"We are in the advanced stages of negotiations with a number of consortia which have expressed great interest in this very valuable asset... When we hopefully conclude the Reliance Infratel transaction, it will be the largest private equity transaction in the history of this country," RCom chairman Ambani told the shareholders at the AGM
Mumbai: Reliance Communications (RCom) chairman Anil Ambani today 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, reports PTI.
Addressing the shareholders at the RCom AGM, Mr Ambani also said the promoters plan to raise their stake in the flagship company to 75% from the current 67.9%.
"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," Mr 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 Rs679 crore on a debt of around Rs32,000 crore. The company also hopes to maintain its debt at substantially lower levels, Mr 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.
Speaking to the shareholders at the company's AGM, Reliance Capital chairman Anil Ambani said the company is looking at unlocking value by divesting across its businesses and is in 'advanced stage' of talks to sell a stake in its asset management and mutual funds business to Nippon Life of Japan
Mumbai: Reliance Capital chairman Anil Ambani today said the company is looking at unlocking value by divesting across its businesses and is in 'advanced stage' of talks to sell a stake in its asset management and mutual funds business to Nippon Life of Japan, reports PTI.
Speaking to the shareholders at the company's AGM here, Mr Ambani also informed that Reliance Capital will explore all possible opportunities to enter the banking sector and announced that the banking entity of the group could be called 'Reliance Bank'.
The comments came in the backdrop of the company sitting on a huge debt of Rs18,483 crore as of June quarter.
In the quarter to June, its assets stood at Rs25,511 crore with a net profit of just Rs138.7 crore against Rs229 crore in the year-ago period and had net sales of Rs703.6 crore against Rs1,809 crore year-on-year.
The Reserve Bank of India (RBI) had come out with the draft guidelines for new bank licences last month in which it had said that the companies having a significant exposure to broking and real estate businesses would not be entertained.
Reliance Capital has a broking arm.
When asked by a shareholder about the banking foray, Mr Ambani said, "At an appropriate time when the RBI decides the actual process, we will pursue a banking licence."
Citing its recent divestment of 26% in Reliance Life Insurance to Japan's Nippon Life, Mr Ambani said, "This is an outstanding showcase of value creation and I am confident that we'll replicate that in each of our businesses as we move forward."
He said the company has recovered Rs3,000 crore capital it had invested in the life insurance business by selling 26% to the Japanese company.
Reliance Capital is also looking at expanding its asset management business to other emerging markets, expand its private equity and wealth management practices and looking at asset reconstruction company and bourses businesses.
Mr Ambani said, "We want to be among the top three in terms of market share, in terms of number of customers, in terms of profitability in whatever we do."
The company will be taking a conservative line in its debt profile, Mr Ambani said, adding that the Rs3,000 crore from Nippon expected in the next few weeks will be used to repay debt.
He also assured shareholders that he will be taking their requests of a special dividend and a bonus issue to the company board.
If SEBI’s new norms on investment advisors come into force, mutual fund sales will decline even further and mis-selling of insurance products will increase!
When UK Sinha took over as the chairman of the Securities and Exchange Board of India (SEBI), small distributors were elated. As the head of Unit Trust of India, he had after all felt the impact of a series of harebrained decisions by SEBI under the previous regime relating to mutual funds (such as abolishing upfront commissions abruptly). Small distributors hoped that Mr Sinha would reverse the previous decision or at least make sure that distributors are incentivised in some way. He stunned them by coming out with a more harebrained idea-a small charge to first-time investors. Polite criticism pointed out a simple flaw-how do you define "first-time"? It was no surprise that SEBI had not thought about it. It usually doesn't.
SEBI under Mr Sinha has now a gone a step further which would create major headwinds for the fund industry, especially after an 22nd August circular which asks mutual funds to implement a segregation between an agent and an advisor. SEBI now wants to regulate investment advisors and that too through the completely failed concept of Self Regulatory Organisations (SROs). No matter that its grievance redressal system is not exactly pro-investor, no matter that there is no surveillance worth talking about and market manipulation is rampant, no matter that its consent order system allows crooks to get away, investment advisor regulation seems to be a priority for Sinha.
SEBI has just released a concept paper, which lays down how an SRO would be formed to regulate investment advisors who will be registered under SEBI. The crux of the regulation is: "No financial incentives/consideration would be received from any person other than (an) investor seeking advice". What does this innocuous-sounding rule mean?
First, distributors simply cannot provide advisory services for a commission; they will have to sell for a fee. This means that if one wants to earn a commission and not a fee (since investors don't want to pay fees) he would have to identify himself as an 'agent'. Unfortunately, this means getting a letter signed from an investor that he is buying the product out of his own free will and that the agent has not done any due diligence. Few investors are willing to give such letters. No distributor is asking for it, either.
Second, the only mainline investment product that comes under SEBI is mutual funds. Issues related to other financial products will be dealt with the respective regulators. As such, there would be no single body regulating investment advisors. Is there mis-selling of mutual funds? Well, there has to be selling first! Mutual funds are struggling to add assets-SEBI's August 2009 decision has ensured that interest in mutual funds has totally waned.
In August 2009, SEBI had banned entry load for mutual fund investments. Investors were free to decide the upfront commission to be paid to the distributor/agent, based on factors like assessment of the service of the distributor. The effect has been disastrous. From the time of the ban till August 2011, there has been huge outflow of money. SEBI simply was out of touch with reality when it assumed that investors and distributors would negotiate for the service. Even the healthiest financial services don't sell by themselves. That's the lesson from all around the world. It takes a lot of hand-holding and convincing to get someone to invest in volatile products like mutual funds. Devoid of upfront commissions, the agents simply did not want to take the trouble to sell mutual funds after August 2009. Many distributors were happy to push insurance products, which earned them higher commissions.
Under the new proposal of SEBI, this would not change. This would get aggravated. While very few people would be interested in selling mutual funds for a fee, an "investment advisor" selling only insurance products does not come under the proposed Investment Advisor Regulations. Therefore why would an existing advisor pay for a certification to become an "Investment Advisor" when he is "better off" selling ULIPs (unit-linked insurance plans) as investment products?
The media is full of stories of mis-selling of insurance products. From those nearing their retirement to 80-year-olds have been sold retirement products where they would have to pay a substantial amount for annual payment across 10 years. Sadly, even if the proposal of SEBI comes into force, such cases would continue. Incidentally, the biggest mis-sellers are large banks and SEBI's regulation will not affect them one bit.
Of course, one could argue that the intermediaries would find a way to get around these rules. That is the subject of part two of this series.