In my communication with you through these pages last year, I had laid out Religare''s assessment that the current phase of strengthening of India''s institutional framework and structural underpinnings will set the stage for sustained, consistent and broad-based growth over a multi-
decade period. It is encouraging to see this process being continued in a focussed and determined manner. The various reform initiatives - a remarkable increase in transparency in governance, productivity
gains from ease of doing business and encouragement of innovation, and a
move towards creating a truly seamless nationwide market, to name the major ones - coupled with favourable demographics and the drive and ambition of the people reinforce our belief that India will sustain its
superior growth rates for many years. It is no wonder that IMF refers to India as one of the very few bright spots in an otherwise gloomy world economy. All this portends well for the prospects of businesses generally in India, and particularly for the financial services industry, which is both an enabler and a beneficiary of high growth.
While the Indian economy has moved along the right trajectory during FY2015-16, it was not entirely immune to happenings in other parts of the world - disruptions from exacerbation of the down-cycle in major commodities, devaluation of the Chinese Yuan, tightening of US interest rates (albeit short lived), to name a few of the significant external events - did have some transmission effects on the Indian economy
through trade and capital flows. Yet, the economy did grow at a marginally faster pace than the previous year. There were
asymmetric outcomes in various verticals within the financial services industry - while the banking sector was weighed down by
stress in the portfolios and capital markets were lacklustre after the stellar run up in the earlier year, health insurance in particular
had an outstanding performance.
The mixed performance of the financial services industry notwithstanding, Religare continued to deliver positive outcomes. On a
consolidated basis, our revenue was Rs.4,503 crore, growing at 8% over the earlier year and Profit Before Exceptional Items and Tax
was Rs.535 crore, growing more than 10% overthe earlier year. Excluding exceptional items, we delivered Profit After Tax of Rs.225
crore, reflecting handsome growth of 47% overthe earlier year''s Profit After Tax ofRs.154 crore. We made exceptional gains of Rs.423
crore from divestment of our life insurance and asset management businesses, but these were more than offset by exceptional
provisions of Rs.696 crore, resulting in a reported Loss After Tax of Rs.48 crore. On an operating basis though, FY2015-16 was one
of Religare''s strongest years.
We had foreseen the vast opportunity in financing the growth of SMEs and our Lending Business was amongst the first NBFCs
to focus on the fast growing but underserved SME sector. The lead that we have in this segment has stood the business in good
stead as it closed the year with revenue of Rs.2,528 crore and Profit After Tax of Rs.295 crore, growth of 17% and 15% respectively over the previous year. During the year, the business has worked towards increasing the granularity of the portfolio thereby
building further resilience against sector- or borrower-specific events.
The Health Insurance industry in India has so far only scratched the surface of the opportunity, with low penetration, growing
awareness of health issues, greater access to treatment and the rising cost of healthcare that customers need to protect themselves
against providing all the right ingredients for secular growth. Leveraging the healthcare ecosystem of the group, Religare Health
Insurance has developed innovative products to address unmet needs of the customer. The original design of creating balanced
distribution is paying off, with all channels - agency, brokers, bancassurance, alternate and direct - contributing to growth. Gross
Written Premium generated by the business increased by 82% over the previous year and crossed the Rs.500 crore mark. While
the business is in its gestation phase and this results in losses on a reported basis, the loss after minority interests for the year is
lower at Rs.71 crore as against Rs.89 crore in the earlier year, indicating that the business is moving along the right trajectory.
For the Capital Markets, FY2015-16 was in hindsight a year of consolidation as the market digested the smart gains made in
the earlier year. In the face of stiff challenges posed by the market, the Retail Broking business reported revenue of Rs.469 crore
and Profit After Tax of Rs.23 crore, both marginally lower than the earlier year. Our Institutional Equities and Investment Banking
business continued to strengthen its franchise, emerging as one of the leading managers of Qualified Institutional Placements in
India. Our Wealth Management business maintains its position as a trusted advisor to its clients leveraging its Protection-Growth-
Aspiration (PGA) model.
We live in a world where rapid structural shifts are order of the day and businesses need to constantly reassess their strategies
and reinvent themselves. Religare has been keenly watching the evolving environment and has made some significant strategic
decisions. Firstly, we made a decision to dedicate our resources and energies to the most promising opportunities within the
financial services space and focus on the Indian market. In line with this decision, we have exited the Life Insurance business
during FY2015-16 and made a decision to exit the Global Asset Management business. Furthermore, our partners in the India
Asset Management business, Invesco Limited, expressed their desire to have complete ownership of the business and we have
exited this business soon after the conclusion of FY2015-16. Consequently, Religare will now be present in the Lending, Health
Insurance and Capital Markets verticals. Secondly, with our businesses in these chosen verticals having reached critical scale,
we believe the time has come for each of the three businesses to be independently listed on the stock exchanges. Independent
listing will enable each business to work on the basis of an independent strategy with the management of the business directly
accountable for outcomes thereby benefitting all stakeholders and allowing shareholders to participate in individual businesses
based on their assessment of the value generating potential of each business. The proposed reorganisation is subject to approval
of shareholders, regulators and judicial authorities.
There is renewed vigour in the Indian economy and we at Religare have renewed our focus on making the most of the opportunities
before us. We eagerly look forward to a Resurgent India.
With best wishes,