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The man behind Indiabulls' success
Shyamal Majumdar & Raghavendra Kamath
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April 23, 2008

When he moved into a cabin that was so small that the table occupied more than half the space, the joke in his office was that the lion had finally been caged. The "lion" in this case is a soft-spoken 32-year-old who still looks boyish enough to be an MBA student at his alma mater, the Goa Institute of Management.

Gagan Banga says the tin-roofed office near the Hauz Khas bus terminal in Delhi just didn't have enough space for a cabin, but his bosses made one for him specially as his job as the marketing head of a start-up company like Indiabulls [Get Quote] required him to scream 24x7. His colleagues were relieved when he was finally shifted to the "cage".

We are at the Taj Mahal Hotel's coffee shop, and Banga, who is now the CEO of Indiabulls Financial Services and doubles up as the public face of the group, says he "eats to live and isn't somebody who lives to eat". As if to prove his point, Banga orders a sandwich even before the steward could give the menu card. We settle for biryani.

Indiabulls' journey from the congested office near Hauz Khas to the tony S P Centre in Colaba (the company will shortly move to the top three floors of the 25-storey commercial complex it is developing in central Mumbai) has taken a little over eight years. In the process, the middle-class son of a retired Air Force officer is now worth over Rs 100 crore, courtesy the generous stock options.

Two years ago, Banga had created a new price point for Mumbai's luxury residential property space after he bought a flat in Cuffe Parade's Maker Towers B from Citibank for Rs 7.2 crore at a rate of Rs 37,500 a square foot. The price of the flat has gone up almost two times since then, and Banga says God and Indiabulls have been kind to him as well as to at least 200 of his dollar millionaire colleagues in the company. "I can go to a plush restaurant and order food without having to look at the right side of the menu. But after a point, money is no longer a big deal," he says.

He thanks his stars for making the right career choice and joining a company which, in 2000, had nothing but the dreams of its three promoters, all of whom were from IIT Delhi and in their early twenties. "I liked their entrepreneurial spirit and it helped that all of us were in the same age group. I believed we can achieve what looked impossible at that point in time," he says, taking a generous bite of the sandwich.

The young man was spot on. The market cap of the Indiabulls group has surged 19-fold to Rs 25,546 crore since its September 2004 initial public offer. The benchmark Sensex has risen three-fold in the same period.

This has meant unimaginably hard work and no holidays. The only break he remembers is a three-day work-cum-holiday trip to Dubai sometime back. But Banga has no regrets, as this is inevitable for a start-up company which had to get noticed in the midst of fierce competition.

He remembers how he had to personally visit the offices of elderly traders in Mumbai to teach them the basics of online trading. Most of them were mortally afraid of trading on the net, but he managed to teach them how to trade, which buttons to press to place orders and sell/buy shares.

This early experience is the reason why Indiabulls, which has cornered about 30 per cent of India's online trade volumes, still persists with a hybrid model. While its online revenues are growing faster than its offline revenues, Banga justifies having a 3,000-strong army of relationship managers all over the country. "Clients investing large sums want to see something beyond a website - they want to see an office and want to interact with people," he says. The sandwich is long over and Banga talks slowly as we grapple with the biryani which tastes like standard five-star fare.

Indiabulls, which started life as an online brokerage, has been expanding at a furious pace to become one of the largest non-banking financial companies in the country - all in just eight years. As a group, it has moved into areas ranging from infrastructure and power to financial services, real estate and retail. Insurance and commodity trading are the other two areas it wants to get into soon.

Hasn't it been a bit too much in too short a time? Banga disagrees. It's nothing but meticulous planning that has made Indiabulls the largest retail brokerage; the largest NBFC in terms of disbursements; the third largest real estate company by net worth and market capitalisation (the group has a land bank of 4,000 acres at an acquisition cost of over Rs 2,250 crore); and the fifth most capitalised private sector power company. "Our aim is simple: we have to be amongst the top two or three players in whatever business we are in," he says with apparent conviction.

One of the main reasons for the group's success is that it still retains the financial discipline of a garage start-up. "We still prepare daily balance sheets and daily profit & loss accounts of every business that we are in. This helps ensure that we are not talking in the air," he says.

Banga excuses himself for a while to attend to the incessant mobile calls, and orders coffee. Does the bear market worry him? The master salesman says Indiabulls' business model has been drawn up keeping a bear market in mind. "We find that it is easier to increase market share during the worst times. Clients are not easily acquired during a bull run because it typically takes six to eight days before all the formalities of migrating to another platform are completed. During such times in a bull run, the market can typically move up by 10-15 per cent, so opportunities might be lost," he says.

What about the concern over rising defaults in a high interest rate scenario? Banga has a readymade answer for this one too. Indiabulls mostly operates at 50 per cent lending. So the risk is minimal. Besides, the company is quite choosy with the profile of the average borrower. "Anybody who is buying a house for Rs 50-55 lakh and taking only a Rs 25 lakh loan against his property is the safest group to lend to," he says.

As the conversation veers towards Lakshmi Mittal's angel funding, Banga, for a change, is all wide-eyed and his tone is reverential. The steel baron bought into the Indiabulls story and invested $1 million at Rs 5 a share in February 2000. It was Mittal's first investment in India and that bet has yielded returns of a phenomenal 100 times.  "Mittal took a call when most others didn't know what India is all about. It was more of a vision call, rather than a micro call on the country," he says.

It, however, hasn't been roses all the way and we remind him of the run-ins Indiabulls has had with the Securities and Exchange Board of India. One of the charges was that the brokerage played around with the portfolio of retail investors without their knowledge.

Though the company managed to come out unscathed every time, Indiabulls has been proactive to ensure that the mud doesn't stick. To counter such negative perceptions, the company records every single call that comes into its 400 broking branches nationwide. Some 6,000 lines are recorded and archived daily. It's an expensive solution, which costs Rs 10 lakh per day. "But that's small change as our reputation has to be protected", he says.

As we walk towards the hotel's foyer, Banga says his only regret is being unable to spend more time with his daughter. "She is her mom's daughter for six days a week, but is the centre of my universe on the seventh day," he says, as the silver-coloured Mercedes rolls in for the two-minute drive to his office.

It seems the lion manages to break free from his cage - at least on Sundays.

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