If stronger players come in India banking, consumers will benefit because more competition leads to better pricing for savings accounts and loans. In the US, 48,000 citizens have one bank, which is 3 crore to one bank here. While the US economy is eight to nine times bigger, this number is 660 times. This is the macro picture. For me, this step is a big sacrifice. From my perspective, I have to bring my shareholding down to 15%, losing control and am completely dependent on what RBI allows me to do. I am losing all the power and also dividend income that I have. I am losing all this to make this institution a legacy for the next 100 years.
What is your business plan?
Our thinking around the bank is to provide strong focus on SME financing and housing. Bank of England gave us 40% controlling stake in Oak North Bank in 2015. Today, it is the size of LVB, with a loan book of more than Rs 20,000 crore and deposit base of Rs 23,000 crore without having any branches. In the process, thousands of jobs have been created through SME financing. If someone is open to having their books supervised by RBI and if they have a track record, why should they not be allowed to run a bank?
Where do you stand in terms of regulatory clearances?
I won’t be in a position to comment on our interaction with regulators because it is confidential. But there has been a lot of debate around what happened in 2013 and I want to give some hard facts on that. In 2013, there were 27 applicants and only two got licences. The others were not rejected but were told that there will be a specific policy framework to apply again which was then followed by regulations for on tap banking licences in 2016. Those regulations say 60% of the revenue has to come from financial services and track record etc. Over the years, Indiabulls real estateNSE 10.49 % business which used to be 50% is now less than 20%. Of the ?5,000-crore profits, the group makes, real estate contribution is less than 10%. My real estate business is shrinking and that is a key thing. Real estate is also not a forbidden business, but a legitimate business. Companies are dynamic in nature. Businesses change, financials change over a period of time.
Indiabulls and LVB announced this merger before approvals. Have you received some comfort from the regulator?
RBI will evaluate it on merit. They will examine whether we fit into their parameters threadbare once we apply after shareholder approvals. We qualify on every aspect, according to current policy framework. We don’t want any dispensation. Even on meeting SLR and CRR requirements, we meet them on day one with the liquidity we have. The cash with the company was in excess of Rs 27,500 crore. No dispensation is needed on an operating basis or from a regulatory point of view.
Was it open for you to apply for a fresh banking licence?
Anyone can apply for a fresh licence but, as I understand, there is an external evaluation committee needed, which is not there because nobody has applied. From our perspective, this opportunity came by, we figured out that we are a good fit as far as regulatory framework is concerned and, at the same time, we are getting access to an ongoing platform. We will not lay off even a single person. We have evaluated all these things before making the move.
RBI may ask for changes like cutting real estate exposure. Are you prepared to do that?
I am willing to do what RBI tells me to do. If RBI wants that I should give up real estate, I will give it up. It is not needed because the regulations are clear but, if they insist, I am happy to do that because my heart and passion lies only in financial services. That’s how my group from being 50:50 has reached to a 90:10 in terms of business and I know this percentage will only decrease. I am willing to give up real estate business to pursue financial services.
What was the impact of the liquidity crisis on your business? Your name also cropped up during that crisis a few months ago…
When a sector goes through a tough time, everyone gets painted by the same brush. But through the crisis, we have provided our liquidity position. We had cash of more than ?20,000 crore every single day despite the negative carry. Our FII ownership at 56% is the second highest behind HDFC and my shareholding is just 21.5%, so there is enough free float. If there is a knee-jerk reaction by some overseas investors and if there are no buyers, stock price comes down. There are people who want to benefit by selling short positions. Even now, with this merger, we expect a lot of complaints. We know our detractors will put their negative energies to work but we don’t get discouraged.
Who are your detractors?
There are many. They keep floating around theories about Indiabulls. But our track record speaks for itself. Our group has grown from post IPO market cap of Rs 250 crore in 2004 to Rs 65,000 crore today. Our returns have grown at more than 35% CAGR. Today, Indiabulls Housing has 618 relationships with financial institutions but some people, just out of habit or because of a case of sour grapes, are on the negative track. But we always focus on our work.