We maintain ?buy? on Reliance Capital with a target price of R514 as we take cognizance of the inherent value in its life insurance and asset management businesses, coupled with a scale-up in consumer financing and stability in general insurance.
RCap?s PAT came in at R156 crore against our estimate of R220 crore. Earnings of core businesses surpassed estimates with overall improvement in operating metrics. What led to lower consolidated PAT has been provisioning of R69 crore (commercial finance and proprietary lending) and investment depreciation of R43 crore, leading to a R135-crore loss in investment/finance segment.
Life insurance earnings came in lower than the run-rate due to increased investment-related expenditure.
The company?s earnings have been volatile over the past few quarters due to stake sale and consolidation of group entities. Q4FY13 was no exception, as besides merger, there was write-down in investment portfolio as well.
After being in the consolidation phase, the company?s core businesses such as asset management, commercial financing and life insurance have improved a tad. Third-party motor claim reserves in general insurance are anticipated at R65 crore for FY14 (compared to R130 crore in FY13).
