Religare Enterprises , a Ranbaxy promoter group company, aims to raise up to Rs 140 crore by issuing 75.76 lakh shares with a face value of Rs 10 each. The issue represents 10% of the post-issue equity of the company. The shares will be offered via book-building in the price band of Rs 160-185 per share.
Business : Incorporated in 1984, Religare Enterprises is the holding company of its 11 business subsidiaries. Each of its subsidiaries is engaged in a wide spectrum of financial products and services targeted at retail, high-net worth individuals, corporate and institutional clients. The services offered by the group include share broking, financing loans against shares, IPO financing, distribution of mutual funds, insurance broking, commodity broking, wealth management advisory business, private equity, merchant banking and trading in arts and artifacts among others.
However, most of its subsidiaries are less than a year old and yet to commence business. The major revenue drivers for the company are its retail equity broking arm Religare Securities and Religare Finvest, which finances loans against shares. The two accounted for more than 90% of the Religare consolidated revenues
in FY07.
Growth Strategy : Religare Enterprises is currently present in 392 cities and towns through its network of 1,217 branches. Out of these, the company owns a third, while the remaining centres are owned and managed by franchisees. The company aims to utilise the proceeds of the issue to further expand its geographical presence both in the domestic and international markets that include West Asia and Western Europe. It also plans to use the issue proceeds to significantly enhance its online trading capabilities.
Its wealth advisory arm — Religare Wealth Management Services — recently entered into a 50:50 joint venture with the Australian based Macquarie Bankto offer wealth management services. If the venture clicks, given the rising income and wealth of India's upper middle class, it may turn out to be a major growth driver for the company.
Financials : Starting from a small base, the company has shown rapid topline and bottomline growth in the past few years. During FY07, the company's net profit more than doubled to Rs 25 crore against Rs 11 crore during FY06. Net sales during the period jumped 10 times to Rs 320 crore from Rs 31 crore. The growth momentum continued during the first six months of FY08. Net profit during April-September '07 grew to Rs 36 crore while revenues jumped to Rs 308 crore.
Growth has been fuelled by a boom in the stock market, which has pushed up equity trading volumes to a new high. However, growth has been accompanied by an equally fast rise in its debtors and receivables. In the first half, the company's debt nearly doubled to Rs 514 crore while loans and advances is up by over 140% over the FY07 to to Rs 1,414 crore.
It reported negative cash flows of Rs 535 crore during the first half of FY08. The company, however, says that this is not a cause for concern as its average collection period (debt) is quick and the loans are mainly against shares that can be liquidated in case of default by clients.
Business : Incorporated in 1984, Religare Enterprises is the holding company of its 11 business subsidiaries. Each of its subsidiaries is engaged in a wide spectrum of financial products and services targeted at retail, high-net worth individuals, corporate and institutional clients. The services offered by the group include share broking, financing loans against shares, IPO financing, distribution of mutual funds, insurance broking, commodity broking, wealth management advisory business, private equity, merchant banking and trading in arts and artifacts among others.
However, most of its subsidiaries are less than a year old and yet to commence business. The major revenue drivers for the company are its retail equity broking arm Religare Securities and Religare Finvest, which finances loans against shares. The two accounted for more than 90% of the Religare consolidated revenues
in FY07.
Growth Strategy : Religare Enterprises is currently present in 392 cities and towns through its network of 1,217 branches. Out of these, the company owns a third, while the remaining centres are owned and managed by franchisees. The company aims to utilise the proceeds of the issue to further expand its geographical presence both in the domestic and international markets that include West Asia and Western Europe. It also plans to use the issue proceeds to significantly enhance its online trading capabilities.
Its wealth advisory arm — Religare Wealth Management Services — recently entered into a 50:50 joint venture with the Australian based Macquarie Bankto offer wealth management services. If the venture clicks, given the rising income and wealth of India's upper middle class, it may turn out to be a major growth driver for the company.
Financials : Starting from a small base, the company has shown rapid topline and bottomline growth in the past few years. During FY07, the company's net profit more than doubled to Rs 25 crore against Rs 11 crore during FY06. Net sales during the period jumped 10 times to Rs 320 crore from Rs 31 crore. The growth momentum continued during the first six months of FY08. Net profit during April-September '07 grew to Rs 36 crore while revenues jumped to Rs 308 crore.
Growth has been fuelled by a boom in the stock market, which has pushed up equity trading volumes to a new high. However, growth has been accompanied by an equally fast rise in its debtors and receivables. In the first half, the company's debt nearly doubled to Rs 514 crore while loans and advances is up by over 140% over the FY07 to to Rs 1,414 crore.
It reported negative cash flows of Rs 535 crore during the first half of FY08. The company, however, says that this is not a cause for concern as its average collection period (debt) is quick and the loans are mainly against shares that can be liquidated in case of default by clients.
Valuations : At the lower price band, the company is valued at 17 times its FY08 estimated earning per share (EPS) of Rs 9.6 and at the upper band the price-to-earnings ratio is 19.4 times. This is more or less at par with its peers and the company looks fully priced at its upper price band.
Though it does not have a long record of spectacular performances, it has grown at a phenomenal rate in the past six quarters. If it is able to maintain the momentum, the stock is a good buy at the offer price. Moreover, many of its subsidiaries are yet to commence business and it remains to be seen how they perform in the forthcoming quarters.
Risks : The nature of business is highly susceptible to the growth in the equity market. Also, the existence of a number of well-established players in the industry is expected to make it difficult for the company to create a niche for itself.
Though it does not have a long record of spectacular performances, it has grown at a phenomenal rate in the past six quarters. If it is able to maintain the momentum, the stock is a good buy at the offer price. Moreover, many of its subsidiaries are yet to commence business and it remains to be seen how they perform in the forthcoming quarters.
Risks : The nature of business is highly susceptible to the growth in the equity market. Also, the existence of a number of well-established players in the industry is expected to make it difficult for the company to create a niche for itself.
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