Reliance Capital reports 17.3% EBITDA growth in 2016 and 12.0% Revenue growth

06-05-2016 • About Reliance Capital ($RELCAPITAL) • By InTwits

Reliance Capital reported FY2016 financial results today. Overall the company's long term financial model is characterised by the following facts:

Reliance Capital is a growth stock: FY2016 revenue growth was 12.0%, 5 year revenue CAGR was 12.5% at FY2016 ROIC 4.1%
Reliance Capital has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.6%. At the same time it's in pair with industry average of 1.9%
CAPEX is quite volatile: ₹1,610m in FY2016, ₹920m in FY2015, ₹1,890m in FY2014, ₹550m in FY2013, ₹1,300m in FY2012
The company has potentially unprofitable business model: ROIC is 4.1%
It operates with high leverage: Net Debt/EBITDA is 5.3x while industry average is 2.9x

Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.

Revenue and profitability

The company's Revenue jumped on 12.0%. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 2.1 pp from 44.1% to 46.2% in FY2016. EBITDA Margin stuck to a growing trend at 0.85 pp per annum in the last 5 years.

Net Income margin showed almost no change in FY2016.

Investments (CAPEX, working capital and M&A)

The company's CAPEX/Revenue was 1.6% in FY2016. Reliance Capital's CAPEX/Revenue increased slightly on 0.88 pp from 0.73% in FY2013 to 1.6% in FY2016. Average CAPEX/Revenue for the last three years was 1.7%.

Return on investment

The company operates at low ROIC (4.1%) and ROE (8.0%). ROIC increased slightly on 1.0 pp from 3.1% to 4.1% in FY2016. ROE showed almost no change in FY2016. ROIC followed a growing trend at 0.54 pp per annum in FY2012-FY2016. ROE grew at 0.76 pp per annum in FY2012-FY2016.

Leverage (Debt)

Company's Net Debt / EBITDA is 5.3x and Debt / EBITDA is 6.1x. Net Debt / EBITDA dropped on 0.9x from 6.2x to 5.3x in FY2016. Debt increased on 7.3% while cash surged on 105%.

Reliance Capital has short term refinancing risk: cash is only 33.4% of short term debt.

Management team

Soumen Ghosh "Sam" is a Reliance Capital's CEO. Soumen Ghosh "Sam" has spent 5 years with the company.

Financial and operational results

Reliance Capital ($RELCAPITAL) key annual financial indicators

mln. INR	2012	2013	2014	2015	2016	2016/2015
P&L
Revenue	66,270	75,190	75,440	89,290	99,980	12.0%
EBITDA	28,230	32,290	34,090	39,410	46,230	17.3%
Net Income	4,580	8,120	7,470	10,010	11,010	10.0%
Balance Sheet
Cash	11,250	15,820	26,630	16,240	33,350	105.4%
Short Term Debt	76,640	88,240	113,990	94,420	99,780	5.7%
Long Term Debt	119,260	136,860	141,780	166,970	180,570	8.1%
Cash flow
Capex	1,300	550	1,890	920	1,610	75.0%
Ratios
Revenue growth	19.7%	13.5%	0.3%	18.4%	12.0%
EBITDA growth	56.5%	14.4%	5.6%	15.6%	17.3%

EBITDA Margin	42.6%	42.9%	45.2%	44.1%	46.2%	2.1%
Net Income Margin	6.9%	10.8%	9.9%	11.2%	11.0%	-0.2%
CAPEX, % of revenue	2.0%	0.7%	2.5%	1.0%	1.6%	0.6%

ROIC	1.7%	2.5%	2.3%	3.1%	4.1%	1.0%
ROE	4.7%	6.8%	6.1%	7.8%	8.0%	0.2%
Net Debt/EBITDA	6.5x	6.5x	6.7x	6.2x	5.3x	-0.9x

Peers in Finance (including NBFCs)

Below you can find Reliance Capital benchmarking vs. other companies in Finance (including NBFCs) industry. It's shown for the period of 5 years for the key financial metrics. Each table has median value for all the companies in the industry together with individual financial data of the top-5 companies in the industry by particular financial metric.

Top companies by Revenue growth, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Fortune Financial Services (India) ($FORTUNEF)	-11.7%	-24.9%	-7.1%	188.4%	-
Motilal Oswal Financial Services ($MOTILALOFS)	-	0.4%	-0.9%	64.7%	39.8%
Sks Microfinance ($SKSMICRO)	-	-25.6%	55.0%	47.3%	64.5%
Bajaj Holdings & Investment ($BAJAJHLDNG)	-	12.8%	25.9%	27.0%	-12.2%
Bajaj Finserv ($BAJAJFINSV)	59.7%	28.1%	18.8%	26.8%	-
Median (23 companies)	23.4%	27.4%	20.8%	13.3%	12.4%
Reliance Capital ($RELCAPITAL)	-	13.5%	0.3%	18.4%	12.0%

Top companies by EBITDA margin, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Microse India ($MICROSE)	-	-	-	101.1%	-
Pnb Gilts ($PNBGILTS)	94.0%	96.4%	96.4%	96.1%	-
Jsw Holdings ($JSWHL)	-	-	-	93.8%	-
Rural Electrification Corporation ($RECLTD)	97.2%	97.3%	96.7%	93.3%	-
Bajaj Holdings & Investment ($BAJAJHLDNG)	96.1%	95.4%	92.3%	92.7%	91.4%
Median (48 companies)	70.0%	67.8%	66.4%	56.6%	66.8%
Reliance Capital ($RELCAPITAL)	42.6%	42.9%	45.2%	44.1%	46.2%

Top companies by CAPEX/Revenue, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Fortune Financial Services (India) ($FORTUNEF)	1.0%	1.3%	4.5%	7.3%	-
Clarus Finance & Securities ($CLARUS)	-	-	6.9%	5.8%	-
Srei Infrastructure Finance ($SREINFRA)	30.2%	8.5%	12.3%	5.4%	-
Motilal Oswal Financial Services ($MOTILALOFS)	15.5%	5.3%	1.7%	3.4%	2.5%
Bengal & Assam Company ($BENGALASM)	15.9%	4.5%	1.2%	2.1%	-
Median (21 companies)	0.6%	0.7%	0.9%	0.7%	1.0%
Reliance Capital ($RELCAPITAL)	2.0%	0.7%	2.5%	1.0%	1.6%

Top companies by ROIC, %


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Motilal Oswal Financial Services ($MOTILALOFS)	-	12.0%	9.7%	11.9%	7.8%
Sks Microfinance ($SKSMICRO)	-	-	4.1%	6.6%	7.6%
Shriram City Union Finance ($SHRIRAMCIT)	6.1%	5.8%	5.8%	5.7%	4.6%
Rural Electrification Corporation ($RECLTD)	-	4.7%	5.2%	4.7%	-
Mahindra & Mahindra Financial Services ($M&MFIN)	6.4%	6.3%	5.3%	4.2%	3.2%
Median (52 companies)	4.6%	4.7%	4.2%	4.2%	4.3%
Reliance Capital ($RELCAPITAL)	1.7%	2.5%	2.3%	3.1%	4.1%

Top companies by Net Debt / EBITDA


Top 5	FY2012	FY2013	FY2014	FY2015	FY2016
Fortune Financial Services (India) ($FORTUNEF)	9.0x	-	10.8x	8.9x	-
Pnb Gilts ($PNBGILTS)	14.2x	11.2x	11.3x	8.8x	-
Srei Infrastructure Finance ($SREINFRA)	7.0x	6.2x	7.5x	8.0x	-
Rural Electrification Corporation ($RECLTD)	8.3x	8.0x	7.5x	8.0x	-
Magma Fincorp ($MAGMA)	7.7x	8.5x	7.0x	7.7x	-
Median (44 companies)	4.4x	3.6x	2.9x	0.0x	5.3x
Reliance Capital ($RELCAPITAL)	6.5x	6.5x	6.7x	6.2x	5.3x

Reliance Capital stock price chart

Reliance Capital financials

mln.	FY2010	FY2011	FY2012

Revenue	61,336	55,360	66,270
EBITDA	20,062	18,040	28,230
Net income	4,345	2,910	4,580
CAPEX	429.9	990.0	1,300
Debt	145,193	203,740	195,900
Cash	8,628	16,340	11,250

About Reliance Capital

Reliance Capital Limited provides various financial services in India. It operates through Finance & Investment, Asset Management, General Insurance, Commercial Finance, and Others segments. The company provides asset management services, including mutual funds, offshore funds, pension funds, and portfolio management services; life insurance products comprising protection, retirement, and investment plans for individuals and groups; and general insurance products, such as health, home, motor, travel, fire, engineering, marine, liability, and aviation insurance products for the corporate and individual customers. It also offers commercial finance services consisting of mortgages loans, loans against property, loans for vehicles, loans for construction equipment, SME loans, business loans, and infrastructure financing. In addition, the company provides retail broking services, such as access to equities, equity options and commodities futures, wealth management, wealth management services, mutual funds, initial public offers, and investment banking services; and distributes third party products, such as life and general insurance products, money transfer, currency exchange, loans, and gold coins, as well as premium products. Further, it is engaged in proprietary investments, institutional broking, and asset reconstruction businesses. The company was formerly known as Reliance Capital & Finance Trust Limited and changed its name to Reliance Capital Limited in January 1995. Reliance Capital Limited was incorporated in 1986 and is based in Mumbai, India. Reliance Capital Limited operates as a subsidiary of Reliance - ADA Group Limited.