Indiabulls to foray into insurance

Indiabulls Financial Service (IBFSL) is likely to announce a joint venture with a global insurance player in the next few days.

This follows the demerger of its stock broking business, a necessity for foraying into the insurance business, as regulators won't approve the presence of a capital market arm in an insurance company.

The Delhi High Court, on Friday, approved the demerger of the stock broking arm Indiabulls Securities Limited (ISL) from the parent IBFSL and the merger of the consumer financing arm Indiabulls Credit Services Limited (ICSL) with the parent IBFSL. The merger was mooted in August 2007.

ISL will be listed around mid-January. "The demerger will open a number of avenues for the group, such as insurance." said an analyst with a brokerage who didn't wish to be identified.

''Broking is still a limited opportunity, while insurance is a much larger business opportunity. ICICI Prudential has a valuation of $10 billion. The large players in the world are either into financing or insurance,'' added the analyst.

Merrill-Lynch in its February report estimated that private players in India alone would have asets worth $45 billion under management from $15 billion today.

ISL's listing will help the group in its efforts to set up an institutional desk. Indian brokerages, keen to enter the growing institutional business, are trying to rope in experienced hands from foreign brokerages by offering employee stock options (ESOPs).

Some months back, four key professionals reportedly moved from CLSA to India Infoline for a package of Rs 11 crore each and ESOPs worth Rs 10 crore each. The whole institutional team of HSBC Securities shifted to Antique Securities, while JM Financial bought the institutional business of ASK Securities.

Indiabulls is apparently trying to rope in teams from Merill Lynch and Citibank, and is holding negotiations with them in this regard.

''With ISL's listing, they have the currency to negotiate with these professionals,'' said an industry expert closely tracking the Indiabulls Group.

''The wealth upside for professionals is limited in a large brokerage. Often, it's the team which enjoys the franchisee and gets the business. They come as a team - the research guy comes up with an idea, the sales guy sells it to investors and the dealers execute the deal,'' said a senior executive with a broking firm.