Indiabulls Financial Services Ltd, backed by billionaire Lakshmi Mittal, predicts a planned fund management unit will rank among India’s Top 5 by 2010, seeking to replicate successes from broking to real estate.
Indiabulls chief executive Gagan Banga, who helped steer a $12 million (Rs47.16 crore today) company into a group valued at more than $10 billion since 2004, said he expects to receive a licence to set up a mutual fund unit this week. Banga said he plans to create a $6 billion fund management company, vying with Templeton Asset Management India Pvt. Ltd and Fidelity Funds Management Pvt. Ltdin an industry that’s quadrupled in size over the past five years.
“If we can’t do it in two years, we’ll never do it,” Banga, 32, said in a 7 January interview in Mumbai. “We should be in the Top 5 business groups in the next three years. We should run the largest retail brokerage, run the largest financial services operation, we want to be among the largest real estate companies, be among the largest retailing companies.”
Banga said he’ll tap a million-strong client base at more than 600 offices across India to compete for the wealth of a nation where invested assets will quadruple to $1 trillion by 2012, according to consulting firm Celent Llc.
Started in 2000, Indiabulls owns the country’s third most valuable real estate company and more than 42 retail outlets in the $906 billion economy.
Indiabulls shares climbed Rs5.05, to close at Rs839.80 on the Bombay Stock Exchange (BSE) on Wedensday.
Sameer Gehlaut, who is the chairperson of the company, started Indiabulls as an online stock brokerage with two fellow engineering graduates from the Indian Institute of Technology Delhi.
Mittal, ranked by Forbes as the richest Indian with a $51 billion fortune, at the time invested about $1 million in Indiabulls, said Banga. That bet has yielded a more than 200- fold return since then, after accounting for spin-offs of the group’s real estate and brokerage units, he added.
“He took a call when most others didn’t know what India was all about,” said Banga. “It was more of a vision call, rather than a micro call on the country.”
Indiabulls has surged 45-fold since its September 2004 initial public offering. BSE’s benchmark index, the Sensex, has almost quadrupled during the period.
Banga, who models Indiabulls on Charles Schwab Corp., the biggest US discount brokerage, and Costco Wholesale Corp., the largest US chain of wholesale warehouse stores, is taking a bet on an economy forecast by the government to expand 9% this year, second only to China among major economies.
Indiabulls plans to invest Rs1,500 crore over the next 12 months to set up 30 shopping malls across the country, Banga said. The company will hire 10,000 employees for its retail forays—representing a 50% expansion of its current headcount, he said. Last month, Indiabulls said it’s acquiring Piramyd Retail Ltd, with 42 stores. Almost half of India’s 1.1 billion people are under 25 years old. They’re spending more on electronics, jewellery, clothes and cars as incomes grow along with the economy and credit becomes more accessible.
Tracking the nation’s rising affluence, Indiabulls’ real estate unit doubled on BSE since it listed in March. The company this week said it plans to raise $1 billion selling shares, the fourth such offering since 2004. Last month, Indiabulls announced an insurance venture with Société Générale, France’s second biggest bank by market value.
Now, Banga is setting his sights on one of the world’s fastest growing funds markets. Assets under management at mutual funds in India swelled more than fourfold to Rs5.4 trillion in the five years to November, according to data compiled by Bloomberg.
Banga may struggle to reach his fund management goals, said Dhirendra Kumar, chief executive of Value Research Online, a New Delhi-based company that tracks the industry. “It seems to be an ambitious target as the variables required to run a mutual fund are quite different from the securities broking and real estate businesses,” said Kumar. “The mutual funds business in India is still in its infancy, and Indiabulls stands to make a mark, but two years seems to be a very ambitious target.”
Reliance Mutual Fund, India’s largest, boosted assets under management fivefold to Rs77,700 crore in the two years to November. In the same period, Templeton Asset Management almost doubled assets to Rs30,800 crore.
Indiabulls may resort to acquisitions to help reach its goals, Banga said. “If something comes by at an appropriate price we will buy,” he said. “But we will not depend on that model. We are happy to do the build model,” he added.