Indiabulls’ diversification into unrelated businesses could hamper its stock broking business
The growth trajectory of the Indian insurance sector
is all set to soar high. All thanks to liberalisation, competition and now diversification that has forced biggies in the financial domain to look towards this highly untapped sector with great interest. No doubt, its low penetration level (at 3% of the GDP) coupled with the fact that only 20% of the total insurable Indians have a life insurance cover provide players a perfect launch pad for growth. Considering the fact, broking firm Indiabulls, which entered the fray recently through a joint venture (74:26) with French insurance major Societe Generale, aims to tap 2-3% of the domestic life insurance market by 2010. A good move when the thriving insurance sector (growing at a CAGR of 175%) is all set to reach Rs.2 trillion by 2010 from Rs.500 billion at present (Assocham). Even their target to collect Rs.10 billion as premium in their first year and Rs.50 billion in next three years looks achievable when one takes into account expected growth of 140% in the private sector insurance business.
But, as Indiabulls diversifies into large scale growth areas, one is left pondering on the fate of the mother business of securities? “Diversifying into high value added products and services is another way to maintain our leadership position,” is what Sameer Gehlaut, CEO, Indiabulls has to say. As regulations don’t allow a capital market arm in the insurance business, Indiabulls necessarily will have to demerge its stock broking business. However, the primary question doing the rounds is whether or not their diversification into related as well as unrelated business domains along with such demergers will finally pay off.
Actually, there is another critical logic besides maintaining leadership. The company has been focusing on building multiple businesses to mitigate cyclicality in earnings and as the demand for financial products grows, Indiabulls is further expected to unlock the value of the securities business. While all these seem to be good, the company has to be wary of the extremely competitive insurance sector, where there is little scope for product differentiation in insurance.
Certainly their real estate venture has been doing well (thanks to expected sectoral CAGR of 25-30% over the next five years); but what about insurance? “We have a strong distribution network and this will help us operate on a large scale with efficiency,” remarks a company official. Also Societe Generale, its partner, is not new to the Indian landscape; its long standing JV with SBI can be leveraged by the new entity. In fact, the company is planning to be amongst the top three by 2010. Comments S. Rao, Sr. Analyst, Arihant Capital, “they plan to emerge as an integrated financial service provider. Considering their distribution network and experience with Max New York, diversifying into insurance is definitely a rational decision.” Insurance is capital intensive, but for Indiabulls, whose PAT has witnessed a y-o-y growth of 82%, it shouldn’t be a problem. Even analysts are betting big on Indiabulls’ insurance business and seem to be keenly looking forward to their other proposed new ventures.
Still, Indiabulls must tread with caution. With well established incumbents and many more queuing in, even this relatively mundane (as compared to their stock broking business) insurance sector can offer many more thrills than they assume they are ready for.
The growth trajectory of the Indian insurance sector
is all set to soar high. All thanks to liberalisation, competition and now diversification that has forced biggies in the financial domain to look towards this highly untapped sector with great interest. No doubt, its low penetration level (at 3% of the GDP) coupled with the fact that only 20% of the total insurable Indians have a life insurance cover provide players a perfect launch pad for growth. Considering the fact, broking firm Indiabulls, which entered the fray recently through a joint venture (74:26) with French insurance major Societe Generale, aims to tap 2-3% of the domestic life insurance market by 2010. A good move when the thriving insurance sector (growing at a CAGR of 175%) is all set to reach Rs.2 trillion by 2010 from Rs.500 billion at present (Assocham). Even their target to collect Rs.10 billion as premium in their first year and Rs.50 billion in next three years looks achievable when one takes into account expected growth of 140% in the private sector insurance business.But, as Indiabulls diversifies into large scale growth areas, one is left pondering on the fate of the mother business of securities? “Diversifying into high value added products and services is another way to maintain our leadership position,” is what Sameer Gehlaut, CEO, Indiabulls has to say. As regulations don’t allow a capital market arm in the insurance business, Indiabulls necessarily will have to demerge its stock broking business. However, the primary question doing the rounds is whether or not their diversification into related as well as unrelated business domains along with such demergers will finally pay off.
Actually, there is another critical logic besides maintaining leadership. The company has been focusing on building multiple businesses to mitigate cyclicality in earnings and as the demand for financial products grows, Indiabulls is further expected to unlock the value of the securities business. While all these seem to be good, the company has to be wary of the extremely competitive insurance sector, where there is little scope for product differentiation in insurance.
Certainly their real estate venture has been doing well (thanks to expected sectoral CAGR of 25-30% over the next five years); but what about insurance? “We have a strong distribution network and this will help us operate on a large scale with efficiency,” remarks a company official. Also Societe Generale, its partner, is not new to the Indian landscape; its long standing JV with SBI can be leveraged by the new entity. In fact, the company is planning to be amongst the top three by 2010. Comments S. Rao, Sr. Analyst, Arihant Capital, “they plan to emerge as an integrated financial service provider. Considering their distribution network and experience with Max New York, diversifying into insurance is definitely a rational decision.” Insurance is capital intensive, but for Indiabulls, whose PAT has witnessed a y-o-y growth of 82%, it shouldn’t be a problem. Even analysts are betting big on Indiabulls’ insurance business and seem to be keenly looking forward to their other proposed new ventures.
Still, Indiabulls must tread with caution. With well established incumbents and many more queuing in, even this relatively mundane (as compared to their stock broking business) insurance sector can offer many more thrills than they assume they are ready for.
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foreign policy challenge for India is at the moment. It is a challenge that will determine the future of India – good, bad or ugly – for the next 50 years or so. The challenge is tackling an imploding Pakistan. The savage assassination of Benazir Bhutto clearly shows that either the military regime led by General Pervez Musharaff was instrumental in ordering her execution, or Musharaff is no longer capable of reining the Jehadi monsters that were unleashed by the late General Zia-ul Haq. Either way, India and the world face the frightening prospect of a rogue nation, its institutions and its nuclear weapons falling into Jehadi hands. Make no mistake: were that to happen, the first target will be an Indian city because the Indian establishment has repeatedly proven that it is a ‘soft state’ that meekly shrugs its shoulders and accepts terrorist attacks, which are implemented with impunity.
all governments got re-elected or elected only on the basis of their performance on various governance indicators. Such indicators, as defined by The World Bank, include accountability with respect to civil liberties, political stability, effectiveness of the government, corruption, and the rule of law. India’s former President, A.P J. Abdul Kalam agrees, and feels that “when a political leader performs in a state and realises economic prosperity of the state using development politics, he or she will definitely succeed in getting re-elected.” Utopian is what we mentioned, and many pockets of global politics, like social relationships, are a million miles away from this logic.
administration. Nitish Kumar, who had been at helm in various ministries at the Central Government, finally realised his dream in 2005, when NDA finally emerged as the victorious combination in the November elections. Nitish had earlier got an opportunity to get ensconced on the CM’s chair in 2000, however, this lasted only for seven days, when Laloo Prasad Yadav, his erstwhile friend, snatched away the opportunity from him. Earlier in 2004 too the opportunity had eluded Nitish by a whisker, when the President’s rule was finally declared in the state. A civil engineer by profession, Nitish has image of honest politician. During the days of Emergency in the 1970s, following the call from Jai Prakash Narayan, Nitish had plunged himself into politics. From 1974-77, he remained in the forefront of student politics in Bihar. In 1974, he was jailed under the Maintenance of Internal Security Act (MISA).
Maharashtra Government had come up with new policy of marriage counseling and family planning for couples. Satara with a population of 3 million, records 25,000 weddings annually. Moreover, about 90% of newlyweds conceive during their first year of marriage. The policy entitles newlyweds to receive “Honeymoon Package” of Rs.5,000 if they delay childbearing for a year, and Rs.7,500 if delayed by two. The newlyweds need to register with the government healthcare centre and will then be provided with marriage counseling, free contraceptives and advice on childcare etc. The registered couples will undergo medical check-ups every three months, to make sure that no unprotected sexual activity is going on. The district authorities targets 20% of the couples to enroll for the scheme which would lead to delaying the birth of 5,000 babies.