SIPs may boost MF biz AUM by 15-20% in FY17: Reliance Capital

On Reliance Capital's plan to apply for a banking license through the Reserve Bank of India's (RBI's) new on-tap initiative, Ghosh says, they are keen to get a banking license but would prefer to wait till the final guidelines are out.Below is the verbatim transcript of Sam Ghosh's interview with Latha Venkatesh and Sonia Shenoy on CNBC-TV18.Latha: Which were the verticals that did best for you, looks like home finance was the best?A: All our verticals performed very well obviously asset management did a very good job. This year the profits are over Rs 500 crore, first time we have achieved that with Rs 1,58,000 of AUM.Our housing finance and our commercial finance both have performed well. Housing finance has shown exceptionally good results with AUM of about Rs 7,500 crore and profit of over Rs 137 crore. So increase of about 25 percent in terms of profitability.Our commercial finance also book size now has grown by significantly nearly Rs 17,500 crore and profits are at about Rs 310 crore and on our general insurance business, very good set of numbers and profit is at Rs 99 crore, up nearly 20 percent.All the business have shown great results for the auarter.Sonia: What kind of AUM growth do you forecast for FY17?A: Asset management business from Rs 1,58,000 crore we are expecting at least 15-20 percent growth because good thing is that systematic investment plans (SIP) are doing well, now we are performing very well and AUM from international operations has also grown significantly.Latha: Commercial finance -- what did you say was the profit growth there?A: The commercial finance was a flat profit this time for Rs 10-12 crore. There primarily SME business has done very well. Our loan against property business also has done very well. On the commercial vehicle side, they have been showing some stress so we have kept the books flat and we have been degrowing that book slowly. So I think that was the only place where we had a bit of a stress but that is industry related.Latha: That is the 3.1 percent gross non-performing assets (GNPA) largely?A: Correct.Latha: Can it get worst you think?A: If you look at SME, the GNPA is about 1.5, on the loan against property (LAP) it is about 1, on the commercial finance side it is about 3.5 but it has peaked.Latha: You came to 90 days?A: We were at 90 days throughout.Sonia: Your board has also approved the transfer of the commercial finance division into a separate subsidiary. Tell us more about that, any kind of value unlocking that you have planned?A: Yes, we decided that we should move commercial finance as a wholly owned subsidiary and then at some point if you find right partners obviously we can bring them in as a strategic partner but that will make Reliance Capital into core investment company which is like any other of the larger non-banking financial companies (NBFCs) and other finance companies which have created the same structure.Latha: You would be looking to list this subsidiary at any point?A: That we will see. First we look at bringing in a strategic partner and then at some point obviously if the company is growing at a very fast rate, then we will look at.Latha: On-tap banking license attracts you?A: Yes, it certainly does. We have to look at the draft guidelines for comment. We will give our comments to Reserve Bank of India (RBI) and give our feedback on it and let us see how the final guidelines come up and then we will decide our course forward. But certainly as Reliance Capital, we have always said we want to apply for banking license.Sonia: Can you tell us what is happening with the radio business? Are you looking to sell it to anyone at any point?A: We have made an announcement on that that we are looking to exit. We want to exit all our non-financial services.Sonia: By when would you complete that sell and who would it be?A: Our thinking is that in this financial year, certainly we would like to complete the transaction there. Also, we are bringing a partner in our general insurance company.Latha: Other long-term liabilities Rs 13,600 crore versus Rs 129 crore year ago, what is that?A: What has happened is, Reliance Life Insurance was an associate company up to this last financial year-end. When we did the transaction with Nippon Life, when Nippon Life went up to 95 percent, Reliance Capital at that point was 48 percent so we make sure that we went up to 51. So now Reliance Life is a subsidiary of Reliance Capital. By making it a subsidiary, we have to consolidate, the assets and liabilities of the life company, so this is a long-term liabilities of the life company at Rs 13,000 crore.Latha: So it is not comparing like-to-like?A: Yes, because if you look at it, we brought in capitals so with the raising of capital through the life and asset management stake sell, we have reduced that.Sonia: Finally then you spoke about 15-20 percent growth in your AUMs for FY17. What about the home finance business, how much could the AUM growth be there this year?A: On the home finance, our aim is to try and go at that at a fairly fast rate. It will be a fairly small housing finance company. Today our AUM is about Rs 7,500 crore. Our aim is to grow by 30-40 percent this year also and next few years. So that we can get to a sizeable level.Latha: Your AUMs in mutual fund business is definitely an extraordinary performance and as you say, profits also Rs 500 crore, would you now look for inorganic expansions now that it looks like domestic retail investment is picking up?A: If you look at it on the asset management business, the advantage is that we are open to strategic partners or bringing in partners, which are acquiring something which is the Goldman Sachs transaction whereby it is still not close but once it is close, it will become the largest exchange traded fund (ETF) player in the Indian market. So same way we are always open to seeing if there is some opportunity which will have to be a strategic fit to Reliance in the business in the business concern.