Gagan Banga loves quoting from Outliers: The Story of Success. In the book, author Malcolm Gladwell repeatedly mentions the 10,000-hour rule, claiming the key to success in any field was, to a large extent, a matter of practising a specific task for a total of around 10,000 hours.
“We, in Indiabulls, have done our own 10,000 hours. And, we have matured a lot,” Banga says, sitting in his makeshift office in Lower Parel, Mumbai. That may be new for the seven-year-old group, but no one would argue on the ‘maturing’ of Banga, the chief executive officer of Indiabulls Financial Services, and the group’s three young promoters—Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal.
Just three years ago, Indiabulls wanted to be just about everything: One of the top five business groups in the country, run the largest retail brokerage and financial services operations and one of the largest real estate and retail companies.
However, Banga now talks about the group “becoming a specialist, rather than a generalist”. “We want to focus on four things (financial services, stock broking, real estate and power) and not run behind 50 things,” Banga told Business Standard.
The group has exited unsecured lendings (once its mainstay), given up its insurance licence, almost exited its much-hyped retail venture, whittled down its exposure in a commodity exchange and has dropped its banking ambitions, though Banga denies it ever had any. He terms all the changes as part of the group’s “evolution and a part of planned exits”.
The fact is Indiabulls seems to have finally got its act together. With a Rs 24,000-crore balance sheet, Indiabulls Financial Services is one of the largest non-banking financial companies in the country. With 5,400 Mw of power to be commissioned in the next four to five years, Indiabulls Power is one of the largest private producers in the country. And, with over 60 million square feet under development, Indiabulls Real Estate is one of the largest real estate developer in the country. The lease rentals from its Parel properties alone stand at Rs 500 crore a month.
Though the market capitalisation of the group companies has slid from its all-time high of Rs 25,500 crore in April 2008, it rose 10-fold in the last seven years—from Rs 1,404 crore in 2004 to over Rs 10,948 crore as on August 18. It is among the country’s top 50 most valued private business houses.
Sanjay Sakuja, chief executive and managing director (corporate finance) believes the age of promoters has played a significant role in changing the group's strategy. “They have started aggressively and mellowed down. As you grow old and mature, you look at businesses in a different way,” he says.
HOW THE GROUP COMPANIES HAVE EVOLVED
Financial services: Indiabulls Financial Services has come out of the unsecured lending portfolios and is focusing on mortgage-based assets. It has 70 per cent in mortgage assets, 10 per cent in commercial lending and 20 per cent in corporate lending. “There is nothing new to be done in this. Our focus is to grow at a compounded annual growth rate of 25-30 per cent,” Banga says.
Indiabulls Mutual Fund, sponsored by IFSL, has secured the approval from the Securities & Exchange Board of India and the group is now evaluating its options.
Stock broking: In the securities business, the group plans to continue “as it is and where it is,” and Banga says there is no truth in the market buzz that the group is either scaling down or exiting the business. Banga says Indiabulls Securities has one million customers and the group would use the firm's distribution network for debt, real estate and all liability products.
Retail: Though the group had high ambitions for the retail segment, it has frozen the plans as of now. The group forayed into retail in late 2007, with the acquisition of Ashok Piramal Group's Piramyd Retail for Rs 208 crore. The group had originally planned to set up 30 hypermarkets in the country, with an outlay of Rs 1,500 crore crore and to expand Pyramid's store network from 42 stores to 150 in a year. However, Banga says the country’s retail sector is yet to mature, adding, and “Our entry was ahead of the times.” Store One Retail has accounted for combined losses of Rs 305 crore between 2007-08 and 2010-11.
Indiabulls is now investing in the power and real estate segments, in which it plans capex of around Rs 30,000 crore in the next couple of years. It plans to produce 5400 Mw power from Nashik and Amravati in the next four-five years.
The market, however, is still not convinced. Like its peers, Indiabulls Power stock is trading at around Rs 14, compared with a listing price of Rs 45. Banga, however, is unperturbed. “My sense is the stock would get its true value when skepticism about power projects goes away and re-rating would happen when we commission our projects or move closer to the date,” he says.
In real estate, the group's realty arm, Indiabulls Real Estate, plans to focus mostly on residential properties. It has constructed nearly three million square feet of office space in central Mumbai, while another 60 million is under development.
Banga's only regret is he should have scaled up the non-banking financial company business earlier. “In the last three years, we have been growing at a compounded annual growth rate of 24 per cent. We wish we would have grown at a higher rate,” he says.
