10 July 2014
The Idea Junction
Equity Shares (m)
M.Cap. (INR b)/(USD b)
52-Week Range (INR)
1,6,12 Rel. Perf. (%)
Core businesses gain traction
Monetization of non-core investments to improve profitability
Restructuring and cost rationalization implemented across businesses leading to sharp
improvement in core profitability.
Both life and non-life insurance businesses turned profitable and continue to witness
steady improvement across key parameters. Proposal to hike FDI limit in life insurance
to 49% from 26% to help unlock value.
Better macros and improving liquidity augur well for lending business. Expected
improvement in margins and steady asset quality to lead to RoE improvement.
Revival in equity market bodes well for capital market related business and monetization
of non-strategic investments.
Financials & Valuation (INR b)
EPS Gr. (%)
Div. Yield (%)
Life insurance (RLIFE) focus on profitable growth:
Shift in product mix, focus
on improving agents' productivity and cutting the flab, emphasis on high ticket
business, with a focus on Tier I locations not only led to rapid increase in
market share gains (6.6% in FY14 v/s 4.5% in FY13), but also better profitability
(NBAP margins rose to 23.8%, compared to 15.6% in FY12). With regulatory
headwinds behind, the insurance industry and Reliance Life Insurance (RLIFE)
will move to a higher growth trajectory over the next three years.
Lending business (RCF) steady growth and improving RoE:
Commercial Finance (RCF) has created a niche presence across high yielding
LAP and SME segments. Over FY10-14, RCF focused on self-employed
customers, asset-based lending and financing for productive asset creation,
which augurs well from asset quality perspective. Improving growth outlook
will reduce risk aversion and growth rates to be 20%+ CAGR over FY14-17E.
NIM to stay 5%+ due to focus on high yielding assets, higher proportion of
fixed rate loans and expectation of systemic decline in funding cost.
Revival in equity market bodes well for capital market related business:
Reliance Capital AMC (RCAM) is a dominant player in MF industry, with +12%
market share and is highly profitable. Despite a stagnant AUM over last three
years, RCAM managed to report PBT CAGR of +10%. With improving macro-
economic outlook and better capital market flow, we expect AUM CAGR of
18% over next three years. Better capital market also augurs well for non-
is a new offering from the Research team at Motilal Oswal. While our Coverage Universe
is a wide representation of investment opportunities in India, there are many emerging names in the
Mid Cap Universe that are not under coverage. Spotlight is an attempt to feature such mid cap stocks
by visiting such companies. We are not including these stocks under our active coverage at this point
in time. Motilal Oswal Research may or may not follow up on stocks under Spotlight.
Shareholding pattern (%)
Mar-14 Dec-13 Mar-13
Stock performance (1 year)
(Sunesh.Khanna@motilaloswal.com); +91 22 3982 5521
(Alpesh.Mehta@MotilalOswal.com); +91 22 3982 5415
Investors are advised to refer through disclosures made at the end of the Research Report.
AMBER: In transition