Reliance Cap to list housing finance arm

Reliance Home Fin seeks to build a Rs 50,000 cr loan book, says RCL's Anmol A Ambani; Reliance Cap shareholders to get 49% stake

The Anil Ambani-controlled Reliance Capital (RCap) will independently list its subsidiary Reliance Home Finance (RHF) on the stock exchanges. The housing finance arm aims to increase its book size to Rs 50,000 crore over the next few years.

RCap will issue 49 per cent stake in the home loan company to about one million RCap shareholders. These shares will be allotted in the ratio of one share free of cost in RHF for every one share held in RCap.

Nidhesh Jain, financial analyst, Investec Capital, said, “Currently the housing finance business is housed under commercial finance business. Right now, analysts are not assigning any value to the housing finance business.

Analysts are valuing the commercial finance business, not housing finance. Currently most HFCs (housing finance companies) are trading around four-five times FY18 estimated book value.” The net worth of Reliance’s home finance business is around Rs 500 crore. “If we apply a multiple of about four times, then the valuation of this entity will be around Rs 2,000 crore and 50 per cent will be given to the shareholders of Reliance Capital,” he said.

This development comes a day after RCap said its shareholders had approved the transfer of its commercial finance division into a separate subsidiary. The move was to provide flexibility to unlock value through stake sale.

The company reported assets under management of Rs 8,259 crore ($1.2 billion) during the quarter ended June 30, 2016. “There is presently an estimated shortage of 100 million residential units in India. To address the needs of this sector, Reliance Home Finance has charted an aggressive growth plan in this space, and aims to increase its book size to over Rs 50,000 crore in the next few years,” said Jai Anmol A Ambani, director, RCap.

The board of directors gave the nod for the proposal at its meeting on Tuesday. The proposal is subject to necessary shareholders’ and other approvals, the company said in a statement.

RCap will hold a 51 per cent stake in RHF. The company will be adequately capitalised to grow the lending book to over Rs 20,000 crore in the next 18 months.

RHF, a 100 per cent subsidiary of RCap, provides a wide range of loan solutions like home loan, loans against property, construction finance and affordable housing loans.