We could consider raising further capital in the near future: Sam Ghosh

Interview with CEO, Reliance Capital

Reliance Capital Chief Executive Officer Sam Ghosh says he is interested only in a universal banking licence and that the partnership with Sumitomo Mitsui Trust Bank will continue irrespective of whether the company gets a licence or not. The alliance, he says, will help Reliance Capital look at various businesses such as a real estate broking, a real estate investment trust and offering vendor financing and advisory services to the Japanese bank's clients in India. Edited excerpts from an interview with Neelasri Barman:

When is the deal expected to close?

It could take maximum of four weeks to close. We need to fulfil the regulatory guidelines on a preferential allotment notice for extraordinary general meeting. Apart from that, we need approvals from others, such as the Competition Commission of India.

Are you interested in a payment bank, small bank or a universal bank licence?

We are interested in applying for a universal bank licence and will wait. A universal bank fits in our existing clients’ portfolio, mainly small and medium enterprises (SMEs). Small and payment banks are mainly for companies having a large number of small-ticket retail clients. So it will not be a preferred option.

Why does the deal with Sumitomo have a one-year lock-in?

According to the guidelines, in a preferential allotment, there is a requirement of a minimum lock-in. In our case, both companies agreed to keep this period one year.

You have termed the deal strategic. Why so? Apart from the money, what else are you getting?

After the Narendra Modi government took charge, India and Japan have come together in a major way for trade. We have seen increased activities between  companies of the two countries and believe this momentum will gain pace. Sumitomo Mitsui has a large base of SME clients. We will be supporting their clients — looking at vendor financing and advisory services — in India. Besides, we get to support mergers and acquistion (M&A) activities for their clients who plan to come to India. We can help find their clients local partners. Sumitomo Mitsui is also a large player in real estate investment trusts (REIT) in Japan and with their partnership, even we can probably build a REIT. Over and above, they are into real estate broking, which will help us to venture into such avenues.

In case you do not get a banking licence, are there chances the partner might exit?

No, it is a long-term partnership, as we will collaborate with them across various initiatives. We will be looking after their clients, it shall help grow our M&A business and build REIT operations.

How will the fresh flow of funds help to reduce your debt?

Our current debt could be  Rs 5,000-6,000 crore and that will come down. Our debt equity ratio of 1:1.8 is one of the lowest in the sector. As a practice, we usually use the sale proceeds in either reducing debts or scaling our business. Since the company is adequately capitalised and maintain a healthy capital adequacy of over 18 per cent, we would use this proceeds to reduce debt. If required, we may consider further capital in the near future, by way of preferential allotment or a qualified institutional placement.