Religare Enterprises

Religare Enterprises

Fortis, Religare to benefit from Ranbaxy profits

Flush with funds, almost to the tune of Rs 10,000 crore after selling family stake in Ranbaxy Laboratories to Japan's Daiichi Sankyo, Malvinder Singh plans to pump in money to Religare and Fortis to make them top firms in respective sectors, besides planning to list diagnostics subsidiary 'SRL Ranbaxy'.

"Healthcare and financial services are two areas where we have existing businesses, where we will make investments," Ranbaxy CEO and Managing Director Malvinder Singh said when asked how he planned to utilise proceeds of stake sale.

Earlier this month, Ranbaxy promoters had entered into an agreement with Daiichi Sankyo to sell off their 34.82 per cent stake in the pharmaceutical major, valued at around Rs 10,000 crore.

"I think for the next many years, our focus is clear to remain in healthcare and to make it number one healthcare firm in India," Singh said.

Elaborating on future plans for Fortis, Singh said, "In the next step, we would be looking at taking it to international level and have strong presence in Asia and then take it to other markets. That will happen in a phase manner."

Dispelling speculations of stake sale in Fortis Healthcare and link-up with Anil Ambani group, he said: "I am not talking to them and I welcome competition but there is absolutely no discussion at any place and I am not talking to anyone about this."

As for Religare, he said, "In terms of the financial services, we certainly want Religare to be in the financial services what Ranbaxy is in pharmaceutical sector."

Singh, however declined to divulge details of investments in the two firms.

"Till now, we haven't discussed it to decide what will go where," he said.

Asked if the funds from the Ranbaxy stake sale could be utilised by Fortis and Religare for mergers and acquisitions, he said, "It is an integral part of the growth of these companies."

Two-three months ago Religare picked up the oldest broking house in UK, which was the first acquisition by any financial company outside India, he said.

"We have done things and will keep doings which will continue to strengthen our business globally. We are always evaluating opportunity and it is difficult at this point of time to give definite answer," Singh said when asked if there could be any acquisition in the near future.

The Singh family had recently undertook a rebranding exercise to rechristening its diagnostics subsidiary SRL Ranbaxy under the Religare name and is planning to expand it further.

Asked if there was any plan to go public with the diagnostic arm, Singh replied in the affirmative.

"The company is doing well... we are the largest pathology company in the country and at some point, we would like to list it as a separate company in the Indian market," he said.

Under the new initiative, Singh said SRL Ranbaxy would be rebranded in terms of the growth and the business.

via Economic times

Great Offshore, Religare, Sasken, SBI, Tata Motors

Great Offshore, Religare, Sasken, SBI, Tata Motors

IPO Listings

Religare will list on 21st Nov. 2007 (Wednesday)

Varun Industries will list on 22nd Nov. 2007 (Thursday)

Allied Computers will list on 23rd Nov. 2007 (Friday)

Religare IPO Listing

Religare Enterprises will list on Nov 21 2007

Religare Allotment Status

Religare Allotment Status

Religare Enterprises IPO Subscription

Qualified Institutional Buyers (QIBs) - 184.9493 times

Non Institutional Investors - 215.4472 times

Retail Individual Investors (RIIs) - 93.5018 times

OVERALL - 160.56 times


It's becoming pointless to apply for these IPOs - Good Luck to all who have applied

Grey Market - Edelweiss, Religare, Mundra, Barak, Varun

Reliance Power -- 50 to 51


Mundra Port & Sez 400 to 440 380 to 390


Varun Ind. 60 40 to 42


Religare Enterprises 160 to 185 280 to 285


Barak Valley Cement 37 to 42 19 to 20


Empee Distilleries 350 to 400 150 to 155


Edelweiss 725 to 825 200 to 210


Circuit Systems (India) Ltd. 35 6 to 8


Rathi Bars 35 3 to 3.50


Allied Computers 12 16 to 17


SVPCL 40 to 45 2 to 3

Grey Market - Mundra, Religare, Reliance Power

Reliance Power 51 to 52


Mundra Port & Sez 400 to 440 335 to 340


Varun Ind. 60 41 to 43


Religare Enterprises 160 to 185 270 to 280


Barak Valley Cement 37 to 42 18 to 20


Empee Distilleries 350 to 400 138 to 140


Circuit Systems (India) Ltd. 35 2 to 3


Rathi Bars 35 3 to 4


Allied Computers 12 17 to 18


SVPCL 40 to 45 3 to 5

Barak Valley, Hindustan Zinc, Mahindra and Mahindra, Varun Industries, Religare Enterprises

Barak Valley, Hindustan Zinc, Mahindra and Mahindra, Varun Industries, Religare Enterprises

Religare Enterprises IPO

Religare Enterprises IPO

Religare Enterprises IPO Analysis

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.

Grey Market - Religare, Allied Computer, Varun, SVPCL

Reliance Power 50 to 51

Mundra Port & Sez 400 to 440 320 to 330

Circuit Systems (India) Ltd. 35 3 to 4

Rathi Bars 35 3 to 4

Allied Computers 12 15 to 16

Varun Ind. 60 39 to 40

SVPCL 40 to 45 5 to 7

Religare Enterprises 170 to 190 260 to 270

Barak Valley Cement 37 to 42 12 to 13

Empee Distilleries 350 to 400 30 to 35

Religare Enterprises: Invest at cut-off

Investors with a high risk appetite may subscribe to the Initial Public Offer from Religare Enterprises, a financial services firm which derives the bulk of its revenues from equity broking and financing services. A recent entrant to the financial services space, the company has managed an impressive ramp-up in its client base and transaction volumes. However, the company conducts its business through a web of subsidiaries. Relevant financials for Religare’s consolidated operations are available only for a year and a half.

The offer price band of Rs 160-185 values the company at about 20-23 times its earnings for 2007-08 on the fully diluted equity base. The earnings for the full year have been estimated using first half performance, after factoring in operating profit margins managed by the company’s peer group. Most brokerage firms of comparable size trade in the price-earnings band of 30-40 times their current earnings at this juncture.

Background

Religare’s businesses, routed through subsidiaries in which it holds 75-100 per cent stakes, span stock broking, loans against shares, commodities broking, personal lending, depository services, wealth management, venture capital, insurance broking, real-estate investing, insurance and arts advisory services. These are offered to retail and institutional clients.

Equity broking: Pluses and pitfalls

Most of these businesses are in a nascent stage, and equity broking and financing services currently contribute the lion’s share of the company’s consolidated revenues and earnings. For the first half of 2007-08, Religare reported a total income of Rs 307 crore on a consolidated basis; with EBIDTA (earning before interest, depreciation, tax and amortisation) margins of about 41 per cent and net profits of Rs 36.7 crore.

Broking operations (mainly equity), contributed 52 per cent of this income; interest on loans against shares/delayed payments from clients brought in about 30 per cent; while transaction charges/fees from clients and investment income chipped in with the rest. Though the company has a presence in the institutional segment, it is the retail business on which revenues and earnings rely heavily.

The focus on retail broking may deliver strong growth under the secular bull market conditions prevailing now. However, this may result in high volatility in Religare’s earnings over the medium-to-long term.

This pegs up the company’s risk profile in relation to others who have a more broad-based revenue stream. Regulatory and systemic risks would also be higher with retail-focused firms.

The equity broking business is a volume-driven one. Transaction volumes, which have reached new highs recently, could dry up quickly if stock markets move from a buoyant to a prolonged choppy or range-bound phase. This could have a direct impact on Religare’s revenues and, thus, profits.

Falling fee structures also heighten these risks. The growing retail pie in the domestic stock market has intensified competition, with private banks, finance companies and new global players entering the business. The possible rise of discount brokerages and popularity of online trading, also point to pressure on fees earned by full service broking firms such as Religare, making volumes crucial.

Strong growth so far

Religare has, however, displayed an ability to grow quite aggressively in its key businesses in the relatively short period of its existence. The number of clients registered for Religare’s equity/derivative broking services grew from just 12,000 in March 2005 to 2.37 lakh by September 2007. An expansion in the number of trades executed from 49,517 to 4.70 lakh over the same period; gave the company a rough 3.8 per cent share on the combined turnover on the NSE and the BSE.

These compare well with established players such as Motilal Oswal Securities. Religare’s investments in acquiring a pan-India presence (392 cities reaching out to 1200 locations) and a strong research backing for each of its businesses, appear to have aided asset expansion.

The company has been a relatively late entrant to the online platform, starting trading in August 2006 and investments in May 2007. The wealth advisory services and portfolio management services, advised/managed assets of Rs.185 crore and Rs.255 crore respectively in September, most of it garnered since 2006.

The company’s ability to deliver sustainable earnings growth may hinge on its success in driving growth in its non-broking businesses.

Several of the nascent businesses into which Religare is charting a foray (insurance broking, insurance, wealth management, asset management) hold immense potential for growth. This apart, these businesses are also quite scalable and may require lower incremental investments, given Religare’s wide geographic reach and its existing resources in terms of research and marketing personnel.

Having acquired a good client base in equity broking, there are also significant cross-selling opportunities that each new business can tap into.

However, with a slew of Indian and foreign players making a beeline for each of these businesses, none of this will offer Religare any protection against competition.

Overall, investors with a high risk appetite may consider subscribing to this offer in the light of the lower pricing relative to listed firms in this space and the sector’s growth potential.

Offer details: Religare Enterprises is offering 75.7 lakh shares in the price band of Rs160-185 to raise Rs121-140 crore. Offer proceeds will be deployed mainly in funding the lending and retail finance businesses and in expanding the branch network

Navabharat Ventures

Navabharat Ventures

Religare - Tantia Constructions, Garware Offshore

Religare - Tantia Constructions, Garware Offshore

Religare - Cinemax

Religare - Cinemax

Religare - Aventis Pharma, Bihar Tubes

Religare - Aventis Pharma, Bihar Tubes

Religare - ICICI Bank FPO

Religare - ICICI Bank FPO

Religare - Bihar Tubes, Sasken

Religare - Bihar Tubes, Sasken