Expect profitability to improve ahead: Reliance Cap

Here is an excerpt from the interview.

If you look at our overall business, our turnover has gone up to about Rs 1700 crore. So we have about 17% growth. If you look at our profitability, that has gone up significantly with a 30% growth rate to Rs 45 crore. That's how our businesses have performed. Now, if you go business by business, our asset management business, its profits have remained slightly flat primarily because the AUMs, though they have grown to about Rs 80,000 crore  compared to last year's Q1, we had over one lakh crore of AUM.

Due to that reduction, profits have remained more or less flat. But, if you look at our life insurance business, profits have gone up nearly 140%. We also haven't as yet booked on the traditional portfolio. We haven’t booked a part of the  profits incurred last quarter and it amounts to above Rs 90 crore.

We know that there are additional profits available. In the commercial finance business we had 86% growth and it has been in terms of AUM, though we haven't grown that significantly primarily because of market conditions. However, profits have grown fairly significantly, to about Rs 66 crore, nearly 25-30% growth rate. The broking business has also shown about 25% growth rate and our general insurance business where we had a loss of about Rs 30 crore last year has come down to about Rs 20 crore loss.

If you look at all our busineses, in terms of profitability, they have shown a better result. Going forward, we obviously expect the profits to be higher. In our asset management  business, where we have a partnership with Nippon Life, the regulatory approvals have come and we expect that transaction to be closed by the end of August.

Therefore, we get about Rs 1450 crore in terms of cash coming into the business from there as security sale. And they valued the company at Rs 5600 crore and the money coming in will go towards reducing debt.

The general insurance business showed a loss of Rs 20 crore and that loss is due to the motor third party pool positioning that we have to do for this year and next year. So every quarter we are booking about Rs 20 crore.

Roughly, Rs 65-70 crore of postioning is required for the motor third party pool for this fiscal year. But, if you look at the business as a whole, the performance without this motor third party has shown a positive growth and we expect this growth to continue. We will start showing profits excluding the motor third party pool also.