Broad spectrum play

STRATEGY: Religare is doing a Cifran with financial services: going all out, and hoping to tweak the rules of the game.

The Ranbaxy group, you thought, is all about pharma and healthcare with a network of state-of-the-art hospitals. Think again. For the group's promoters are now aggressively moving into what you would consider uncharted area "" to turn Religare into a financial services powerhouse in a few short years.

Sounds unbelievable?

Read on. Ranbaxy's Singhs have had a financial services business for a couple of years. But it's only now that their Religare Enterprises is firming up plans to do what few Delhi-based business houses have dared so far: tackle asset management, wealth management and commodities brokerage, apart from banking and insurance, the two big daddy industries in finance.

Last fortnight, Religare floated a $150-million private equity fund with Evermore Partners which will invest in growth industries such as healthcare and infrastructure, via companies with market capitalisations (current trading value of all shares added up) in the small-to-mid range that are looking for heady growth or even acquisitions abroad.

And just days ago, it soft launched its online brokerage service with a target of at least 50,000 clients in the first phase of operations.

Shivinder Singh, one of the directors and promoters of Religare, of course, tries to explain the synergy between financial services and the group's core in terms of consumer sensitivity: "Like in pharma or healthcare, financial services is a customer-centric business. Our aim is to become the one-stop-shop for the customer with any financial services need... and also number one."

But still, can financial services grow to constitute over one-third of the group's turnover "" Singh's target "" in four years?

Singh thinks it can. And to make it happen, Religare hopes to double its reach in the country "" from 180 to over 300 locations "" within 12 months. Religare is already trading stocks more furiously than you'd think. It does average trading volumes of Rs 2,000 crore every day on both NSE and BSE "" about 4 per cent of all trading.

Yet, getting beyond that threshold may require Religare to set itself apart from the swarms of financial firms that crowd the market, few of which seem anxious about its entry as a rival.

According to an executive at a competing firm, "They have made tall claims in terms of sheer size, but have a long way to go. In commodities trading, they have done well "" but $150 million is really inconsequential in a market now that fund sizes have gone above $1 billion."

For its part, Religare is trying its utmost to alter the rules of the game. For instance, in the brokerage services business, it avoids proprietary trading, which means Religare does not take positions of its own on shares.

Says Sunil Godhwani, managing director of Religare: "We want to have arms' length distance "" provide objective advice to our clients rather than get influenced by our own positions in the market."

It has also dumped the norm of commission-based remuneration for managers selling financial instruments. Instead, incentives are based on a bonus in the end of the year which is related to the overall profits of the company.

Argues Godhwani, "We are looking at a long-term relationship with our client instead of a transaction-led one. In a commission-based system, you tend to force your clients to trade even if it's not advisable."

Such lofty systems depend on team commitment, to ensure which Religare intends to institute a system of stock options.

Meanwhile, its moves in commodities trading, where price discovery happens at the mandi level, are being watched. With over 30,000 clients, 15 mandi offices and another 27 due to open soon, it has become a force to reckon with.

This feel for business trends beyond the metros is apparent even in the private equity business. Unlike the big boys like ICICI Ventures or Chrysalis, Religare is scouring small opportunities in areas that are typically not on the big radar. Its average investment size, as proposed, will be in the $10-20 million range.

According to Singh, this involves an understanding of profit potential beyond what's apparent in the account books. The betting is that these entrepreneurs, armed with Religare's strategic inputs, will become tomorrow's growth stories.

What's more, Religare plans to go overseas in a big way. It is opening seven offices this financial year "" to serve as service points for international investors.

Apart from London, Singapore and Hong Kong, offices are planned in Europe, the US and West Asia. Gradually, these offices would be upgraded to full wealth management offices to undertake services for other markets also.

"The India story is already sold in the global market," says Godhwani, adding that India has barely seen a fraction of the money that could come its way. And this, he can say again.