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Reliance Cap looks at investment banking, mulls insurance IPO

22 Jul 2009 Evaluate

Reliance Capital Ltd (R-Cap) yesterday made a series of announcements for his financial services firm, among them a possible initial public offering (IPO) for the life insurance division and an increased thrust in its newer businesses of merchant banking, private equity and institutional brokerage. If the IPO comes through, it will be the first in the country for an insurance company. R-Cap, through a network of its subsidiaries, has interests in mutual funds, retail broking, consumer finance, and life and general insurance.

 

R-Cap’s intends to become a full-service financial services company. However, the institutional broking and merchant banking segments are pretty crowded and may not form a significant portion of the revenues initially. Its life insurance business is a potential gold mine for investors, The company is considering various options to unlock this value—from a potential IPO to a financial stake sale or even a combination of both. A final call on the equity dilution will be taken shortly. Up to 26% stake could be divested in the insurance subsidiary.

 

The life insurance business closed the year ended 31 March with new-business premium worth Rs 3,500 crore, an increase of 28% from the previous year. Domestic fund-raising for the first private equity fund of Reliance Equity Advisors Ltd, with special focus on high net-worth individuals and financial institutions, has started operations. The fund wants to mop up Rs 2,000 crore. The money will be invested in buyouts, minority investment as well as acquisition financing of companies across media, retailing, clinical research, healthcare and logistics.

 

The company is also looking to enter the institutional broking business through its wholly owned subsidiary Reliance Equities International Pvt. Ltd that started operating in 2008 and has set up at least 50 accounts with foreign institutional investors and around 500 sub-accounts. The only business segment R-Cap does not have a presence in is banking. However, the group is looking towards owning a bank as soon as the country’s regulations allow private entities to do so.crackcrack

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