Reliance Capital is the AMC that manages the Reliance Mutual Fund and it is the financial services arm of the ADAG group. While most of the ADAG group companies like RCOM, RPOWER, and RELINFRA have come under strain, Reliance Capital has been one company that has not been really impacted. Recently CARE ratings had pointed out that the cash reserves of the group had fallen to just Rs.11 crore and the company is currently seeking to sell assets to the tune of nearly Rs.14,000 crore to stave off a potential crisis.
Reliance Capital has already seen some downgrades on concerns over debt servicing capacity. Also, we have seen two of the group NBFCs of the ADAG group being downgraded by rating agencies to default status. One has to keep in mind these factors while taking a call on the stock.
At the current point of time, the risks are just too high on the stock and with the short term funding costs going up, the company is going to be constrained for profitability. While we do not recommend a fresh buy on the stock and hold should only be down with a strict stop loss.