Priya Nadkarni: Making 5-paise go a long way

From 2001, when he had problems raising funds to last May, when he poached CLSA's entire top team, Nirmal Jain's come a long way.

Nirmal Jain's sea-facing office at Mumbai's Nariman point is suitably plush, in keeping with the cash-flush status of his company, India Infoline. The financial services outfit has Rs 271 crore in reserves and nearly Rs 127 crore in cash.

Clearly, Jain has come a long way from the period between 2001 and 2004, when he had problems raising money. India Infoline's initial public offer of 2005 raised a grand total of Rs 90 crore by offloading 27.31 per cent of post-issue equity. "These days we sell a stake in a subsidiary for more than that," quips Harshad Apte, the company's vice-president (strategy).

Jain's journey from those days accelerated sharply when, in a tour de force, he poached the entire top team of CLSA, a big foreign brokerage, in May last year.

The stock market has been profuse in its appreciation. On the first day of this year, the company's stock touched a high of Rs 1,974.9, nearly six times its value of Rs 319.3 on January 3 last year.

"After the CLSA team joined us, it became very clear that we had serious plans for investment banking and institutional businesses," says Jain, the company's founder and chairman.

In the fiercely competitive industry, Jain has managed to attract talent "" the key driver "" and retain it through a liberal employee stock options programme. The foursome from CLSA received a welcome made better by a combined sign-on bonus of Rs 44 crore. The company has announced plans to hive off its wealth management business as a subsidiary that will be run by a team hired from Kotak Mahindra Wealth Management.

The months after the CLSA coup have been hectic. In December last year, the Singapore-based Orient Global picked up 6.48 per cent equity in India Infoline for Rs 555 crore, giving it an impressive valuation of Rs 8,565 crore. The investment group is paying another Rs 197 crore for 10 per cent equity in India Infoline's insurance subsidiary, India Infoline Marketing Services, valuing it at more than Rs 1,000 crore. Earlier, Orient Global bought 22.5 per cent equity in the company's consumer finance arm, India Infoline Investment Services, for Rs 300 crore.

With so much PE on board, more IPOs loom. "As we have private equity investments in our consumer finance as well as insurance distribution businesses, the private equity investors will need an exit route. The most likely way to provide that will be a public offer," says Jain, an alumnus of Indian Institute of Management, Ahmedabad. He does not rule out roping in a strategic partner.

Jain has been down this road before. India Infoline floated its initial public offering in 2005, when PE investors, who had been with the company for six years, were given an exit route. It managed to raise Rs 90 crore through the offer of 11,800,000 shares. "It is more difficult to fully tap an opportunity in a booming market as compared to just coming out of a crisis. Whenever there is an opportunity there is always intense competition," says Jain.

He started the company as Probity Research and Services in 1995, when the technology boom was just setting in, targetting institutional customers. His forefathers were commodity traders in Rajasthan. When silver prices shot up and then crashed in 1978, his family, which had speculated in silver, suffered huge losses. "That's when an idea emerged that if we make all our research free on a website, maybe our number of users would leapfrog," he says.

In keeping with the dotcom spirit of the time, Probity quickly became Indiainfoline.com. The ensuing bust stalled Jain, but by that time, he had already started selling mutual funds and life insurance through wholly-owned subsidiaries. In 2000, the company acquired Agri Marketing Services, a direct selling agent of personal financial products including mutual funds, fixed deposits, corporate bonds and post-office instruments.

Cutting costs, investing in technology and building the trader-terminal platform became the mantra for the core team of 15 people. "We observed that in a down-trend, people do not stop investing. Even if the GDP grows by, say, 2 per cent lower, people still have income and savings. They only put their money in relatively safer instruments like debt, life insurance and mutual fund products," says Apte.

Today India Infoline is the holding company that has subsidiaries offering secondary market securities broking, portfolio management services, distribution of mutual funds and other investment products, commodities broking, insurance broking and margin funding. "The structure of corporate holding and the subsidiary companies has evolved primarily to meet the regulatory guidelines as well as to have sharper focus on the businesses," says Jain.

What he does not talk about is that this Nariman point office bears little resemblance to Probity's first office in Vile Parle, a small suburb of Mumbai.