MIRA
INFORM REPORT
|
Report Date : |
21.03.2008 |
IDENTIFICATION
DETAILS
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Name : |
RELIANCE CAPITAL LIMITED |
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Registered Office : |
H Block, 1st Floor, Dhirubhai Ambani Knowledge City,
Koparkhairane, Navi Mumbai-400710, Maharashtra |
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Country : |
India |
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Financials (as on) : |
31.03.2007 |
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Date of Incorporation : |
05.03.1986 |
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Com. Reg. No.: |
165645 |
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CIN No.: [Company
Identification No.] |
L65910MH1986PLC165645 |
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TAN No.: [Tax
Deduction & Collection Account No.] |
MUMR15405F |
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PAN No.: [Permanent
Account No.] |
AAACR5054J |
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Legal Form : |
Subject is a Public Limited Liability company. The company’s shares
are listed on the Stock Exchanges. |
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Line of Business : |
Non Banking Finance Companies (NBFCs) providing Fund and Non-Fund Based Financial Services. |
RATING &
COMMENTS
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MIRA’s Rating : |
Aa |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
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Maximum Credit Limit : |
USD 206449200 |
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Status : |
Excellent |
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Payment Behaviour : |
Regular |
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Litigation : |
Clear |
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Comments : |
Subject is a well-established and reputed company and a part of
Reliance Anil Dhirubhai Ambani progressing well. Directors are reported as
experienced and respectable businessmen. Trade relations are reported as
fair. Business is active. Payments are usually correct and as per
commitments. Fundamentals are strong and healthy. The company can be considered normal for business dealings at usual
trade terms and conditions. The company can be regarded as a promising business partner in a
medium to long-run. |
LOCATIONS
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Registered Office / Corporate Office : |
H Block, 1st Floor, Dhirubhai Ambani Knowledge City,
Koparkhairane, Navi Mumbai-400710, Maharashtra, India |
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Tel. No.: |
91-22-30327000 |
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Fax No.: |
91-22-30327202 |
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E-Mail : |
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Head Office : |
Avdesh House, 2nd Floor, Pritam Nagar, 1st
Slope, Ellis bridge, Ahmedabad - 380 006, Gujarat, India |
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Tel. No.: |
91-79-6576895 |
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Fax No.: |
91-79-657 8070 |
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Factory 1 : |
Fosbery Road, Off Ready Road Station (East), Mumbai - 400 033,
Maharashtra |
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Factory 2 : |
Village Meghpar/ Padana, Taluka Lalpur, District Jamnagar-361280,
Gujarat, India |
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Tel. No.: |
91-288-3011556 |
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Fax No.: |
91-288-3011598 |
DIRECTORS
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Name : |
Mr. Anil D Ambani |
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Designation : |
Chairman |
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Name : |
Mr. Amitabh Jhunjhunwala |
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Designation : |
Vice Chairman |
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Age : |
51 Years |
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Qualifications : |
Chartered Accountant |
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Date of Ceasing : |
20.03.2006 |
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Date of Appointment : |
07.03.2007 |
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Name : |
Rajendra Chitale |
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Designation : |
Independent Director |
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Age : |
46 Years |
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Qualifications : |
Chartered Accountant |
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Name : |
Mr. Udyan Bose |
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Designation : |
Additional Director |
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Date of Appointment : |
29.12.2005 |
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Name : |
Mr. C P Jain |
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Designation : |
Former Chairman and Managing Director |
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Age : |
61 Years |
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Qualification : |
Law Graduate |
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Date of Appointment : |
24.04.2006 |
KEY EXECUTIVES
|
Name : |
Mr. V R Mohan |
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Designation : |
Company Secretary and Manager |
MAJOR SHAREHOLDERS
/ SHAREHOLDING PATTERN
|
Name of shareholders |
No. of Shares |
Percentage of
Holding |
|
Shareholding of
promoter Group |
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Indian |
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Individuals/Hindu Undivided Family |
1162983 |
0.47 |
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Bodies Corporate |
127566291 |
51.93 |
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Sub Total (A)
(1) |
128732274 |
52.41 |
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Public
Shareholding |
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Institutions |
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Mutual Funds / UTI |
2377061 |
0.97 |
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Financial Institutions/Banks |
115829 |
0.05 |
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Central Governments / State Governments |
53452 |
0.02 |
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Insurance Companies |
3496942 |
1.42 |
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Foreign Institutional Investors |
74745229 |
30.43 |
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Sub Total (B) (1) |
80788513 |
32.89 |
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Non-Institutions |
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Bodies Corporate |
4562916 |
1.86 |
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Individual Shareholders holding nominal Share capital up to Rs. 0.100
million. |
26792805 |
10.91 |
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Individual Shareholders holding nominal Share capital in excess of
Rs.. 0.100 million. |
1825716 |
0.74 |
|
NRIs/OCBs |
968240 |
0.39 |
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Sub Total (B)
(2) |
34149677 |
13.90 |
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Total Public
Shareholding B=
(B) (1) + (B) (2) |
114938190 |
46.79 |
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Total (A) + (B) |
243670464 |
99.20 |
|
Shares held by Custodians and against which depository Receipts have
been issued. |
1962336 |
0.80 |
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Grand Total (A)
+ (B) + (C) |
245632800 |
100.00 |
BUSINESS DETAILS
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Line of Business : |
Non Banking Finance Companies (NBFCs) providing Fund and Non-Fund Based Financial Services. |
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Products : |
Generic names of principal products/services are :- ·
Asset Financing ·
Lending ·
Investments |
GENERAL
INFORMATION
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No. of Employees : |
6046 |
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Bankers : |
Ø Allahabad Bank Ø ICICI Bank
Limited Ø IDBI Bank
Limited Ø HDFC Bank
Limited Ø Punjab National
Bank Ø Syndicate Bank Ø Axis Bank
Limited Ø State Bank of
Hyderabad |
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Facilities : |
Secured Loans : From Banks : Rs.1675.000 millions Unsecured Loans
: Security Deposit Received – Lease : Rs.743.900 millions |
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Banking
Relations : |
Good |
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Auditors : |
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Name : |
·
Chaturvedi and Shah, Chartered
Accountant ·
BSR and Company, Chartered
Accountant |
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Parent Company : |
Ø Reliance
Industries Limited |
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Associates/Subsidiaries : |
Subsidiaries: v Reliance Capital Asset Management Limited v Reliance Capital Trustee Company Limited v Reliance General Insurance Company Limited v Reliance Gilts Limited (formerly Reliance Life Insurance Company Limited) v Reliance Venture Assets Management Private Limited (w.e.f. October 3.2006.) v Reliance Capital Research Private Limited (w.e.f. February 16, 2007.) v Travel mate Services (India) Private Limited (w.e.f. November 29, 2006.) v Medybiz Private Limited (w.e.f. February 16, 2007.) v Net Logistics Private Limited. (w. e. f. February 16, 2007.) v Reliance Technologies Ventures Private Limited (w. e. f. February 23, 2007.) v Reliance Asset Management (Mauritius) Limited. v Reliance Asset Management (Singapore) Private Limited. v Reliance Capital Partners (Partnership Firm) (w. e. f. April 19, 2006.) v Gate way Systems (India) Limited v Matrix Innovations Limited v Reliance Web Stores Limited. v Reliance Communication Ventures Limited v Reliance Natural Resources Limited v Reliance Communications Infrastructure Limited Associates: v AAA Enterprises Private Limited v Reliance Industries Limited v Reliance Energy Limited v Reliance Infocomm Limited v Reliance Telecom Limited v Reliance Capital Ventures Limited v Reliance Energy Ventures Limited v Reliance Land Private Limited v Reliance Share & Stock Brokers Private Limited v WorldTel Holding Limited v Reliance Life Insurance Company Limited (formerly AMP Sanmar Life Insurance Company Limited) v Viscount Management (Alpha) Services Limited v Viscount Management Services Limited v Ammolite Holdings Limited v
Adlabs Films Limited v
Reliance Asst Reconstruction Company Limited. |
CAPITAL STRUCTURE
Authorised Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
4000,000,00 |
Equity Shares |
Rs. 10/- Each |
Rs. 4000.000 millions |
Issued, Subscribed & Paid-up Capital :
|
No. of Shares |
Type |
Value |
Amount |
|
2461,600,00 |
Equity Shares |
Rs. 10/- Each |
Rs. 2461.600
millions |
FINANCIAL DATA
[all figures are in Rupees Millions]
ABRIDGED BALANCE
SHEET
|
SOURCES OF FUNDS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
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SHAREHOLDERS FUNDS |
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1] Share Capital |
2461.600 |
2728.800 |
1278.400 |
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2] Share Application Money |
0.000 |
0.000 |
0.000 |
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3] Reserves & Surplus |
49150.700 |
38495.800 |
13100.800 |
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4] (Accumulated Losses) |
0.000 |
0.000 |
0.000 |
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NETWORTH |
51612.300 |
41224.600 |
14379.200 |
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LOAN FUNDS |
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1] Secured Loans |
1450.000 |
1675.000 |
0.000 |
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2] Unsecured Loans |
12579.600 |
743.900 |
13135.500 |
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TOTAL BORROWING |
14029.600 |
2418.900 |
13135.500 |
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DEFERRED TAX LIABILITIES |
90.000 |
0.000 |
0.000 |
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TOTAL |
65731.900 |
43643.500 |
27514.700 |
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APPLICATION OF FUNDS |
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FIXED ASSETS [Net Block] |
841.100 |
1683.500 |
2135.400 |
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Capital work-in-progress |
146.000 |
131.300 |
130.500 |
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INVESTMENT |
24343.400 |
22306.200 |
16440.000 |
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DEFERREX TAX ASSETS |
0.000 |
0.000 |
0.000 |
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CURRENT ASSETS, LOANS & ADVANCES |
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Inventories |
8.200
|
61.900 |
3060.500 |
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Sundry Debtors |
2541.600
|
430.200 |
23.900 |
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Cash & Bank Balances |
1749.500
|
1869.500 |
54.500 |
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Other Current Assets |
1394.100
|
6142.600 |
4767.700 |
|
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Loans & Advances |
36757.400
|
12045.600 |
1486.900 |
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Total
Current Assets |
42450.800
|
20549.800 |
9393.500 |
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Less : CURRENT LIABILITIES & PROVISIONS |
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Current Liabilities |
962.200
|
174.700 |
117.400 |
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Provisions |
1087.200
|
852.600 |
467.300 |
|
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Total
Current Liabilities |
2049.400
|
1027.300 |
584.700 |
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Net Current Assets |
40401.400
|
19522.500 |
8808.800 |
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MISCELLANEOUS EXPENSES |
0.000 |
0.000 |
0.000 |
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TOTAL |
65731.900 |
43643.500 |
27514.700 |
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PROFIT & LOSS
ACCOUNT
|
PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
|
|
Operating Income |
8689.900 |
6269.600 |
2956.900 |
|
|
Other Income |
148.700 |
250.600 |
0.000 |
|
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Total Income |
8838.600 |
6520.200 |
2956.900 |
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|
|
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|
|
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Profit/(Loss) Before Tax |
7331.800 |
5506.100 |
1112.100 |
|
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Provision for Taxation |
870.000 |
130.000 |
54.000 |
|
|
Profit/(Loss) After Tax |
6461.800 |
5376.100 |
1058.100 |
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Imports : |
|
|
|
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Others |
NA |
NA |
2741.000 |
|
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Total Imports |
NA |
NA |
2741.000 |
|
|
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Expenditures : |
|
|
|
|
|
|
Salaries, Wages, Bonus, etc. |
450.600 |
101.900 |
0.000 |
|
|
Administrative Expenses |
0.000 |
0.000 |
56.300 |
|
|
Managerial Remuneration |
2.500 |
1.400 |
0.000 |
|
|
Payment to Auditors |
4.500 |
2.300 |
0.000 |
|
|
Provision for non performing Assets |
13.500 |
1.500 |
0.000 |
|
|
Interest & Finance Charges |
426.300 |
223.100 |
1510.800 |
|
|
Depreciation & Amortization |
70.700 |
452.000 |
277.700 |
|
|
Other Expenditure |
538.700 |
231.900 |
(140.500) |
|
Total Expenditure |
1506.800 |
1014.200 |
1844.800 |
|
QUARTERLY RESULTS
|
PARTICULARS |
30.06.2007 |
30.09.2007 |
31.12.2007 |
|
Type |
1st Quarter |
2nd
Quarter |
3rd Quarter |
|
Sales Turnover |
5124.700 |
3849.300 |
3725.100 |
|
Other Income |
13.000 |
63.400 |
34.200 |
|
Total Income |
5137.700 |
3912.700 |
3759.300 |
|
Total Expenditure |
1286.100 |
963.100 |
831.300 |
|
Operating Profit |
3851.600 |
2949.600 |
2928.000 |
|
Interest |
374.900 |
534.800 |
1331.500 |
|
Gross Profit |
3476.700 |
2414.800 |
1596.500 |
|
Depreciation |
26.900 |
37.500 |
41.600 |
|
Tax |
385.500 |
284.500 |
177.500 |
|
Reported PAT |
3024.300 |
2012.800 |
1352.400 |
KEY RATIOS
|
PARTICULARS |
31.03.2007 |
31.03.2006 |
31.03.2005 |
|
Debt Equity Ratio |
0.18 |
0.28 |
1.04 |
|
Long Term Debt
Equity Ratio |
0.05 |
0.25 |
1.04 |
|
Current Ratio |
4.12 |
7.92 |
4.97 |
|
TURNOVER RATIOS |
|
|
|
|
Fixed Assets |
2.66 |
1.47 |
0.58 |
|
Inventory |
255.59 |
4.33 |
0.88 |
|
Debtors |
6.03 |
29.75 |
13.77 |
|
Interest Cover
Ratio |
18.20 |
13.18 |
1.74 |
|
Operating Profit
Margin (%) |
88.73 |
95.11 |
98.19 |
|
Profit Before
Interest and Tax Margin (%) |
86.60 |
88.22 |
84.22 |
|
Cash Profit
Margin (%) |
74.26 |
86.49 |
47.94 |
|
Adjusted Net
Profit Margin (%) |
72.13 |
79.60 |
33.98 |
|
Return on Capital
Employed (%) |
14.26 |
16.86 |
9.07 |
|
Return on Net
Worth (%) |
14.00 |
19.51 |
7.46 |
LOCAL AGENCY
FURTHER INFORMATION
HISTORY
The company was incorporated on 5th March 1986 at Ahmedabad
in Gujarat having Company Registration Number 8526.
Formerly known as Reliance Capital and Finance Trust and was promoted in
1986 at Ahmedabad, in State of Gujarat with a capital of Rs. 0.070 millions.
The company intended to access the capital market as part of resource raising
programme, which materialised in the year 1990 and active operations commenced
soon after its maiden public issue of equity shares aggregating Rs. 200
millions in April, 1990.
In January 1995, the company came out with a rights-cum-public issue at
a premium of Rs. 130/- each, aggregating Rs. 6000.00 millions to strengthen the
company’s equity base and meet its long-term working capital requirements.
The company was granted approval by the Securities and Exchange Board of
India (SEBI) to act as an approved intermediary under the provision of SEBI’s
Securities Lending Scheme, 1997.
During 1998-99, the company disinvested part of its holding in Reliance
Share and Stock Broker and Reliance Land. These companies have accordingly
ceased to be subsidiary of the company.
In financial year 1993 the company raised Rs. 874.8 millions by a right
issue of Rs. 10 shares at a premium of Rs. 30.
The company has acquired membership of Over The Counter Stock Exchange
of India (OTCEI) and engages in market making for several scrips.
The company also has category I Merchant Banker certificate and
corporate membership of Mumbai Stock Exchange. The company has set up several
subsidiaries for diversifying and broadening the base in the financial sector.
The company’s subsidiaries have membership of Ahmedabad Stock Exchange
and National Stock Exchange.
BUSINESS
Subject is one of India's leading non banking finance companies
(NBFCs) providing fund and non-fund
based financial services.
The company has four wholly owned subsidiaries. Reliance Capital Assets
Management is the investment manager of Reliance Capital Mutual Fund, Reliance
Capital Trustee Company, is the Trustee Company of the Reliance Capital Mutual
Fund, Reliance Net Private Limited and observer Network Private Limited.
The company is shifting its focus from a traditional NBFC to a special
purpose vehicle and venture capital outfit developing infrastructure projects
and investing in Infotech, media, internet and biotech start-ups, will help it
boost its performance in the coming year. The company’s fee-based activities
include a packaged deal offer to the corporate besides like issue management,
underwriting, corporate advisory, corporate valuation, restructuring of
operations, privatisation, divestment, mergers and acquisitions.
The company has also obtained approval from the Reserve Bank of India
(RBI) and Insurance Regulatory and Development Authority (IRDA) for financial
participation in the insurance sector. It has firmed up plans to enter
both life and general insurance categories and accordingly has floated
the two companies Reliance General Insurance Company and Reliance Life
Insurance Company.
Fixed Assets:
ASSETS ON LEASE
v Plant & Machinery
v Furniture & Finings
v Ships
v Aircraft
v Office & Other Equipments
ASSETS FOR OWN USE
v Buildings
v Furniture & Fittings
v Office & Other Equipments
v Motor Vehicles
CAPITAL WORK-IN-PROGRESS
v
Assets For Own use
Financial Performance:
The Company's gross income for the financial year ended
March 31, 2007 increased to Rs. 8838.600 millions, from Rs. 6520.200 millions
in the previous year, registering a growth of over 35.56 Percent.
The operating profit (PBDIT) of the Company increased 26.48 per cent to Rs. 782.88
millions during the year from Rs. 6190.000 millions in the Previous
Year. Interest expenses for the year declined 5.69 per cent to Rs. 426.300
millions, from Rs. 4520.000 millions, in the previous year. Depreciation was at
Rs. 70.700 millions as against Rs. 231.900 millions in the Previous
Year. Provision for taxation during the year was Rs. 870.000 millions.
Net profit for the year increased by over 20 per cent to Rs.
6461.800 millions from Rs. 5376.000 millions in the previous year. An amount of
Rs. 1292.400 millions was transferred to Statutory Reserve Fund pursuant to
section 45-IC of the Reserve Bank of India Act, 1934, and an amount of Rs.
646.200 millions was transferred to the General Reserve during the year under
review.
The Company's Net worth as on March 31, 2007, stood at s. 51612.300 millions,
as against Rs. 41224.600 millions last year.
Scheme
of Amalgamation and Arrangement:
During the year, in terms of the Scheme of Amalgamation and Arrangement between
the Company, Reliance Capital Ventures Limited (RCVL) and their respective
shareholders and creditors, as approved by the Hon'ble High Court of Gujarat at
Ahmedabad and the Hon'ble High Court of Judicature at Bombay vide the
irrespective orders dated June 23, 2006 and June 22, 2006, RCVL stood
amalgamated with the Company with effect from July 17, 2006. In terms of the
Scheme, the Company issued and allotted 5 (five) equity shares of the face
value of Rs. 10 each, for every 100 (one hundred) equity shares of the face
value of Rs. 10 each held in RCVL, and the entire shareholding of the Company
held by RCVL stood cancelled, thus resulting in a net increase of 10,66,555
equity shares of Rs. 10 each in the paid up capital of the Company.
Open
Offer under SEBI Takeover Regulations:
On April 18, 2007, the Company announced an open offer
to the Shareholders of TV Today Network Limited to comply with the procedural
requirement of the Securities and Exchange Board of India (Substantial
Acquisition of Shares and Takeovers) Regulations, 1997. The open offer shall be
for acquisition of the mandatory 20% share capital of TV Today Network Limited
from the existing shareholders, at a price of Rs. 130.50 per share, amounting
to approximately Rs. 1513.800 millions. The said open offer is intended to
facilitate increasing the Company's existing shareholding of approximately 12%
to beyond the stipulated threshold of 15% and will not result in any change in
the management and/or control of TV Today Network Limited.
Subsidiaries:
During the year, Reliance Venture Asset Management Private Limited,
Travel mate Services (India) Private Limited, Medybiz Private Limited, Net
Logistics Private Limited, Reliance Capital Research Private Limited and
Reliance Technology Ventures Private Limited have become subsidiaries of the
Company.
In terms of the approvals granted by the Central Government under section
212(8) of the Companies Act, 1956, copy of the Balance Sheet, Profit and Loss
Account, Reports of the Board of Directors and Auditors of the subsisting
subsidiaries have not been attached with the Balance Sheet of the Company.
These documents will be made available upon request by any member of the
Company interested in obtaining the same. However, as directed by the Central
Government, the financial data of the subsidiaries have been furnished under
'Details of Subsidiaries', forming part of the Annual Report. Further, pursuant
to Accounting Standard (AS-21) issued by the Institute of Chartered Accountants
of India, Consolidated Financial Statements presented by the Company in this
Annual Report includes financial information of its subsidiaries.
MANAGEMENT DISCUSSION AND ANALYSIS
The financial statements have been prepared in compliance with the requirements
of the Companies Act, 1956, and Generally Accepted Accounting Principles (GAAP)
in India. However, readers are cautioned that this discussion may contain
'forward-looking statements' by Reliance Capital Limited ('RCL') that are not
historical in nature. These forward looking statements, which may include
statements relating to future results of operations, financial condition,
business prospects, plans and objectives, are based on the current beliefs,
assumptions, expectations, estimates, and projections of the directors and
management of RCL about the business, industry and markets in which the company
operates. These statements are not guarantees of future performance, and are
subject to known and unknown risks, uncertainties, and other factors, many of
which beyond RCL's control and difficult to predict, that could cause actual
results, performance or achievements to differ materially from those in the
forward looking statements. Such statements are not, and should not be
construed, as a representation as to future performance or achievements of RCL.
In particular, such statements should not be regarded as a projection of future
performance of RCL. It should be noted that the actual performance or
achievements of RCL may vary significantly from such statements.
Macroeconomic Overview:
A structural shift has
taken place in the Indian economy, which will propel real GDP growth from the 6
per cent averaged over the previous two decades, to nearly 8 per cent in the
coming years.
Indeed,
recent economic performance supports this view. GDP has increased on an average
by about 8.5 per cent annually over the last four years. This economic
expansion was marked by three related trends.
* First,
productivity gains in both industry and services have allowed the country to
increase its participation in international trade and investment. For example,
goods and services exports (in nominal US$ terms) have grown at an average of
30 per cent annually since 2003. Average net foreign investment inflows have
increased from less than US$ 5 billion annually between the mid to late
nineties to about US$ 15 billion annually between 2003 and 2006.
* Second,
technology and human resources now flow easily across India's borders in both
directions, further facilitating efficiency.
* Third, increased financial intermediation has helped accelerate the
pace of domestic investment. It has also provided additional channels for
savings so that households may reap the benefits of corporate profitability via
financial market participation. Fixed investment has risen from 24 per cent of
GDP in FY 2001 to 33.8 per cent of GDP in FY 2006, while savings have gone up
from 23.4 per cent of GDP to 32.4 per cent of GDP during the same period.
2006 Growth Builds on Previous
Trends:
Global growth in 2006-07 was estimated at about 5.4 per cent and India
was among the world's fastest growing economies, with a growth rate of 9.2 per
cent. This performance was supported by strong growth numbers both in
manufacturing the index of industrial production grew at 11 per cent between April
2006 and February 2007 and the services sector, which registered a rise of 10.9
per cent between April and December 2006.
Foreign Capital Inflows support
Balance of Payments position:
India's external trade account reflected a robust economic momentum in
2006-07. A strong increase in domestic demand led to a 28 per cent increase in
merchandise imports over the first eleven months of 2006-07, while merchandise
exports grew 19 per cent over the same period. The consequent widening of the
trade deficit was more than offset by non-resident remittances along with
foreign debt and investment inflows. Hence, 2006-07 continued the trend of
substantial balance of payments surpluses. India's foreign exchange reserves
increased by about US$ 48 billion over the previous year and crossed the US$
200 billion mark in April 2007.
The country's overall external debt position continues to be benign, as
current foreign exchange reserves far exceed the total official and private
sector external debt.
Inflation and Monetary
Policy:
The RBI had
forecast that WPI inflation would range between 5 and 5.5 per cent over 2006-07
and that forecast has proved true on an annual average basis. However, the year
was characterized by a steadily rising inflation.
Although it started
the fiscal year at a little under 5 per cent, the WPI had risen above 5.5 per
cent by November 2006, and between January and March 2007 it was pegged above 6
per cent. The runaway growth in bank credit was another cause of concern for
the Central bank.
The RBI,
which has been tightening money supply since 2004, became even more forceful in
its approach: between December 2006 and March 2007, the repo rate was increased
by 50 basis points from 7.25 per cent to 7.75 per cent and the CRR by 150 basis
points from 5 per cent to 6.50 per cent. The impact of this monetary tightening
was evident in the slowing of bank credit growth, which came down to about 27.5
per cent by end March 2007.
RCL with its
growing presence in Asset management, General and Life insurance, Broking and
distribution businesses, all within the financial services space, is well
positioned to tap the expected across-the-board growth in various financial
products and services. The launch of retail finance business in the current financial
year will be another step in RCL's journey to become a leading player in the
financial services space in India.
Consolidated financial performance:
* RCL's
consolidated operating and other income for the financial year ended March 31,
2007 increased to Rs. 21578.600 millions (US$ 495.03 Million), from Rs.
9470.500 millions in the previous year, registering a growth of 128 per
cent.
* Staff
costs for the year were Rs. 1472.200 millions (US$ 33.77 Million) as against
Rs. 445.700 millions in the previous year, an increase of 230 per cent
This was
largely due to a planned ramp up in the number of employees across various
businesses.
*
Administrative and other expenses excluding premium paid on reinsurance, and
reserve for unexpired risk were Rs. 4709.900 millions (US$ 108.05 Million) as
against Rs. 1042.900 millions, an increase of 352 per cent. The increase was
mainly on account of expanding distribution network and higher spending on
marketing and selling.
*
Interest and finance charges for the year were Rs. 427.000 millions (US$ 9.80
Million) as against Rs. 452.000 millions in the previous year. Depreciation for
the year was Rs. 139.600 millions as against Rs. 255.500 millions in the previous year.
* Profit
before tax increased to Rs. 8115.200 millions (US$ 186.17 Million) during the
year as against Rs. 6154.200 millions crore in the previous year, an increase
of 32 per cent.
* Tax
provision for the year was Rs. 1120.200 millions (US$ 25.70 Million) as against
Rs. 344.500 millions in the previous year, an increase of 225 per cent.
* Profit
after tax, minority interest and share of profit of associates for the year was
Rs. 703.21 crore (US$ 161.32 Million) as against Rs. 5713.700 millions in the
previous year, an increase of 23 per cent.
Resources and Liquidity:
* As on
March 31, 2007, the net worth of the company stood at Rs. 51.600 millions (US$
1.18 Billion) as against Rs. 41220.000 millions, an increase of 25 per cent.
*
Consolidated net worth of the company stood at Rs. 53020.000 millions (US$ 1.22
Billion) as against Rs. 421.100 millions and increase of 26 per cent.
*
During the year, the promoter group was allotted 2,17,00 000 equity shares upon
conversion of outstanding warrants issued in 2005-05, and the paid up equity
share capital increased to Rs. 2460.000 millions (US$ 56.43 Million).
* As on March 31, 2007, the Company had a debt equity ratio of 0.28. The
company has not raised any fixed deposits from the public.
Finance & Investments:
RCL's
(standalone) investment portfolio as on March 31, 2007 was Rs. 24340.000
millions (US$ 558.38 Million), at cost. RCL's strategy for its proprietary
investment and private equity is to focus on asset quality and asset mix to
achieve superior returns. The company has increasingly diversified its scope of
operations into a variety of avenues as afforded under the Indian NBFC
regulatory framework, through its interests in asset management and mutual
funds, life and general insurance, stock broking and other activities in
financial services.
Reliance Capital Asset Management:
Reliance Mutual fund:
* With
growing awareness of mutual funds as an investment option, the AUM of the
Indian mutual industry has grown over four fold over the past three years.
Despite the strong growth, India continues to be one of the most under
penetrated markets in the world, with AUM of less than 9 per cent of GDP. The
Mutual funds AUM as a percentage of GDP in case of developed markets like the
US is around 70 per cent, and around 40 per cent in developing markets like
Brazil.
* At the
end of March 2007, there were 32 mutual fund players in India. The industry is
highly fragmented, with the top 5 players commanding 52 per cent of the market
share.
* During
the year 2006-07, Reliance Mutual Fund (RMF) emerged as the no.1 mutual fund in
the country. The AUM as on March 31, 2007, increased to Rs. 463070.000 millions
(US$ 10.62 Billion) from Rs. 246700.000 millions as on March 31, 2006, an
increase of 87.7 per cent. During the same period, the AUM of the entire Indian
mutual fund industry increased from Rs. 2318620.000 millions to Rs. 3590970.000
millions (US$ 82.38 Billion), a growth of 55 per cent. (Source: AMFI
website).
* The
number of investors in RMF increased to 322.700 millions lakh by March 31, 2007,
as against 209.500 millions investors on March 31, 2006, an increase of 54 per
cent.
* During
2006-07, 6 new schemes were launched and by March 31, 2007 there were a total
of 28 schemes, of which 13 were equity-oriented while 15 others were
debt-oriented schemes.
* The number of
branches as on March 31, 2007, increased to 123, from 81 as on March 31,
2006.
* In
November 2006, Reliance Growth and Reliance Vision, two equity funds managed by
RMF, were ranked as the top two funds globally, based on their five year
performance track record. The ranking was as per data from the internationally
acclaimed Lipper, which benchmarked the top 20 performers from a global
universe of open-ended equity funds. The base date for the performance
calculation was taken to be October 31, 2006, and the data was evaluated in
terms of USD.
* In
March 2007, RMF bagged six awards at the Lipper Fund Award Gulf 2007 for
outstanding fund performance across various categories. The idea behind the
awards was to honor consistent out-performance by individual funds and fund
companies. The winning funds demonstrated a consistently strong track record of
risk adjusted returns compared with peers. The performance was measured across
bond, equity and mixed asset classes over a 1, 3, 5 and 10 year period.
Reliance Asset Management (Singapore) Pte. Ltd.:
* During
the year, Reliance Asset Management (Singapore) Pte. Ltd., a wholly owned
subsidiary of Reliance Capital Ltd. (through Reliance Capital Asset Management
Ltd.) received approval from the Securities and Exchange Board of India (SEBI)
and the Monetary Authority of Singapore to commence operations.
* The first fund of this subsidiary, India Equity Growth Fund, commenced
operations in February, 2007. As on March 31, 2007, the AUM of this fund was
US$ 95 million.
Portfolio Management Services:
*
Reliance Portfolio Management Services is a premium financial service for
select investors, from the portfolio management division of Reliance Capital
Asset Management Limited. This division creates customized portfolios for high
net-worth individuals, keeping in mind their risk return preferences, and
endeavors to generate superior returns.
* The AUM increased to Rs. 30036.600 millions (US$ 689.07 Million) as on
March 31, 2007, from Rs. 14006.100 millions as on March 31, 2006, reflecting a
growth of 114 per cent.
The net
profit of Reliance Capital Asset Management Ltd. was Rs. 490.000 millions (US$
11.24 Million) for the period under review as against Rs. 300.000 millions in
the previous year, an increase of 63 per cent.
Reliance Life Insurance:
* During
the year ended March 31, 2007, the Indian life insurance industry collected new
business premium of Rs. 7540.600 millions (US$ 17.30 Billion) as against Rs.
358980.000 millions in the previous year, an increase of 110 per cent.
* At the
end of March 2007, there were 15 private sector players and one public sector
company, Life Insurance Corporation of India (LIC). LIC enjoys 74 per cent
market share, while the private sector players have 26 per cent market share.
Within the private sector, the top 5 players command 75 per cent of the market
share.
* Despite the high growth witnessed by the industry over the past few
years, the growth potential remains strong, thanks to low penetration,
attractive demographics, robust economic growth and increasing awareness.
* Through its investments in associate companies, Reliance Capital Ltd.
is entitled to 100 per cent economic benefits arising from Reliance Life
Insurance Co. Ltd. (RLIC).
* RLIC
was the fastest growing Indian life insurance company amongst the private
sector players, and moved up in industry rankings (in terms of monthly new
business premium) from no. 11 in the previous year to no. 5 in 2006-07.
* Premium income for the year increased to Rs. 10050.000 millions (US$
230.56 Million) as against Rs. 2240.000 millions in the previous year, a rise
of 349 per cent.
*
New business premium for the year was Rs. 9320.000 millions (US$ 213.81
Million) as against Rs. 1940.000 millions, an increase of 380 per cent. Of the
total premium income, 88 per cent was from unit-linked plans and 12 per cent
from others.
The income
during the year from single premium policies was 23 per cent as against 54 per
cent in the previous year.
* The total number of policies in force as on March 31, 2007, was
5,15,680 as against 1,24,885, on March 31, 2006, an increase of 313 per
cent.
*
Reliance Life offers 32 products, of which 26 are aimed at individuals and 6 at
groups.
* The distribution network was increased to 217 branches at the end of
March 31, 2007, as against 153 branches at the end of March 31, 2006. RLIC has
secured the approval of the Insurance Regulatory & Development Authority
(IRDA) to start an additional 130 branches.
* The
number of agents at the end of the year was 1,06,337, as against 20,231 agents
at the end of previous year, an increase of 426 per cent.
* The
policy holders' funds under management increased to Rs. 12050.000 millions (US$
276.44 Million) by March 31, 2007, as against Rs. 3990.000 millions on March
31, 2006.
Reliance
Life Insurance will endeavor to attain a leadership position in the market over
the next few years, by further expanding and strengthening its distribution
network, and offering a diverse array of products to suit the varied and
specific needs of individual customers.
Reliance General Insurance:
* As on
March 31, 2007, there were 8 private sector players and 4 public sector players
in the general insurance sector in India. The public sector companies have 65
per cent market share, while the private sector players account for the balance
35 per cent.
* Post
January 2007, tariffs have been partially deregulated. Insurance companies are
now allowed to set their own prices (except 'Third party motor insurance')
subject to gradual increase / decrease in premiums from the tariff
prices.
* With
gross written premium of around 0.6 per cent of GDP, India is one of the most
under-penetrated markets anywhere in the world, including emerging economies.
In many developed nations, non-life insurance penetration is around 40-50 per
cent of the life insurance market. For India, this figure stands at around 20
per cent.
* Reliance General Insurance (RGI) offers home, property, auto, travel,
marine, commercial and other specialty insurance products.
* RGI was
the fastest growing Indian general insurance company amongst the private sector
players in 2006-07, and moved up in industry rankings (in terms of new business
premium) from no. 8 in the previous year to no. 4 in March 2007.
* Gross
Direct Premium for the year ended March 31, 2007, was Rs. 9120.000 millions
(US$ 209.22 Million) as against Rs.1630.000 millions in the corresponding
period the previous year, an increase of 462 per cent.
* The distribution network was increased to 85 branches by March 31,
2007, as against a mere 20 branches on March 31, 2006.
The
deregulation in this Industry in January 2007 which resulted in
the detariffing of a majority of insurance products has intensified
competition among various players. With increasing investment in technology and
further strengthening of the underwriting process, Reliance General Insurance
is set to rank among the leading private sector players in India.
Reliance Money:
* Reliance
Money is a comprehensive financial services and solutions provider, providing
customers with access to equities, equity and commodities derivatives, mutual
funds, IPOs, life and general insurance products, offshore investments and
credit cards.
* Reliance
Money is targeting the low level of retail penetration in Indian retail
financial market. Retail participation in equities in India is amongst the
lowest in the world, with less than 5 per cent of household sector financial
savings invested in equity/equity-related assets.
* The
company has formally commenced operations in April 2007.
Risks and Concerns:
RCL is exposed to specific risks
that are particular to its businesses and the environment, within which it
operates, including, inter alia, market risk, competition risk, interest rate
volatility, human resource risk, execution risk and any significant downturn in
the economic cycle.
Economic Cycle:
The
Indian economy has shown sustained growth over the last several years.
Any slowdown in
economic growth could adversely affect the Company's business.
Market Risk:
The
Company has significant quoted investments which are exposed to fluctuations in
stock prices. These investments represent a material portion of the Company's
business and are vulnerable to fluctuations in the stock markets. Any decline
in the prices of the Company's quoted investments may affect its financial
position and the results of its operations. RCL has a well diversified
portfolio of stocks to mitigate any stock specific risk. It also continuously
monitors market exposure and uses derivative instruments as a hedging
mechanism, wherever appropriate, to limit volatility in its asset
returns.
Competition Risk:
The financial sector industry is
becoming increasingly competitive and the Company's growth will depend on its
ability to compete effectively. The Company's main competitors are Indian
non-banking financial companies, life and non-life insurance companies, both in
the public and private sector, mutual funds, depository participants and other
financial service providers. The Company's strong brand image, wide
distribution network, diversified product offering and depth of management
places it in a strong position to effectively mitigate this risk.
Credit Risk:
Credit risk is
the risk of failure by the borrower to meet financial obligations to the
lender. RCL has a standardized framework for evaluating loan proposals. The
proposals are evaluated on various quantitative and qualitative parameters. The
loan portfolios are continuously monitored, post disbursement, to proactively
address credit related issues and initiate appropriate measures for
recovery.
Interest Rate Risk:
The
Company's earnings include, to a certain extent, interest income from its
operations. The Company is exposed to interest rate risk, principally, as a
result of lending to its customers at fixed interest rates and in amounts and
for periods which may differ from those of its funding sources.
There can be no
assurance that significant interest rate movements will not have an adverse
effect on its financial position. RCL's treasury team actively manages Asset
Liability positions and interest rate exposure within the norms and guidelines
set out by the management in the Asset Liability Management (ALM)
framework.
Human Resource Risk:
The Company's
success depends largely upon its management team and key personnel and its
ability to attract and retain such persons. Any failure to attract and retain
talented professionals may have an adverse impact on the Company's business,
and its future financial performance. The Company has instituted a strong
performance linked incentive plan wherein the employee's earnings are directly
proportional to his/her contribution to business results.
Operational Risk:
The rapid
development and establishment of financial services businesses in new markets
may raise unanticipated operational or control risks, that may have an adverse
effect on the Company's financial position and the results of its operations.
An extensive system of internal controls is practiced by RCL to ensure that all
its assets are safeguarded and protected against loss from unauthorized use or
disposition and that all transactions are authorized recorded and reported
correctly. The Audit Committee of Directors reviews the adequacy of internal
controls.
RCL manages all
these risks by maintaining a conservative financial profile and by following
prudent business and risk management practices
Opportunities:
* Low retail penetration of financial services/products in India
*
Leveraging the Reliance brand and distribution network
* Cross
selling of services
* Rising
per-capita GDP
* Young
population and attractive demographic profile
Threats:
* Competition from local and multinational players
*
Execution risk
*
Regulatory changes
*
Attraction and retention of Human Capital
Outlook:
The global economy is expected to grow at a slightly slower pace in 2007
than in 2006, led by a cooling of growth in the United States, but somewhat
compensated by growth in Asia, including Japan. Europe too is expected to
maintain growth levels only slightly below last year's.
Having
maintained an accelerated pace of over 9 per cent for the last two years,
India's GDP growth is expected to moderate over 2007 but not significantly. The
country is likely to become a US$ 1 trillion economy very shortly.
Surveys indicate that domestic capital expenditure plans remain robust
and should set the stage for future growth momentum. Similarly, infrastructure
development should help unshackle the economy from supply constraints. The twin
roles of funding this investment and distributing its benefits widely will be
played by a growing and deepening Indian financial sector.
In light
of the above, the company, with its diversified portfolio of businesses having
interests in asset management, life and general insurance, private equity and
proprietary stock broking, expects to be a leading player in the financial
services space in the coming years.
|
Contingent
Liabilities |
AS on 31.03.2007 |
As
on 31.03.2006 |
|
Guarantees to Banks and Financial Institutions on behalf of third
parties |
560.600 |
696.200 |
|
Estimated amount of contracts remaining to be executed on capital
account (net of advances) |
14.900 |
3.500 |
|
Uncalled amount on Investment. |
220.200 |
0.000 |
|
Claims against the Company not acknowledged as debt (Sales Tax) |
89.100 |
1.100 |
(a) In Terms of
the Scheme of Amalgamation and arrangement (Scheme) approved by orders dated
June 23, 2006 of Hon’ble High Court of Gujarat at Ahmedabad and June 22, 2006
of Hon’ble High Court of Judicature at Bombay. Reliance Capital Ventures
Limited (“RCVL”) – (whose core business is financial services) has been
amalgamated with the company with effect from July 17, 2006.
(b) The amalgamation
has been accounted for under the “pooling of interest method” as prescribed by
Accounting Standard (As-14) Accounting for amalgamation issued by the institute
of Chartered Accountants of India.
(c) In
accordance with the said Scheme:
(i) All the
assets (other than shares of the company held by “RCVL”) debts, liabilities,
duties and obligations of “RCLV” have been vested in the company with effect
from July 17, 2006 and have been recorded at their respective book values under
the pooling of interest method of accounting for amalgamation. There were no
difference in the accounting policies of “RCVL” and the company.
(ii) 6 11 56
521 equity shares of Rs. 10/- each have been allotted to the shareholders of
“RCVL” in the ratio of 5 equity shares of Rs. 10/- each of the company for every 100 equity shares of Rs.
10/- each of “RCVL” . The Company’s paid up capital has accordingly increased
by Rs. 10.700 millions. These equity shares shall rank pari-passu with the
existing equity shares of the company.
(iii)
Investment in equity shares by “RCVL” in its books and 6 00 89 966 equity
shares of the company has been cancelled.
(iv) In
accordance with the said scheme, any excess / shortfall of the Net Assets value
taken over by the company over the paid up value of equity shares to be issued
and allotted has been transferred to General Reserve.
(v) The
computation of the amount transferred to General Reserve is as under:
o Book value of Assets
- Rs. 10.300 millions
o
Investment –
Rs. 260.000
millions
o
Net Current Assets – Rs. 6.000 millions
o
Less: Accumulated Depreciation – Rs. 4.600 millions
o
Less: Capital Reserve -- Rs. 0.500 millions
o
Book Value of Net Assets taken over -- Rs. 259.200 millions.
a. The firm consisted of following partners:
i. Reliance Capital Limited. (From April 19, 2006 to March
31, 2007)
ii. Reliance Land Private Limited (From April 19, 2006 to
March 31, 2007)
iii. Sonata Investments Limited. (From April 19, 2006 to
April 21, 2006)
iv. Mr. Surendra Pipara (From April 21, 2006 to March 31,
2007)
|
Contingent
Liability |
Fellow
Subsidiaries |
Associates |
|
(a) Guarantees to Banks and Financial Institutions on behalf of third
parties |
Rs. 1.200
millions (Rs 328.500) millions |
Rs.
3.500 millions (Rs. 328.500) millions |
Contingent
Liability for Bank Guarantee given to Bank’s and Financial Institution lying in
subsidiaries / associates includes Rs. 0.800 millions (Previous Year Rs. 1.200
millions) for Matrix Innovations Private Limited., Rs. 0.300 millions (Previous
Year Rs. 0.400 millions for Reliance Web stores Private Limited., Rs. 3.500
millions (Previous Year Rs. 135.000 millions for Reliance Share and Stock
Brokers Private Limited., and Rs. Nil (Previous Year Rs. 166.300 millions) for
reliance Telecom Limited.