Let’s Understand The Decline of Reliance Capital

In Short: Decline of Reliance Capitala financial services firm owned by Anil Ambani. In 2008, the company had a market capitalization of over Rs 70,000 crore, larger than HDFC. However, it faced challenges such as governance issues, diversification into infrastructure, defense, and media sectors, excess leverage at Reliance Communications, and tightening liquidity. These factors led to the RBI initiating bankruptcy proceedings in 2021.

Let’s start from beginning

The rise and fall of Reliance Capital.

Anil Ambani’s financial services company. Reliance Capital had a market capitalization of more above Rs 70,000 crore in 2008, surpassing that of HDFC. But the business encountered a number of difficulties during the following ten years that ultimately contributed to its demise.

The crucial elements were:

1. Problems with governance at Reliance Capital’s lending businesses, Reliance Home Finance and Reliance Commercial Finance, in particular related-party activities.

2. Investing in the media, defense, and infrastructure sectors at the incorrect point in the business cycle

3.Overuse of power at Reliance Communications, which was using outmoded CDMA technology.

4.The RBI filed for bankruptcy in 2021 due to the tightening of liquidity following the bankruptcies of IL&FS and DHFL, which resulted in the auditor of Reliance Capital refusing to sign the FY19 balance sheet.

Now We know Answers of all the Questions Below:

1. How much was Reliance Capital’s market capitalization in 2008, and how did it stack up against HDFC?

2. What were the main reasons for Reliance Capital’s demise?

3. What part did Reliance Communications play in Reliance Capital’s downfall?

4. What was the last straw that caused Reliance Capital to fail, causing the RBI to file for bankruptcy?