The Fully Integrated Financial Services Business Model of Future Capital Holdings

Topics: Dhirubhai Ambani, Reliance Industries, Mukesh Ambani Pages: 9 (3199 words) Published: January 1, 2010

Double or Quits

Kishore Biyani is India’s most successful retailer to date. And he wants to stay that way. Even if it means wagering everything he has built so far.

Is Kishore Biyani a retailer or a fund manager? That question might well be asked of him in the not too distant future. Over the last few months, Future Capital Holdings (FCH), led by CEO Sameer Sain, has stitched together a fully integrated financial services business model. FCH has already become the fastest growing start-up in the alternative asset management business in India with almost $830 million in assets. Now, it has big plans in insurance, retail lending and forex services. “Whether we have a consumer who wants to leverage future income to realise his aspirations today, or wants to save and invest, or buy protection for his family, we want to be a part of it,” says Sain. He believes that in 5-7 years, FCH’s bottom line will be bigger than the retail business! In the insurance business, the Future Group has managed to wrest a 74 per cent stake in a joint venture by investing just Rs 100 crore (its JV partner invested the same amount for a 26 per cent stake). “Italian Assicurazioni Generali, ranked 21 on the Fortune 500 list, is a good fit for us because they derive almost 17 per cent of their sales from mall assurance. They have also partnered another retailer in the Philippines,” says Sain. Biyani estimates that with just a 1 per cent footfall conversion rate, the insurance business would have over 2 million customers. That would earn him huge fees on distribution and catapult the company to amongst the largest private insurance players by way of number of policies sold. FCH has promoted an integrated retail financial services distribution company christened Money Bazaar that will be housed within all Future Group stores and malls. It will market credit cards, personal loans, mortgages and consumer durable loans. Raman Mangalorkar, head (consumer and retail practice), AT Kearney, says that a study in the Americas found that the cards business contributed most of the value of the retail business of large American and Canadian retailers as the core business was characterised by cut-throat margins. Perhaps Biyani is motivated by similar expectations. FCH will also distribute forex products and mutual funds. For its sub-prime financing business, it is in talks with potential partners who will hold a minority stake while pumping in money and contributing expertise. Also on the anvil is a $200 million-250 million hospitality fund. This will set up a chain of 30-40, three and four star hotels pan India. FCH will also launch hedge funds in addition to Kshitij 2, a domestic real estate venture fund, estimated to be around $80 million in size. It will also undertake corporate finance and advisory work and has set up Future Capital Special Situations (Investment) to do proprietary investments. The first such proprietary investment is a 47,000-sq. ft building in Peninsular Corporate Park at Lower Parel in central Mumbai, part of which will be self occupied. We are putting investors on notice.” That’s a surprising statement from a man who is about to raise funds for a high-risk Rs 4,000crore expansion. Kishore Biyani, 44, who controls the country’s biggest retail group, should be talking up his share price, not spooking it. But as he steers the Rs 1,993-crore Pantaloon Retail (India), or PRIL, into its next phase, Biyani, more than anyone else, knows there is no point trying to camouflage the scale of his wager. He is buying up more retail real estate than many Asian biggies. He is attempting a quick fire launch of 18 formats and over 3,340 new stores by 2010. (He...
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