Reliance Capital Ltd: Buy
CMP: Rs.10.25
Target: Rs.17/19
Company Overview:
Reliance Capital Ltd (RCL) is one of India`s leading
and amongst most valuable financial services companies in the private sector.
RCL in the initial years engaged in steady annuity yielding businesses such as leasing, bill discounting, and inter-corporate deposits.
RCL in the initial years engaged in steady annuity yielding businesses such as leasing, bill discounting, and inter-corporate deposits.
Later thhe company diversified their business in the areas of portfolio investment, lending against securities, custodial services, money market operations, project finance advisory services, and investment banking.
Presently the company is engaged in businesses like asset management, mutual funds, life and general insurance, private equity and proprietary investments, stock broking, depository services, distribution of financial products, consumer finance and other activities in the financial services space.
The company operates through the following divisions Reliance Mutual Fund, Reliance Life Insurance Company Limited, Reliance Commercial Finance, Reliance Securities & Reliance Money.
The company operates through the following divisions Reliance Mutual Fund, Reliance Life Insurance Company Limited, Reliance Commercial Finance, Reliance Securities & Reliance Money.
Oher businesses of the company includes - Reliance Spot Exchange, Quant Capital, Reliance Equity Advisors, Reliance Asset Reconstruction Company & Reliance Venture Asset Management (Source: Moneycontrol.com).
Triggers:
#The current market cap of the company is only
Rs.260.29 crore against H1FY20 earning of Rs.811 crore.
#The Book value of the shares of Reliance Capital is Rs. 350.63 against the CMP of Rs.10.25.
#Anil Ambani, recently vowed to do more, to streamline the group’s overall operations, including exiting the lending business under Reliance Capital and repaying another ₹15,000 crore of the group’s debt by March 2020.
#The two lending businesses — Reliance Commercial Finance (RCF) and Reliance Home Finance (RHF) — have an asset base of over ₹25,000 crore.
#Anil Ambani further said: The Reliance Group has repaid over ₹35,000 crore in the 14 months till May 2019 and will be paying another ₹15,000 crore till March 2020, aggregating to over ₹50,000 crore through monetisation and cash flows to lenders.
#Anil Ambani controlled ADA Group has over ₹60,000 crore receivables stuck in regulatory and arbitration matters; which are pending since as much as 5 - 10 years.
This is almost twice the group's debt ($5 billion) as of September, 2019.
#The entire Reliance Nippon Life Asset Management (RNAM). stake monetisation proceeds of around Rs.6,000 crore to be received through stake sale via offer for sale and transaction with Nippon Life Insurance of Japan will be utilised to reduce Reliance Capital’s outstanding debt.
Based on the above facts, and other asset monetisation deals currently underway, Reliance Capital hopes to reduce debt by at least Rs.12,000 crore (US$ 1.7 billion), or 70%, in the current fiscal.
#As of March 2018, the Reliance Group companies had a total debt of over Rs.1.7 lakh crore which reduced to Rs.93,900 crore in July 2019, excluding Reliance Communications, after the sale of major assets and businesses. Therefore, the things have started to look more brighter for the ADA Group.
#In December, 201, there were media reports that a UK High Court dismissed an application for summary judgment by Chinese banks for a $680 million claim against Anil Ambani. The court, however, has asked Ambani's legal team to submit further evidence in his defence and prove that the claim by Chinese lenders holds no merit.
#Global distressed asset buyers are picking up Reliance Capital’s junkrated debt securities following an assurance by its home finance unit that 98% of retail debenture holders will get their money back, dealers said. Reliance Capital bonds worth ₹565 crore changed hands in the secondary market in seven transactions.
Triggers:
#The current market cap of the company is only
#The Book value of the shares of Reliance Capital is Rs. 350.63 against the CMP of Rs.10.25.
#Anil Ambani, recently vowed to do more, to streamline the group’s overall operations, including exiting the lending business under Reliance Capital and repaying another ₹15,000 crore of the group’s debt by March 2020.
#The two lending businesses — Reliance Commercial Finance (RCF) and Reliance Home Finance (RHF) — have an asset base of over ₹25,000 crore.
#Anil Ambani further said: The Reliance Group has repaid over ₹35,000 crore in the 14 months till May 2019 and will be paying another ₹15,000 crore till March 2020, aggregating to over ₹50,000 crore through monetisation and cash flows to lenders.
#Anil Ambani controlled ADA Group has over ₹60,000 crore receivables stuck in regulatory and arbitration matters; which are pending since as much as 5 - 10 years.
This is almost twice the group's debt ($5 billion) as of September, 2019.
#The entire Reliance Nippon Life Asset Management (RNAM). stake monetisation proceeds of around Rs.6,000 crore to be received through stake sale via offer for sale and transaction with Nippon Life Insurance of Japan will be utilised to reduce Reliance Capital’s outstanding debt.
Based on the above facts, and other asset monetisation deals currently underway, Reliance Capital hopes to reduce debt by at least Rs.12,000 crore (US$ 1.7 billion), or 70%, in the current fiscal.
#As of March 2018, the Reliance Group companies had a total debt of over Rs.1.7 lakh crore which reduced to Rs.93,900 crore in July 2019, excluding Reliance Communications, after the sale of major assets and businesses. Therefore, the things have started to look more brighter for the ADA Group.
#In December, 201, there were media reports that a UK High Court dismissed an application for summary judgment by Chinese banks for a $680 million claim against Anil Ambani. The court, however, has asked Ambani's legal team to submit further evidence in his defence and prove that the claim by Chinese lenders holds no merit.
#Global distressed asset buyers are picking up Reliance Capital’s junkrated debt securities following an assurance by its home finance unit that 98% of retail debenture holders will get their money back, dealers said. Reliance Capital bonds worth ₹565 crore changed hands in the secondary market in seven transactions.
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