rs 1,889 crore on an year-on-year basis.
"Our commercial finance and asset management businesses have outperformed. In the commercial finance business, margins have improved from 4.2 per cent to 5.6 per cent mainly because of bringing down the ticket size of home loans where yields are better," Ghosh said.
In mortgage business, the company has moved into Tier II and Tier III centres, while its ticket size has also come down with the loan disbursements of Rs 5-10 lakh as well. Earlier, the company was concentrating on big-ticket loans of over Rs 50 lakh.
"The home loan business has grown by 8-10 per cent, while the overall loan growth of Reliance Commercial Finance was 3-4 per cent year-on-year," Ghosh said, adding that average ticket size has come down to Rs 28 lakh from Rs 40 lakh a year ago.
In the asset management business, Ghosh said, a shift in focus to retail debt from liquid mutual funds has helped the company post higher earnings. "In next few quarters, we should see focus back on equity side also," he added.
Reliance Capital Asset Management had average assets under management of Rs 1.02 lakh crore during the quarter and it runs the country's second biggest mutual fund house.
Reliance Life Insurance posted net profit of Rs 27 crore during the third quarter, down from Rs 40 crore in the same period of the previous year.
"This is mainly because surrender profits have come down, which is putting pressure on profitability in the short-term but is positive for the long term," Ghosh said.
The company has not booked the surplus arising from non-participating business, which was Rs 74 crore, as the item is added only during second and fourth quarter earnings.
While Reliance General Insurance's gross written premium was up 21 per cent to Rs 599 crore, its net profit fell to Rs 11 crore from Rs 16 crore during the period under review.
"This is due to losses of Rs 16 crore in the declined risk motor pool. We contributed around Rs 16 crore to the 'third part motor declined risk pool', an industry wide corpus mandated by the regulator to third-party motor insurance claims, which hurt the general insurance business profit," he said.
Reliance General Insurance, which is scouting for a foreign partner to pick up a stake in the company, is yet to finalise the process.