Reliance Capital net profit falls 57% in fiscal 2010 as costs rise

Reliance Capital net profit falls 57% in fiscal 2010 as costs rise
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First Published: Sun, May 02 2010. 10 35 PM IST

Graphic: Naveen Kumar Saini/Mint
Graphic: Naveen Kumar Saini/Mint
Updated: Sun, May 02 2010. 10 35 PM IST
Mumbai: The financial services arm of the Reliance-Anil Dhirubhai Ambani Group (R-Adag), Reliance Capital Ltd, posted a 57% decline in net profit for fiscal 2010 as earnings from investment dropped and costs increased.
Net profit in the year ended March was Rs435 crore, compared with Rs1,015.7 crore in the previous year, said Reliance Capital, which has insurance, mutual fund, brokerage, consumer finance and private equity businesses.
Revenue rose 3% to Rs6,141 crore in the fiscal from Rs5,939.58 crore a year ago. Revenue was propped by an eightfold increase in so-called other income—or earnings from sources other than its main business—to Rs215.54 crore from Rs27.41 crore. Costs increased 20% to Rs4,219.88 crore from Rs3,515.33 crore.
Graphic: Naveen Kumar Saini/Mint
For the fourth quarter alone, net profit worked out to Rs65 crore, or a near 80% decline from a year ago. The company, which published its results on Saturday, didn’t release fourth quarter numbers separately, and the three-month profit was calculated by deducting its earnings for the first three quarters from the full-year figure.
A Reliance Capital spokesperson declined immediate comment on the results.
Without giving specifics in its statement, Reliance Capital said that it had booked lower capital gains in the year. It said “thrust on increasing contribution from operating businesses towards profitability” would be a key area for the company.
A Mumbai-based sector analyst with a domestic brokerage who didn’t want to be named said the results were “certainly not great”.
Investment income dropped to Rs342.56 crore in the year from Rs1,037.51 crore a year earlier.
“Their general insurance losses have nearly doubled and they have posted a loss figure in the ‘others’ category too. The asset management and consumer finance numbers are encouraging, though,” the analyst said.
Reliance Capital has for five quarters in a row reported a decline in profit from the year-ago period.
Its unit, Reliance Life Insurance Co. Ltd, the only one in its sector without an overseas stakeholder yet, is expected to sell a 26% stake to the Zurich-based reinsurer Swiss Reinsurance Co. Ltd, Mint reported in late March. Reliance General Insurance Co. Ltd is also in talks for a deal with British firm RSA Insurance Group Plc.
Sundaram Finance Group, RSA’s partner in Royal Sundaram Alliance Insurance Co. Ltd, could exit the venturer and be replaced by the Reliance firm, which could then hold the 74% stake, Mint has reported. RSA will continue to hold 26%—the highest stakeholding currently allowed to an overseas investor in insurance by Indian regulations.
Reliance Capital has also shown interest in securing a banking licence after the Indian finance minister announced in this year’s Budget that the Reserve Bank of India would formulate guidelines for giving out new bank licences.
As on 31 March, Reliance Capital’s net worth stood at Rs7,712.5 crore, placing it among the top three in the pecking order of the private sector financial service groups in India.
bhuma.s@livemint.com
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First Published: Sun, May 02 2010. 10 35 PM IST