With a view to tap all elements of the value chain, the Anil Ambani-led ADAG has formed a new company called Reliance Capital Services (RCS), aimed to distribute financial service products to the 170 million plus customers across the ADAG group. This can be likened with the business models followed by international giants like the General Electric group which created GE Capital to finance customers in its other businesses.
“We already have an existing relationship with over 170 million customers through our various group companies. We intend to leverage this relationship and offer specialised products to these set of customers through this new company, wherever possible” said Sam Ghosh, Group CEO, Reliance Capital. RCS will be a 100% subsidiary of Reliance Capital
Financial service distributors, who work on thin margins ranging from 5% to 10%, for non-insurance products have ‘customer acquisition’ as their main cost. With the access to such relationships, trade experts reckon that RCS would be on a strong footing.
Moreover, it will also aid the sales of the existing group companies. “We plan to compliment the marketing and distribution efforts of individual companies that are focused on selling their individual products. This initiative adds to their already aggressive growth momentum,” he added.
Considering the number stack, the Reliance ADA Group has over 50 million customers in its telecom venture, 20 million customers across financial services, over 30 million across Reliance Energy and 70 million customers across its entertainment businesses. Reliance Capital, the financial services arm of the group, itself, has over 20 million customers across its various financial services businesses.
The management indicates that RCS will initially focus on life insurance, general insurance and consumer finance products for group customers. Distribution costs are extremely lucrative in the insurance business as commissions are as high as 35% (first year for life insurance). Reliance Capital is one of the fastest growing insurance companies with a consumer loan book size of over Rs 7,000 crore across various retail finance products. The management adds that customer permissions will be taken before accessing them. Also, the huge pool of shareholders and employees will also be tapped.
The company would initially start with a headcount of 200 people that will be scaled up, as RCS will have a pan India footprint.
The ADA group has had a strategic intent to capture all aspects of the value chain in a business enterprise and this can be seen from the fact that it has also formed Reliance HR Services, a human resources company that plans to recruit half a million people for the group in the next four years. Recruitment costs are estimated to be around 20% of the employee’s first annual salary, reckon experts. With the high attrition witnessed across industries, recruitment cost savings can be enormous.
