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Reliance Capital
Reliance Capital
Reliance Capital
Reliance Capital (RCAP), a non banking financial company, is the financial service arm of the
Anil Dhirubhai Ambani Group (ADAG) which has varied interests in areas like telecom,
energy, entertainment. Reliance Capital is one of India's leading and fastest growing private
sector financial services companies and ranks among the top 3 private sector financial services
and banking companies, in terms of net worth. Through the company’s subsidiaries, it offers
products and services like mutual fund, life insurance and general insurance. It has sizable
private equity and proprietary investments and is pursuing new ventures like stock broking,
consumer financing and the asset recovery business as well. Reliance Capital, initially focused
on the asset management business, has recently expanded its presence in life insurance,
general insurance space and ebroking business as well. Reliance Capital launched Reliance
Money, a retail broking and distributor of a range of financial service products. It has a
network of over 2,200 outlets (India’s largest retail network by a non banking financial
services company). Reliance Capital has 100% economic interest in all the business units.
Valuation Summary
SECTOR OVERVIEW
India’s recent economic growth has been led by the dynamism of its services sector
– particularly the high-end, knowledge-intensive services. Service sector has been
consistently growing at a faster pace than the economy since the liberalisation of the
economy took place in 1991. According to the economic survey of 2007, the
services sector contributes to nearly 55 per cent of India’s GDP.
India’s insurance sector, like its banking system, has an important role to play in
enhancing financial intermediation, creating liquidity and mobilising savings in the
economy. The opening of the life and non-life insurance sectors to foreign
investment in the year 2000 spurred increased activity by foreign investors. In spite
of the growing awareness of insurance products, the penetration of the Industry is
abysmally low at 2.5% as compared to the matured markets. This would augur well
for the growth of Insurance sector. In the life insurance sector, there are currently
15 private insurers plus the government-owned Life Insurance Corporation (LIC).
According to the Insurance Regulatory and Development Authority (IRDA), first
year (i.e. new business) premium income of the private insurers for 2006–07 was Rs
19, 500 Crs. In the space of just six years from FY 2002, private insurers have
secured a 26 per cent share in new business segment.
VALUATION
VALUATION
Valuation-NBAP Multiple
We believe that Reliance Life Insurance will be among the top players in this
segment by year 2008 due to its reach and the growth rates shown in the previous
years. Its reach will help to penetrate the under-penetrated markets. Due to its
focus on distribution and its rapid scaling-up plans we believe the FYPs should
grow by 150% in FY08 and in the subsequent year a growth rate of 85%. Single
Premiums should grow by 60% in FY08 and 50% in FY09.The NBAP multiple is
expected to increase from 22 to 25 in FY09.
LIFE INSURANCE