RELIANCE CAPITAL LTD., We recommend Buy with a price target of Buying levels : The scrip has consolidated at 2200 levels and has formed a double bottom at that level. so strong buy at these levels and in every dip. The scrip has formed a double top at 2400 level if crosses the level will attain the target.

Company Outlook Reliance Capital (RCAP), a non banking financial company, is the financial service arm of the Anil Dhirubhai Ambani Group (ADAG) which has varied interests in areas like telecom, energy, entertainment. Reliance Capital is one of India's leading and fastest growing private sector financial services companies and ranks among the top 3 private sector financial services and banking companies, in terms of net worth. Through the companys subsidiaries, it offers products and services like mutual fund, life insurance and general insurance. It has sizable private equity and proprietary investments and is pursuing new ventures like stock broking, consumer financing and the asset recovery business as well. Reliance Capital, initially focused on the asset management business, has recently expanded its presence in life insurance, general insurance space and ebroking business as well. Reliance Capital launched Reliance Money, a retail broking and distributor of a range of financial service products. It has a network of over 2,200 outlets (Indias largest retail network by a non banking financial services company). Reliance Capital has 100% economic interest in all the business units.

Valuation Summary SECTOR OVERVIEW Indias recent economic growth has been led by the dynamism of its services sector – particularly the high-end, knowledge-intensive services. Service sector has been consistently growing at a faster pace than the economy since the liberalisation of the economy took place in According to the economic survey of 2007, the services sector contributes to nearly 55 per cent of Indias GDP. The financial sector consists of banking, insurance, consumer finance, NBFCs. According to Indian Brand Equity Foundation (IBEF), the financial sector contributed around 5 % of the GDP in FY Indias banking and insurance sectors have been significantly opened to private sector since 1993 and 2000 respectively. With the deregulation of the Mutual fund industry as well in 1993, the sector has seen a spate of new private and foreign players.

BANKING The scenario in the Indian banking industry is changing rapidly. Traditionally, it was characterised by poor performing public sector banks which employed outdated practices and technology. The liberalisation process resulted in the number of private sector scheduled commercial banks increasing to 61, including 31 foreign banks. Private sector banks had increased their share of total assets to 24.7 per cent and foreign banks to 6.6 per cent share. By September 2004, the total number of foreign bank branches in India was 217. The penetration of banking services and products in rural India is particularly low, with only 42 per cent of rural households having bank accounts of which 21 per cent having access to credit from a formal source and only one percent relying on a loan from a financial intermediary. Improved access to banking products would greatly benefit rural businesses and households, and help to raise living standards across the rural sector as a whole.

INSURANCE Indias insurance sector, like its banking system, has an important role to play in enhancing financial intermediation, creating liquidity and mobilising savings in the economy. The opening of the life and non-life insurance sectors to foreign investment in the year 2000 spurred increased activity by foreign investors. In spite of the growing awareness of insurance products, the penetration of the Industry is abysmally low at 2.5% as compared to the matured markets. This would augur well for the growth of Insurance sector. In the life insurance sector, there are currently 15 private insurers plus the government-owned Life Insurance Corporation (LIC). According to the Insurance Regulatory and Development Authority (IRDA), first year (i.e. new business) premium income of the private insurers for 2006–07 was Rs 19, 500 Crs. In the space of just six years from FY 2002, private insurers have secured a 26 per cent share in new business segment.

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APE (Annualised Premium Equivalents) is sum of FYP and 10% of Single Premium Valuation-NBAP Multiple We believe that Reliance Life Insurance will be among the top players in this segment by year 2008 due to its reach and the growth rates shown in the previous years. Its reach will help to penetrate the under-penetrated markets. Due to its focus on distribution and its rapid scaling-up plans we believe the FYPs should grow by 150% in FY08 and in the subsequent year a growth rate of 85%. Single Premiums should grow by 60% in FY08 and 50% in FY09.The NBAP multiple is expected to increase from 22 to 25 in FY09. VALUATION

Currently around 80% of the countries population is without a life insurance policy. With the economy booming, the disposable incomes are set to increase which will increase the number of policy holders dramatically. Life insurance industry recorded a growth of 110 % in premium collection FY07. Reliance life Insurance (RLI) is the fastest growing insurance company in India with a market share of 4% amongst private insurers. The AUM is Rs. 12 bn. It already has a reach of 217 branches and may scale up to 400 by FY08.Its agent force would increase to nearly 2, 00,000 agents in FY 2008 up from 1, 06,000 agents in FY Reliance Life grew by 381% in FY07. Reliance expects its growth from rural areas. It will need a capex of around crs for this segment of the business. Of the total premium earned, 88 % is from ULIP plans and 12% from others. This trend is likely to be seen in the future years as well. Currently banks are allowed to sell insurance policies of only one Insurance Company. Banks have a tie up with the insurance company for a period of three years. Since Reliance Capital is a late entrant in this business it does not have a tie up with any of the banks to sell its insurance products. However, it has the opportunity to enter into contracts with banks as and when they come up for renewal after a period of every three years. LIFE INSURANCE

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As per industry estimates penetration (as a percentage of GDP) of general insurance in India has improved marginally from 0.53% to 0.64% over the 5 year period FY General insurance industry in India has grown at 15% CAGR in the past five years in terms of gross premium collection. Given the low penetration of general insurance and a CAGR of 22 %, Reliance General Insurance is expected to cash in on these opportunities. Reliance General Insurance (RGI) is the fastest growing general insurance company and the 4th largest in India with a market share of 10 % amongst private general Insurers. In FY07, the General Insurance business posted a growth of 22%, driven by private players phenomenal growth of 60%. Reliance General Insurance has improved its retention ratio from a 35% in FY 06 to 55% in FY 07. The retail segment accounts for 55% of Reliances General Insurance business. There was a marked shift towards motor insurance, which accounted for a whopping 50% of all retail business. Reliance General Insurance has expanded its distribution network to 85 branches and regional offices in FY 2007 from 34 branches and regional GENERAL INSURANCE

BUSINESS UNIT VALUATION

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