Reliance Capital (RCFT) has delivered better-than-expected results, mainly due to higher-than-expected gains in the proprietary investment book.
Total Income/Revenue declined by 5.4% y-o-y, PBT by 25.1% y-o-y and PAT by 14.7% y-o-y.
We had expected revenue from investment book at Rs2,700 million v/s the actual reported at Rs3,875 million. Much of the gap between our estimates and actual at the PBT and PAT is accounted by this difference.
RCFT’s NBP grew by 28% y-o-y in FY09 compared to -5% decline for the industry. Its market share also increased from 8.1% in FY08 to 10.3% in FY09. At about 20.9%, Reliance Life’s NBAP margin is also one of the best in the industry.
The company’s APE grew by 24% y-o-y in Q4FY09 and 56% y-o-y in FY09. Overall, Reliance Life remains a strong performer even in these challenging market conditions.
General Insurance has been growing in fits and starts for the industry and for RCFT. For FY09, General Insurance grew by 3.1% in FY09 and just 0.7% y-o-y in Q4FY09.
However, the company’s performance on the Combined Ratio has been improving. Its Combined Ratio stood at 121% in Q4FY09 compared to 138% in Q4FY08. For FY09, the same was 114%. The company aims to take it close to 105-110% in FY10.
As expected, the Consumer Finance business remains subdued. From a peak of Rs95 billion in Q2FY09, the loan book has been brought down to Rs86 billion in Q4FY09. Personal Loans are 12% of the book and GNPA’s about 1%.
We expect that with the easing of credit conditions, RCFT will again start building the book in FY10. We have assumed a growth of about 15% in the loan book in FY10.
We expect most of the business segments to report incrementally better performance in the quarters ahead.
Broking, Asset Management and Life Insurance should do particularly well. We maintain ACCUMULATE rating on the stock.