Indiabulls Financial Services has said it may convert to a bank when rules permit, seeking to emulate role models HDFC Bank and Axis Bank.
"Over a period of time, a bank as a franchise is exciting since one can offer a lot more services like cash management, forex and letters of credit,'' Gagan Banga, chief executive officer of Indiabulls Financial, said. "HDFC Bank and Axis have shown conservative and consistent growth and we like to run our business in the same style,'' he said.
The Reserve Bank of India has said it will review the rules for opening up the banking sector in April, which may lead to more banking licences and a wider holding for foreign lenders.
The company can weather the current financial crisis as it has raised Rs 1,000 crore in debt over the past month at an average rate of 13.5 per cent for a three-year period, Banga said. That adds to the Rs 10,000 crore of current bank funding, he said. The company has cash in bank exceeding Rs 4,000 crore, with a capital adequacy ratio of 27.11 per cent, he said.
The Mumbai-based company has a net worth of Rs 3,800 crore and doesn't have any net bad loans, Banga said.
Indiabulls Financials reported a profit of Rs 580 crore for the year ended March 31 on revenue of Rs 1,688 crore, according to the company's financial statement. Its profit climbed 25 per cent in the six months ended September 30 to Rs 280 crore on a revenue of Rs 1,200 crore, Banga said. The profit excludes income from its broking firm Indiabulls Securities, spun-off this year, he said. Its 1.2 million customers will help the group expand into asset management, Banga said. Indiabulls expects trading to begin on its planned commodity exchange by the end of March 31, Banga said. It will sell a 36 per cent stake in the commodity exchange to comply with a government rule that limits founders from owning more than 40 per cent, he said.
In October last year, Indiabulls partnered with MMTC, the state-run trading company with warehouses across the nation, to set up the exchange. Yes Bank, partly owned by Rabobank Group, HDFC Bank, the third-largest by value, and state-run Indian Potash are keen to buy a stake in the exchange, Banga said.
The commodities exchange, asset management business, lending to creditworthy customers in a conservative manner would help it deliver steady growth, he said. "Our core business from profits point of view in the short to medium term will continue to be lending,'' Banga said. "Our philosophy is that we should not be over-leveraged and that will help us mitigate risk in these tough times and focus on building businesses which will create value like life insurance and multi-commodity exchange.''
