gundeep
28-10-2007, 03:58 PM
Religare Enterprises Limited….
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
Page 2
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.
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
Page 2
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.