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Total Income 5,253.6 5,702.0 4,926.0 6.7 4,857.0 8.2 Despite AMC topline not clubbed of |426 crore, total income was strong
Interest and Finance Charges 987.7 1,040.6 748.6 31.9 955.0 3.4
Other Exp 3,822.3 4,157.6 3,779.6 1.1 3,536.0 8.1
Total Expenses 4,810.0 5,198.1 4,528.2 6.2 4,491.0 7.1
PBT 443.5 503.9 397.8 11.5 366.0 21.2
PAT 351.9 297.7 253.2 39.0 238.0 47.9 Higher capital gains led to profit being better than estimate
Source: Company, ICICIdirect.com Research, YoY numbers not comparable on fees front due to AMC not consolidated from Q2FY18
Change in estimates
FY18E FY19E
(| Crore) Oldnew reworked % Change Oldnew reworked % Change
Total Income* 18,727.5 19,028.0 1.6 21,501.0 21,408.4 -0.4
PBT* 1,974.2 1,933.1 -2.1 2,559.7 2,259.0 -11.7
PAT (incl subs and associates)* 1,490.5 1,261.9 -15.3 1,894.2 1,544.7 -18.4
ABV (|) 541.0 568.3 5.0 597.3 610.7 2.2
Source: Company, ICICIdirect.com Research
*Capital gain from stake sale in Life insurance and AMC have not factored in estimates
Assumptions
Current Earlier
FY16 FY17E FY18E FY19E FY18E FY19E
Commercial Finance growth (%) 8.0 16.0 20.0 15.0 15.0 15.0
9% Life Ins Premium growth (%) -24.7 -32.5 16.4 14.0 13.7 14.0
General Ins GWP growth (%) 4.2 40.3 19.7 18.0 19.7 18.0
AUM growth (%) 17.5 22.0 16.0 16.0 15.0 16.0
ot Source: Company, ICICIdirect.com Research
Capital gains from of | 579 crore included stake sale in AMC. Reliance
Capital reported in line consolidated results on topline front with revenues
growing 7% to | 5254 crore in spite of treating AMC as associate from
subsidiary. One-time capital gains from earlier stake sale to Nippon Life in
AMC resulted in PAT growth higher than estimate to | 352 crore.
The ~| 250 crore from Paytm stake sale led to a surge in Q4 PAT to | 416
crore, flat YoY and double QoQ. FY17 PAT was at | 1010 crore vs. | 1100
crore.
We believe profits will start picking up for life for FY18E factoring in
improved product mix and high NBAP margins of 28%.
The AMC is expected to continue reporting strong revenue with PBT
expected to grow to | 771 crore by FY19E with AUM growth of ~16%
CAGR.
The commercial finance loan book started growing post consolidation in
the last two years. However, profits remain strong at ~| 400 crore each
year. We expect loans to grow further at 15% CAGR. Housing finance has
been reporting strong growth in the last two years with AUM of | 11174
crore in FY17. We expect 24% growth over the next two years.
AAUM (| crore)
Debt 86730 85530 90570 96440 100270 104130 96820 108970 107030 127490 135720 128100 124260 136000
Equity 33570 38930 45030 46800 51310 51520 47530 48070 51020 54240 53700 60980 69710 74880
Gold 1,770 1,600 1,530 1,450 1,340 1,300 1,380 1,370 1,440 1,400 2,240 2,720 2,610 2,590
MF AUM 122070 126060 137130 144690 152920 156950 158410 158410 158411 183130 195850 210890 222960 231430
Managed Accounts 1,670 1,630 1,560 1,490 1,500 1,470 1,460 1,460 1,480 1,520 1,414 1,280 1,180 1,250
Pension Funds 89860 93890 99390 90580 94410 98070 122290 122290 126790 131810 136100 142510 147880 152390
Offshore Funds 4,740 7,080 6,040 5,700 5,060 4,110 4,331 4,330 3,950 4,010 1,420 1,910 2,210 2,430
Total AAUM 218340 229060 244650 243100 254610 261420 275170 287430 293120 321610 335990 350600 362500 381510
Source: Company, ICICIdirect.com Research
Infra
Infra Financin LAP
Financing g, 11%
9%
SME SME,
38%
49%
construct construc
ion fin tion fin
9%
Others Others,
27% 20%
Commer
cial
Vehicle
9 8.1
7.3
7
5.9 5.8 5.9
(| Billion)
5.6
5.15.1 5.0
4.7 4.3
5 4.14.0 4.0 4.2 3.7
3.23.4 3.0 2.8 3.3 3.3
3 2.6 2.5
1.8 2.1 1.81.8
Q2FY11
Q4FY11
Q2FY12
Q4FY12
Q2FY13
Q4FY13
Q2FY14
Q4FY14
Q2FY15
Q4FY15
Q2FY16
Q4FY16
Q2FY17
Q4FY17
Q2FY18
Source: Company Quarterly Presentation, ICICIdirect.com Research
Exhibit 9: Life premiums moderation due to shift to changing product mix, expect growth coming in FY18E
Q3FY15 Q4FY15 Q1FY16 Q2FY16 Q3FY16 Q4FY16 Q1FY17 Q2FY17 Q3FY17 Q4FY17 Q1FY18 Q2FY18
First year premium 411.8 462.3 271.1 562.9 269.0 343.7 160.3 306.7 185.3 305.0 164.1 187.9
Single premium 20.3 35 29.7 37.8 15.8 28.3 22.7 22 29.4 20.3 18.9 18.7
Total New business premium 432.1 497.3 300.8 600.7 284.9 372.0 183.0 328.7 214.6 325.3 183.0 206.6
Renewal Premium 624.5 884.9 451.1 672.9 705.8 1009.6 471.6 741.6 775.7 986.4 521 762.4
Total premium (net reins) 1052.0 1402.7 746.5 1262.9 986.2 1375.0 649.6 1063.6 980.8 1305.3 700.0 963.0
Profit before tax 39.5 8.7 35.2 15.1 7.7 -255.3 0.2 0.1 0.10 -61.50 -13.80 -5.00
Total funds under mgmt 18599.5 16924.0 15906.1 15523.9 16038.1 15969.6 15817.8 16270.6 16246.6 17253.0 17400.0 17982.7
NBAP margin (%) 26.8
Source: Company, ICICIdirect.com Research
The life insurance business was started with the acquisition of AMP
Sanmar Life Insurance in 2005. In the last few years, profits generated in
this business have been consolidated. Also, the performance has been
relatively improving post the slump after 2007-08 as total premium grew
5% YoY and new business premium grew 40% YoY to | 1930 crore vs.
23% dip in FY13. FY13 PBT was | 380 crore mainly due to rising
proportion of traditional policies business in the overall mix. FY14
continued the same further with PBT growing to | 359 crore. However,
~| 160 crore of the same was contributed by surrender profits. NBAP
margin has positively improved to 23% vs. 20%. This seems far higher
than peers. Current reported FY17 NBAP margin stood at 28%.
Q2FY18
Motor, 34
Health, 15
Consolidated Entity
Investments book
Reliance Capital has transferred few of the investments to an SPV post
restructuring and being CIC. It funded the same with capital of |1500 odd
crore and carrying similar investments.
All put together non-core investments are | 10000 crore as per
management in the conference call. In the same media and entertainment
investments were to the tune of ~| 6000 crore.
With expected closure of radio business deal (RMVL) in the near term,
~| 2000 crore can come. From Prime focus around | 1200 crore is
expected. The proceeds will be used to pay off debt in the books. Process
of exiting most of these non-core investments is under process.
60.0
(%)
400
300 40.0
200
20.0
100
0 0.0
Nov-15 Jan-16 Apr-16 Jun-16 Aug-16 Nov-16 Jan-17 Apr-17 Jun-17 Sep-17 Nov-17
Key events
Date Event
FY05 Reliance Capital forays into life insurance - Does acquisition of AMP Sanmar Life Insurance
FY08 Reliance Money buys 15% stake in the yet-to-be launched Hong Kong Mercantile Exchange for an undisclosed amount.
FY08 Makes life high peak with stock crossing | 2600 levels
FY11 Reliance Commercial Finance launches loan against gold units
FY11 Reliance Capital signs deal with Nippon Life to sell 26% stake in life insurance
Jan-12 Nippon signs final agreements to acquire 26% stake in Reliance Capital Asset Management
FY12 Applies for banking licence with RBI
FY14 Failure to receive banking license wherein the RBI granted it to IDFC Ltd and Bandhan Financial services (a microfinance company)
Apr-14 Evinces interest in acquiring FTIL's stake in Multi Commodity Exchange (MCX)
Oct-15 Announces purchase of Goldman Sach AMC business in India
Oct-15 Announces further 9% stake sale in Reliance Capital AMC
Sep-16 Home Finance demerger announced and to be listed on exchanges, with reliance capital shareholders getting one share of housing finance for each share held
Application of Funds
Fixed Assets 5515.5 5747.5 5862.5 5979.7
Investments 25279.6 34478.9 34178.9 33778.9
Advances 30105.0 33341.0 36368.4 43484.6
Other current assets 6187.5 8641.8 12075.5 19841.7
Total 67087.6 82209.2 88485.2 103084.9
Source: Company, ICICIdirect.com Research
Strong Buy: >15%/20% for large caps/midcaps, respectively, with high conviction;
Buy: >10%/15% for large caps/midcaps, respectively;
Hold: Up to +/-10%;
Sell: -10% or more;
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