Reliance Capital

man4urheart

Well-known member
#3
This business is under pressure lately, because of market conditions and economic outlook.

This also has been one of punter stocks of Reliance, I am watching it since last year!

Earlier I was comfortable buying it 1220, but now i would like to wait till NIFTY hits 4400 or 4200.

Don't hurry. There will be a lot of time to buy in coming days!...I suggest sit tight in Cash watching for correct NIFTY levels first!
 

Alchemist

Administrator
Staff member
#4
I have purchased 50 shares of Reliance capital at 1500 price. Is there any hope of coming back? Why it is deteriorating that much?
The stock's valuations had become absurd during the bull-run.

In January 2008, the stock had made a high of 2924.

FY 2008 consolidated eps for the stock has been Rs 41.

At 2924, the stock was trading at 71 times its eps.

At the current price of Rs 1118, the stock is available at 27 times FY 2008 earnings.

This is fairly valued - neither cheap nor expensive. (The company is growing fast and thus will get some premium valuation).

However, if markets correct further, Reliance Capital will also go down.

Reliance Capital's asset management and stock broking businesses depend a lot of overall market conditions. A bearish/consolidation phase in the markets, will mean a growth slowdown for Reliance Capital.

Its consumer finance business will also get impacted in this inflationary period.

Even at current prices, I am not comfortable giving a buy call for this stock.

I suggest investors wait for a price around Rs 900.
 
#7
Reliance Capital Limited certain spike in volumes..

Why there is certain spike in volumes in reliance capital..that too in dull market..Any news on it..or just manipulative move is these?? :hmpf:
 

man4urheart

Well-known member
#9
Gentleman any thoughts about this stock. Do you think it is a good buy fundamentally with CMP of 700/-

Alchemist you gave a value buy call at 900 before what are your thoughts for now?
 
#10
I am interested in this stock from a long term perspective.

I will definitely purchase this stock as the business can see sharp growth in the coming years.

What do the charts suggest? man4urheart, please reply?
 

man4urheart

Well-known member
#11


Well here is full picture.

There are 2 bullish counts effective and both as of now point to Target of 1500, where wave iii/c will be 161% of wave i/a

600 should be a hard stop for my count.

It has poor margins in
2010
GPM = 18%
NPM = 14%

Compare with 2006
GPM = 88%
NPM = 82%

Not a competitive business to own.

I will prefer a bank like AXIS bank or HDFC bank or Yes bank at fair prices rather than investing in this company!
 
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Alchemist

Administrator
Staff member
#12
It has poor margins in
2010
GPM = 18%
NPM = 14%

Compare with 2006
GPM = 88%
NPM = 82%

Not a competitive business to own.

I will prefer a bank like AXIS bank or HDFC bank or Yes bank at fair prices rather than investing in this company!
The banks that you have mentioned have similar profit margins too.

Axis Bank - NPM for FY 2010: 16.10%
HDFC Bank - NPM for FY 2010: 11.35%.
Yes Bank - NPM for FY 2010: 16.30%.

For a finance company, a 14% NPM is normal.

Anyway, Reliance Capital is a diversified financial company and offers various financial products and services. I think there is no comparable listed company.

If one looks at the earnings, valuations are very expensive.
 

man4urheart

Well-known member
#13
Agreed but they offer consistent earnings for past 10 years, where as you see the variated earning of reliance capital.

Especially Axis bank is dark horse.

If you see they have made Advances of 104343 crores but at same time have maintained 180586 crores of cash and investments with bank. Which shows prudence in giving loans.

They have 24% as Operating expenses Vs 43% on Interest Expenses, lowest in peers along with HDFC bank.

Same is reflected in fireworks they are doing in Market and getting along with Sensex.
 
#14
The margins are lower because their businesses depend on retail participation. Currently, the retail participation is very low. If the retail participation picks up, their margins will increase.

My guesstimate is that they won't be able to reach the margins they got in 2006, but they will be able to substantially improve their margins. So, if one has to buy this stock, one has to assume that retail participation will surely come back to the markets in the coming years.
 
#15
Can someone comment on this?

The current market cap is less than 14000 crores.

The Nippon deal values the insurance business itself at 11000 crore. Do we see some value here?
 

Alchemist

Administrator
Staff member
#16
Can someone comment on this?

The current market cap is less than 14000 crores.

The Nippon deal values the insurance business itself at 11000 crore. Do we see some value here?
As of now, I do not have a view on Reliance Capital. I will have to look at the financial statements in detail before I can comment further.

Some points that I would like to add:

There is value in Reliance Capital if one looks at it from an assets perspective, but

1. Reliance Capital is unlikely to sell-off its insurance business.

2. Also, many experts feel that Nippon has overpaid for the insurance business.

“Though it’s not fair to comment on the valuation as Reliance Life is a not a listed entity, we believe the valuation is a little inflated,” said Bhishma Maheswari, an official at Edelweiss Insurance Broker.
Nippon to buy 26% stake in Reliance Life

Thus, we should also look at the profitability of the Reliance Capital too for valuing the stock.

e.g. On consolidated basis, Reliance Capital has generated an eps of only Rs 11.50 in the first 9 months of FY 2011.

Reliance Capital, like other ADAG stocks, has assets on paper, but these assets aren't generating proportionate profits.

That along with corporate governance deficit are the two primary reasons why all ADAG stocks have been beaten down so badly in the last few months.

Investors now want to see profits and cash flows, but those are still missing.

--------------------------------------

Insurance businesses report losses in their first few years and thus even if I had the financial statements of subsidiaries of Reliance Capital, I am not sure if I can properly value Reliance Capital.
 

Alchemist

Administrator
Staff member
#18
What is the short term (5 days ) target for Reliance Capital, 501?
Reliance Capital has major resistance in the 470-485 range.

If the stock can close above the 470-485 range, it will be a bullish signal.

There is an ascending triangle pattern on the chart. If the stock breaks out of this patten on the upside, it will go much higher.

Do you have any position in this stock?

 

Alchemist

Administrator
Staff member
#20
Yes, I purchased at 478.
You have bought the stock in last 2 or 3 days?

This is a short-term trade for you or a medium-term trade?

The stock has has run up from 375 to 475 in last 3 weeks and looks over-bought.

If a correction comes now, it will be a deep correction.

If you keep a stop-loss too close to current price, it may happen that you get stopped out and the stock starts rallying again.
 
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