Dear Shareholders,
Since the Global Financial Crisis, the pace of change in the world of
business has greatly increased and the direction of change is less
predictable. Businesses today are faced with an element of' unknown
unknowns' and this underscores the need to be better prepared for the
future than we have been used to so far. At Religare, we devoted FY12
to ensuring that our portfolio companies are better prepared, to
getting them future-ready.
Religare's Lending business is focused on providing growth capital to
the Small and Medium Enterprises (SME) sector and continues to improve
performance on all key parameters - book size, net interest margin and
portfolio quality - quarter after quarter and year after year. The SME
sector forms the backbone of the Indian economy and our focusing early
on developing products & services that are tailor-made for this sector
places us in pole position to tap this massive opportunity that is
already unfolding.
The Retail Broking industry is undergoing changes that are
fundamentally altering the nature of the business: industry structure
has changed dramatically, volatility has become the order of the day
and customers are more discerning. We believe that to be successful in
this business in future, companies must have low fixed costs, embrace
technology in every aspect of their business and be able to deliver
customized solutions on a large scale. We have set our Retail Broking
business on the path to becoming exactly this type of an organization -
agile and capable of swiftly responding to changes in markets and
customer needs.
Our Capital Markets business continues to grow and strengthen the
franchise by adding more clients and completing some notable
transactions in Singapore and India. However, the business has been
facing challenges that are cyclical in nature - trading volumes and
deal flow have declined in response to the persisting uncertainty and
lackluster sentiment, but will return once economic activity picks up.
Religare has responded by adjusting the size and footprint of the
business which will ensure better outcomes in the short-term while
maintaining the long-term health of the business. Furthermore, the
prevailing environment has resulted in the breakeven horizon for this
business shifting further, requiring us to make investments for a
longer duration. In light of the extended horizon for attaining
profitability, Religare's Promoter Group has undertaken to fund this
business directly from outside Religare, while the equity interest
continues to remain with us. This arrangement ensures that the Capital
Markets business will receive the necessary funding, while Religare
Enterprises has the flexibility to raise capital for businesses other
than RCML in the future.
Our Asset Management business, besides channeling domestic savings, has
won mandates for managing funds from overseas investors on the Indian
markets. We have stepped up our efforts to raise the assets under
management from both domestic and offshore investors. The business has
attained a scale at which it has become profitable and further growth
in assets will reinforce the profitable trajectory that we have
established.
In our Life Insurance business, we' re making sure that our plans are
aligned to the current realities, so that we deploy capital judiciously
today and get the maximum value for our investments tomorrow. On a
related note, we have received regulatory approval during FY13 to
commence our Health Insurance business. This is a business that will
combine to great advantage, the collective experience of the extended
Group in both its focus areas: healthcare delivery and financial
services. Our ability to put the entire muscle of the Religare
distribution platform behind the launch of this business is a
validation of our philosophy of building a one-stop shop for financial
services.
The rapid growth that Religare has experienced in the last few years
had resulted in fragmentation and overlaps in corporate functions
across the portfolio companies and a complex system of cross charges.
To remedy this, we have carved out the Corporate Center and centralized
it in a new entity known as Religare Corporate Services Limited.
Reorganizing the Corporate Center in this manner has led to greater
efficiencies, a more responsive organization underpinned by a Master
Services Agreement that defines the minimum service levels, and a
simple and transparent charging mechanism for the portfolio companies.
Religare has always believed in investing in leadership capacity and
core capabilities in advance of scale so that they become enablers of
rather than constraints to growth - the new centralized Corporate
Center will ensure that we always have sufficient capacity for growth.
When I look back at FY12,1 experience a sense of satisfaction from the
fact that this year has seen Religare prepare its portfolio companies
for the new realities resulting from the evolving environment. As the
old saying goes, the future belongs to those who prepare for it today.
Religare is getting future-ready.
With best wishes,