Despite the difficult market conditions, Reliance Capital posted a strong set of number for the fourth quarter of FY12. The company achieved a milestone in terms of turnover last year, with revenues of over Rs 6500 crore.
In an interview to CNBC-TV18, chief executive Sam Ghosh says that each business outperformed significantly compared to last year, taking the company’s profit up 50% Rs 450 crore. “Based on the market, our assets under management (AUM) have fallen significantly, however we are number 1 in the mutual fund segment in terms of profitability as well as AUM,†he added.
The broking business, commercial finance business and life insurance business also posted good profits for FY12. “If you look at the life insurance business, though new business premiums have fallen, this is the first year we made profits of Rs 373 crore,†said Ghosh.
It is in general insurance that the company failed to post profits. “We showed a loss primarily because of third party pool requirements, where we had to put over Rs 200 crore in reserves,†explained Ghosh. However, since the motor third party pool has been dismantled, he expect the business to breakeven this year.
Below is an edited transcript of his interview. Also watch the accompanying video.
Sam Ghosh: As a company, we achieved a milestone this year in terms of turnover. The turnover has gone up by about 20% to over 6500 crore and profit has gone up by over 50% to over Rs 450 crore.
In terms of business breakdown, each of the businesses have outperformed significantly compared to last year. In asset management, profits are up nearly 5% to over Rs 300 crore. Based on the market; assets under management (AUM) have fallen significantly and so has ours. However, we are number 1 in the mutual fund segment in terms of profitability as well as AUM. If you see, we have nearly Rs 1.40 lakh crore assets under management of which Rs 78,000 crore are in mutual funds.
If you look at the life insurance business, though new business premiums have fallen, this is the first year we made profits of Rs 373 crore. In terms of commercial finance business, our AUMs have grown 15%, however profits have remained flat. This is because interest rates went up by 3 percentage points and our borrowing costs also went up by similar amount. We could not pass all the increase in our borrowing costs to customers, yet we could more or less keep our profits flat with a slight marginal decrease in profit in that business.
Finally in the broking business, profits are up nearly 50% year on year to about Rs 20 crore, and this is despite the market being tough for the broking industry – both equities and commodities. On the distribution side, profits are up nearly 80% to over 30 crore.
In general insurance, we showed a loss primarily because of third party pool requirements, where we had to put over Rs 200 crore in reserves. However, the motor third party pool has been dismantled and from 1st April each of the company’s would have to manage the motor third party business on their own books. This should bring about substantial reduction in terms of reserve requirement as well as losses. We expect this business to breakeven this financial year.
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