The Hindu Business Line : Religare makes open offer for Hichens

The acquisition by Religare Capital Markets, a wholly owned subsidiary of Religare Enterprises, of one of UK’s oldest broking firms – Hichens Harrison & Co, if successful, may allow the Indian brokerage to obtain more investment banking mandates in Indian markets and widen its institutional business, by providing a trading platform for the UK firms’ institutional clients.

Religare Enterprises, which listed in the Indian markets in end 2007, currently derives the lion’s share of its revenues and profits from retail broking and funding operations, though it has proposed forays into businesses such as insurance, wealth and asset management through tie-ups with players such as Aegon and Macquarie.

Given that the retail broking business tends to have a high dependence on stock market conditions, a broadbasing of Religare’s revenues through the addition of a bigger investment banking business and more institutional clients, may be positive in the long-term.

Religare plans to focus on mid and small Indian companies for its investment banking business and the Hichens acquisition may facilitate it in bagging mandates for overseas listing and offers for these Indian corporates.

open offer

Religare is making an open offer at 285 pence per share for Hichens’, valuing the firm at about Rs 440 crore (£55.5 million ). This offer values the UK firm at about 13 times its 2007 earnings. This is not an expensive valuation by Indian standards, though the recent market correction has substantially trimmed valuations for Indian financial services firms. Religare itself trades at about 30 times its estimated current year earnings at this juncture. How Religare is proposing to fund the acquisition cost for this all-cash offer is not clear at this juncture. Religare’s initial public offering in November 2007 raised about Rs 140 crore. The offer proceeds were to be deployed mainly in funding the lending and retail finance businesses and in expanding the company’s branch network.

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