| Religare Enterprises Racing in all directions
Aggressive growth plans across financial services Promoted by promoters of Ranbaxy Laboratories, financial services and products company Religare Enterprises (REL) has 11 subsidiaries. The principal subsidiaries are Religare Securities.(RSL), Religare Finvest., Religare Commodities and Religare Insurance Broking. The financial services offered range from equities, commodities, insurance broking, to wealth advisory, portfolio management services, personal finance services, investment banking and institutional broking services. It has also promoted subsidiaries to enter venture capital, private equity, arts and real-estate infrastructure management of group companies. REL has a majority stake in the special purpose vehicle (SPV) Religare Insurance Holding Company (RIHCL). The 50:50 joint venture (JV) with leading global life insurance and pension company Aegon International NV is to foray into mutual funds. REL has infused about Rs 18.96 crore in RIHCL for a 75.39% stake in this start-up subsidiary. A JV with Macquarie Bank to expand its wealth management business is set to start subject to necessary approvals. Macquarie will be a 50% shareholder of Religare Wealth Management Services (RWMSL), expected to be renamed Religare Macquarie Wealth. Both the partners have committed to contribute their pro-rata share of the equity capital: 20 lakh shares worth of Rs 20 million. Also, they have agreed not to transfer their shares or any right, title or interest in it for five years. The objective of the issue is to fuel future growth including expansion of branches of two of its subsidiaries: Religare Securities and Religare Insurance Broking. REL plans to fund the retail finance business as well as expand its financing business through its subsidiaries Religare Finvest and Religare Finance. Strengths - A wide geographic reach, growing clients, and a diversified portfolio of products and services. End September 2007, had six regional offices and 40 sub-regional offices across 392 cities and towns controlling 1,217 business locations (managed with business associates) all over India as well as a representative office in London. Also, has a region-focused entrepreneurial management team leading 6,500 employees.
- Products and service offered under three broad client-interface categories: Retail Spectrum, Wealth Spectrum and Institutional Spectrum. Retail Spectrum offers equity and commodity brokerage, personal financial services, internet trading and personal loans. Wealth Spectrum offers portfolio services (PMS), wealth advisory services and private client services. Institutional Spectrum offers institutional distribution and investment banking services.
- Increasing clients in both equity and commodity trading. Equity clients (including institutional clients) increased from 1,49,000 clients end March 2007 to 2,37,000 clients end September 2007, an increase of 59% over the six months. Also, clients in the commodity service jumped 54%, from 14,955 to 23,000. Online investment accounts surged 189%, from 11,600 to 33,500. Also, market share of trading volume on NSE imoved up from 4.76% to 8.67%.
Weaknesses: - The Securities and Exchange Board of India (Sebi) has taken actions (subject to final orders) against Religare Securities for price manipulation in certain scrips.
- The track record of listed group companies Fortis Financial Services and Fortis Healthcare has been far from encouraging.
- Proper execution and supportive economic environment will be necessary to implement the aggressive growth plans across the financial spectrum..
Valuation At the offer price band of Rs 160-Rs 185, P/E based on the year ending March 2007 (FY 2007) EPS of Rs 3.3 works to 48.7 (on lower band) to 56.4 (on upper price band) times. P/E of other comparable listed players is: India Bulls Financial Services (27.4 times), Emkay Shares (47 times), India Infoline Financial Services (66.8 times), IL&FS Investsmart (31.2 times) and Geojit Financial Services (35.8 times). While valuations appear steep based on FY 2007 numbers, they appear cheaper based on the performance for the six months ended September 2007. During this period, the company reported net profit of Rs 36.19 crore on a consolidated basis, which was 46% higher than the profit reported in FY 2007. The annualised EPS on post-IPO equity works out to Rs 9.6. This is discounted 19.4 times by the upper band of issue price of Rs 185 and 16.7 times by the lower band of Rs 160. | Religare Enterprises: Issue Highlights | | Sector | Securities/Commodities Trading Services | | No. of shares on offer | 7576102 | | Face value (Rs) | 10 | | Price band (Rs) | 160-185 | | Post-issue equity (Rs crore) | 75.76 | | Post-issue promoter stake (%) | 54.36 | | Issue open date | 29-10-2007 | | Issue close date | 1/11/2007 | | Listing | NSE & BSE | | Rating | 48/100 | | Religare Enterprises: Consolidated Financials | | Particulars | 0709(6) | 0703(12) | 0603(12) | | Income from Operations | 266.21 | 283.57 | 26.13 | | Interest Income | 18.20 | 15.05 | 0.016 | | Other Income | 23.55 | 21.50 | 4.98 | | Total Income | 307.96 | 320.12 | 31.13 | | Interest Expenses | 61.16 | 70.92 | 19.23 | | Other Expenses | 179.05 | 188.20 | 2.89 | | Gross Profit | 67.75 | 61.00 | 9.01 | | Depreciation | 10.11 | 12.80 | 0.20 | | Profit Before Tax | 57.64 | 48.20 | 8.81 | | Taxation | 21.21 | 20.11 | 2.24 | | PAT Before Prior Period Adjustment | 36.43 | 28.09 | 6.57 | | Prior Period Adjustments (Net of Tax) | 0.00 | 0.60 | 0.00 | | PAT Before Minority Interest | 36.43 | 27.49 | 6.57 | | Share of Minority Interest | 0.00 | -2.62 | -1.28 | | Add: Share of Profit/Loss from Associates | -0.24 | 0.00 | 5.96 | | Net Profit | 36.19 | 24.87 | 11.25 | | EPS*(Rs) | 9.6 | 3.3 | 1.5 | * Annualised on post-issue equity of Rs 75.76 crore. Face Value: Rs 10.
Religare Securities and Religare Commodities became subsidiaries in FY 2007. Hence, FY2006 numbers are not representative.
Figures in Rs crore
Source: Capitaline Corporate Database | | Religare Enterprises: Peer Group Comparison | | Details | India Bulls | India Infoline | IL&FS | Geojit Financials | Emkay Shares | Motilal Oswal | Religare | | Latest equity share capital (Rs in crore) | 44.55 | 53.36 | 69.84 | 20.9 | 24.27 | 14.2 | 75.76 | | FV (Rs) | 2 | 10 | 10 | 1 | 10 | 5 | 10 | | Consolidated PAT (Rs in crore) as on March 2007 | 443.4 | 75.61 | 40.7 | 25.26 | 10.32 | 71.17 | 24.87 | | Price as on 23 Oct 2007 | 545.75 | 946.35 | 181.9 | 43.3 | 199.9 | 1100 | 160-185 | | EPS (Rs) as on March 2007 | 19.9 | 14.2 | 5.8 | 1.2 | 4.3 | 25.1 | 3.3 | | P/E | 27.4 | 66.8 | 31.2 | 35.8 | 47.0 | 43.9 | 48.7-56.4 | | Market capital (Rs in crore) | 12156.58 | 5049.72 | 1270.39 | 904.97 | 485.16 | 3125.85 | 1212-1401 | Source: Capitaline database.
NA =Not available. | |