New Delhi: The emerging market specialist Baring Private Equity Partners India Ltd is expanding JRG Inditrade, a Kochi-based brokerage firm, out of south India to new locations across the country, especially mandis, or wholesale markets established in rural and semi-rural areas, for the trade of agriproducts.
More than 75% of these broking centres will be based in tier II and tier III towns in south India and Maharashtra. The fund owns a 49.13% stake in the company. All mandi locations do not offer established broking firms and being positioned at such sites will ensure increased retail participation, said Munish Dayal, partner, Baring Private Equity.
“Through investment in best-in-class technology solutions and research, JRG expects to plug-in the expertise and the knowledge gap in the commodities markets,” he said on the sidelines of the World Economic Forum’s India Economic Summit. “It makes business sense to enter the areas of physical market locations which will also facilitate faster information flow and market timing.”
This comes soon after Reu ters reported that Baring had appointed Gaurav Soni, chief financial officer of JRG, as managing director replacing promoter Regi Jacob. Soni was earlier with Ernst & Young. The firm’s original promoter managers have stepped down from executive positions and the company board.
As part of the makeover, Baring is also looking at scaling up the company’s business model by diversifying to attracting corporate customers who will be able to hedge their commodity exposures for better predictability on the prices of raw materials.
“There is a large population in India, especially below the age of 35 years, which is adopting to using financial services—both banking and broking—through the Internet,” Dayal said. “There are existing broking firms which provide Internet broking, but the area is relatively underpenetrated.”
He said expanding connectivity through the Internet for commodity broking made perfect business sense. But the bricks and mortar side of the business will not be neglected.
“Retail customers in smaller towns like to visit the brokers’ office, do live trading with the help of dealers and maintain personal local relationships,” Dayal said. “Given the existing arrangements, it was important to continuously expand its physical footprint to service our customers. The company has a very well-defined model for branch establishment, break-even time frames and ability to sell multiple products to individual customers.”
India, which is likely to sustain economic growth rates of 8-9% for the next five to 10 years, is also likely to see its financial services outpace this increase by 2-3 times.