)
Reliance Commercial Finance – the lending business – reported a profit before tax of Rs 105 crore, 24 per cent higher than the same period of the previous year while Reliance Capital Asset Management, which undertakes the mutual fund business, among others, reported profit before tax of Rs 84 crore, higher by 45 per cent.
“Two businesses have outperformed, which are commercial finance and asset management. 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,” said Sam Ghosh, chief executive officer, Reliance Capital.
In mortgages, the company has penetrated to Tier-II and Tier-III centres and brought down the ticket size too, as it is disbursing loans worth Rs 5 lakh to Rs 10 lakh.
Earlier, the company was only 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.
As the result, the average ticket size has come down to Rs 28 lakh, as compared to Rs 40 lakh earlier.
The outstanding size of the home loan book stood at Rs 3,000 crore. Apart from home loan, Reliance Commercial Finance also extends loans to small and medium enterprises, commercial vehicles and the infrastructure sector. The gross NPA of the commercial finance business, however, increased to 2.4 per cent as on December- end as compared to 1.9 per cent a year ago.
On the asset management side, shifting focus to retail debt rather than liquid mutual funds has helped RCap to post higher earnings.
However, on the insurance business, both life and non-life reported lower net profit.
The life insurance company posted a net profit of Rs 27 crore during the third quarter as compared to 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.
On the general insurance business, 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.
Reliance General Insurance, which was scouting for a foreign partner to pick up a stake in the company, is yet to finanlise the process. Ghosh said the process is on hold now due to upcoming general elections, as foreign investors are in a wait-and-watch mode and would only review their investment plans in India after clarity emerges on the political front.
According to present norms, foreign direct investment for the insurance sector is capped at 26 per cent. While foreign investors would draw more comfort if they are allowed to pick up 49 per cent in domestic insurance companies, the amendment to the Insurance Bill is yet to be tabled in Parliament.
