The Hindu Business Line : ‘Future Group, Centrum may draw upon each other’s strength’

Coimbatore, March 26 The investment of Future Group in Centrum Capital Ltd and its two subsidiaries, involved in a range of capital market and investment services, is a win-win situation for both as each could draw upon the strength of the other, according to Mr Rahul Rege, CEO-Retail, CentrumDirect Ltd. CentrumDirect will expand its network in the country to more than 100 branches before the end of the current calendar year.

Speaking to Business Line in Coimbatore, after the opening of the branch office of CentrumDirect at R.S.Puram here, he said his group was earlier in touch with a couple of people who were purely financial investors.

But that did not make sense because his company was not looking at offloading some stake just to make money.

The idea was ‘to get a partner who was interested in the business’ because the company was conscious of the fact that one business cycle was over and Centrum was ‘looking at difficult times ahead at some point, nobody knew when’ and the company had to prepare itself for that.

His company was keen to get a partner who would ‘allow it to take the business to the next level’.

If one wanted to have a growth model, it should be about scale and to reach that objective it was not enough to have only financial partners but those who can ‘partner your growth’.

The Future Group has a strong balance sheet, has great brands and has products that complement the basket of Centrum’s products and has a distribution network and a captive retail client base that could be targeted by Centrum for its business.

Mr Rege said the valuation of the Centrum group was around Rs 1,400 crore and the Future Group has invested Rs 220 crore for the 10 per cent stake in the holding company Centrum Capital Ltd and for 50.1 per cent stake in the forex distribution and wealth management divisions.

He saw great synergy in the existing operations of both the group companies and the coming together was a ‘win-win situation’ for both of them as each could draw upon the strength of the other.

Asked whether any name change was in the offing he said ‘we will do some co-branding’.

The game plan was to be present across all financial services.

Out of the total investment of Rs 220 crore by the Future Group, the investment into the subsidiaries amounting to Rs 100 crore has already come and the balance amount of Rs 120 crore, forming the investment in the holding company, would come in three months when all approvals are expected to be obtained.

He said there was no depth in the capital market today which was likely to cause a ‘lot of pain’.

Other than sentiment or hype, the crucial segments in the market are the jobbers and arbitragers who have been hit badly over the years since the cost of transaction has gone up for them significantly.

As the impact cost has gone up, they are not transacting as much as they did earlier. Because of STT, he feared bigger impact from April since the tax treatment will change.

Mr Anand Kumar Gupta, Executive Director-Regional Head, South, Centrum Broking Pvt Ltd, Bangalore said earlier that STT was treated as advance tax that was deductible from the total tax payable.

But hereafter it would be treated as business expense and could be deducted from the total income before calculating tax payable, thus reducing the tax benefit substantially.

Mr Rege said the jobbers/arbitragers are ‘extremely crucial’ to the market and any reluctance on their part to trade would lead to erosion in trading volume.

Day traders account for nearly 40 per cent of the daily trading volume in the market and their absence would push up the impact cost of both buy and sell orders.

He expected the current calendar year to be ‘very, very docile’ for everybody.

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