Commercial fin disbursements may grow at 15-17%: Reliance Cap

Reliance Capital's disbursements in its commercial finance business are expected to grow by 15-17 percent in the current fiscal, says Chief Executive Officer Sam Ghosh. Owing to Systematic Investment Plans (SIP), Reliance's mutual fund business witnessed a 15 percent rise in assets under management (AUM). The company reported 3 percent rise in profits for the first quarter of FY17 largely due to a one-time dividend payment to Reliance Nippon Life Insurance. Ghosh says the company plans to sell part of it's stake in the general insurance business within this fiscal.Below is the verbatim transcript of Sam Ghosh’s interview to Kevin Lee on CNBC-TV18. Q: Can you give us some highlights of the quarter's performance? A: If you look at overall, profits have gone up Rs 207 crore up three percent but if you exclude last year we had a dividend payment from our life insurance business which now which has been consolidated. So, if you take that dividend out actually our profits have gone up nearly 33 percent. So, all our business have performed well. In terms of topline also we have shown a Rs 3,700 crore in terms of topline income which means a growth of nearly 30 percent. So, topline growth has happened. If you look at business by business our commercial finance business, lending business, Reliance Commercial Finance assets under management (AUMs) are nearly Rs 17,000 crore now. So, it is up nearly over 15 percent and profits are also up nearly 30 percent over Rs 57 crore and in that business also our net interest margin (NIM) is now at about 6.8 percent which is one of the all time highs for us. If you look at our housing finance business, our housing finance AUMs are nearly Rs 8,300 crore, up nearly 30 percent. Profits are at about Rs 30 crore for that business and NIMs seem to be about 3.5-3.6 percent. Moving on to our asset management business, in asset management our profits are nearly Rs 122 crore, up over 15 percent and if you look at our total AUMs also - for mutual fund AUMs it is Rs 1,67,000 crore up 15 percent and total AUM which includes all our DPFO funding etc is nearly Rs 3 lakh crore. So, that business also is growing at a fairly good rate. Moving on to our insurance businesses in our life insurance business our total income is about Rs 650 crore. And renewal premium is about Rs 450 crore. So, new business premium is going up. Here we focus mainly at traditional products, 85 percent of the business is traditional. And in terms of our persistency that is also over 60 percent. So, that is growing at a fairly healthy rate. Moving onto our general insurance business in general insurance also we have shown a slight growth in our gross return premium. That has grown about 5-10 percent. However if you look in terms of profits, profits have grown over 23 percent and nearly Rs 36 crore. So, again shown a fairly healthy growth in profits. And we know that general insurance also gross return premium will start growing quite substantially. We will be above 10 percent growth rates from next quarter onwards. And broking and distribution finally, the smallest business of us that also in the past was showing losses, now it is at breakeven. So, now we expect to show profits going forward. Q: Speaking first about your commercial finance business, disbursements have grown over 10 percent. What is your guidance for this in FY17 and could you also highlight the non-performing assets (NPAs) separately for commercial and home finance? A: If you look at our commercial finance growth has been 17 percent we expect that for the whole year we will show about 15-17 percent in terms of disbursements and we have been doing that consistently in the past. In terms of NPA levels NPAs in commercial finance is at about 3.3 percent and primarily from commercial vehicle side. So, again we have been slowly reducing that book gradually and that will continue to go down. However the other books, the SME book and the LAP book has been at about 1-1.2 percent. So, it is fairly stable. In our housing finance our total NPA is about 1 percent. So, again we are happy with the situation there. And we obviously reported a 90 day basis. Q: Speaking about your housing finance now, can you give a breakup of AUM for housing finance, construction finance and LAP? A: If you look at in terms of housing finance about 57 percent is home loans. Construction finance is about 16-17 percent and the balance is loan against property. And we expect that we will continue keeping that sort of ratio because basically you have to obviously do over 50 percent home loans which includes construction finance and obviously LAP so that you can get good yields as well as to be able to continue growing your housing finance book. Q: Coming now to mutual funds, last quarter you had given a guidance of 15-20 percent where your AUMs are concerned for Reliance Mutual Funds, how much have Systematic Investment Plan (SIPs) helped you achieve that because you have hit 15 percent growth, how much have SIPs contributed? A: SIPs now are growing at about 20-25 percent primarily because we have about 1.4 million SIPs and STPs and we have been strong in the smaller term. So, if you go below top 15 series our average AUMs is the highest.