Reliance Bank and stake sale: RCap's big announcements

Reliance Anil Dhirubhai Group’s financial services arm Reliance Capital will explore all possible opportunities to enter the banking sector, Anil Ambani said today.

The banking entity of the group could be called Reliance Bank, Ambani told the shareholders of Reliance Capital.

Replying to shareholders’ queries on whether the company would consider the issue of bonus shares and a special dividend, Ambani said he would take these proposals to the board.

Speaking at the Annual General Meeting of the company here, Ambani, the Chairman of Reliance Capital, said growth has so far been achieved mostly through the organic route.

Hinting at the inorganic route for future growth, Ambani said: “Our strategy is now to unlock value from all our major businesses for the benefit of our 1.3 million shareholders.”

Earlier this year, Reliance Capital signed a deal with Japan’s Nippon Life for sale of a 26 percent stake in Reliance Life Insurance for over Rs 3,000 crore in the country’s largest-ever finance services sector FDI transaction.

Recently, Reliance Capital has also signed a Memorandum of Understanding with Nippon Life for evaluating collaboration opportunities - including a strategic partnership - across all Reliance Capital-promoted financial businesses.

Ambani said that the talks for a stake sale in its asset management business to Nippon were also in advanced stages.

In addition, the company would consider a stake sale in other businesses, like general insurance, as well.

Reiterating the group’s interest in setting up a bank, Ambani said that banking was a new growth opportunity and it would evaluate opportunities to enter this high growth sector.

It was keeping track of all regulatory developments on this front, he said, adding that significant under-penetration of financial products and services in India would continue to create immense opportunities for future growth.

The company also plans to take its asset management businesses to other emerging markets and would look at further expansion of its wealth management and private equity businesses, Ambani said.

“From a single business of nominal scale in 2005, we are pleased to have established multiple businesses across the entire spectrum of financial services,” Ambani said.

He said that Reliance Capital has become the country’s largest NBFC, with a net worth of nearly Rs 8,000 crore, more than 2 crore customers and 8,000 offices across the country with a staff strength of over 18,000 people.

“Despite being a late entrant, Reliance Capital has achieved leadership position in all its major businesses in a highly competitive business environment,” he said.

Ambani also said the company is in talks with many consortia to sell its telecom tower unit Reliance Infratel in what could be biggest ever private equity deal in the country.

Ambani said the promoters plan to raise their stake in the flagship company to 75 percent from the current 67.9 percent.

“We are in the advanced stages of negotiations with a number of consortia which have expressed great interest in this very valuable asset, and I am sure that we will be able to move forward expeditiously. When we hopefully conclude the Reliance Infratel transaction, it will be the largest private equity transaction in the history of this country,” Ambani told the shareholders at the AGM here.

Despite posting a loss, the company has declared a modest dividend. At present, it has an annual interest burden of over Rs 679 crore on a debt of around Rs 32,000 crore. The company also hopes to maintain its debt at substantially lower levels, Ambani added.

The development comes amid reports that private equity giants Blackstone and Carlyle Group have jointly expressed an interest to bid for Reliance Communications’ tower business.

At the AGM, the shareholders also approved issue of equity shares of RCom to qualified institutional buyers and raising of resources through issue of securities in the international markets.

Besides, the company also received the shareholders’ nod for appointment of J Ramachandran as a Director and adoption of full-year financial statements for 2010-11. The shareholders also approved appointment of a manager of the company and that of the auditors.

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