Centrum Group Looks To Scale Up Insurance Broking Business

For Centrum Group, 2018 was one of the best years, as the diversified financial services firm wrapped it up with a string of strategic acquisitions, senior hires and a major divestment. The firm expects the run to continue this year, even as it plans to foray into insurance business and at a later stage possibly start an Asset Reconstruction Company (ARC). In an interaction with BusinessLine, Centrum Group Executive Chairman Jaspal Bindra talks about the road ahead. Excerpts:

Following the sale of the forex business, Centrum is flush with funds of about ₹1,200 crore. Do you plan to warehouse the amount or are you looking at investments?

I would say that the sale of the forex business was timely because it happened just before the BFSI sector witnessed uncertainties following the IL&FS debacle. For us as a group this sale brought liquidity and we were able to bid and complete the acquisition of L&T Finance’s supply chain loan portfolio of ₹650 crore. We have also made equity investments in our NBFC, housing finance, wealth management and insurance businesses.

Centrum had plans to foray into insurance and also start an Asset Reconstruction Company. What’s the status on that?

We like the insurance business. We currently have an insurance broking business, which has tie-ups with all leading insurance companies and is growing very well. We would like to scale up this business and subsequently venture into our own insurance products. The ARC business is in our consideration and we are looking at opportunities selectively.

For Centrum, 2018 was a busy year including acquisitions, sell-offs and recruitments. How do you see this year panning out?

From a growth perspective, we have doubled our wealth management AUM in the last 18 months and today it is in excess of ₹20,000 crore. Along with rapid expansion in India, we have also established our presence in Singapore and Dubai. Our lending assets are just above ₹2,000 crore. We feel quite good about having achieved this level in 18 months. We are currently present in 50 locations. We have started expanding our skill sets in traditional businesses of investment banking and institutional broking, as we feel they offer significant growth opportunities for the group. In 2019, we will continue to seize opportunities for growth through acquisitions, while continuing to grow organically.

Would you be keen on roping in a private equity fund?

Currently, we are adequately funded. For the ₹2,000-crore-book, our equity is at about ₹750 crore. So, the book is leveraged only 1:3 times. We, therefore, have no immediate need for additional capital to fund organic growth. However, as and when we go in for any acquisitions, we will look at external PE funding.

How hard has the IL&FS crisis hit the industry?

The IL&FS crisis has had serious repercussions on the BFSI sector. In spite of having an ‘AAA’ rating and pedigreed parentage, the company reached this state. This has led to doubt and uncertainty about the NBFC sector amongst investors. If this issue gets resolved effectively, confidence in the sector will be restored. Otherwise from a lender’s point of view, there are multiple investment options available.

Over the past few years, a lot of bankers including you have moved over to financial services sector. Are the global banks losing their charm?

If you look at the promoters of large domestic NBFCs such as IIFL, Edelweiss, Capital First, they were all bankers earlier. They then decided to move in to entrepreneurial ventures, as they had strong relationships with investors and clients. Today, seasoned Indian global bankers have the choices of continuing in leadership roles globally or explore entrepreneurial opportunities in India. In recent years, the growth of international banks has been curtailed due to the compliance and regulatory environment becoming far more stringent. Therefore, opportunities in India are far more compelling.

What’s the big picture for Centrum in the next five years?

At this point, I can say that we will be larger and have a wider geographical spread than we have today.

From our current presence across 50 locations, we could be at hundreds of locations and will have an increased thrust on growing our businesses digitally. We will look at more alliances and collaborations and continue to grow our client roster along with a larger and stronger talent base. With our strategic plans, internal strengths and the external opportunities, we are truly optimistic about rapidly scaling up all our businesses.