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`Bigger correction is overdue in mid-cap stocks'

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Virendra Verma

Mumbai, July 3

MR ANAND RATHI, Chairman of Anand Rathi Group and former President of the Bombay Stock Exchange, has seen ups and down in his career.

Mr Rathi was in news in 2001 when he stepped down as President of BSE following allegations of talking to surveillance department during the stock market crisis in March 2001. After various court cases, most of the charges against him have not been proved claims Mr Rathi.

Back in the driver's seat, Mr Rathi wants his group to focus on wealth management services. He believes that real estate would give good returns to investors in the long term even as he remains bullish on the stock markets.

In an interview with Business Line, Mr Rathi shares his past experiences and future plans for his group.

Excerpts:

In 2001, SEBI suspended your group's operations. What kind of difficulties you faced when you re-started the operations? We did not face too many problems when we re-started, as most of our clients knew our position and believed in us. I would say we never lost confidence with our existing clients. So getting back into the business was not a problem.

Our top management at the directors level remained with us even when our operations were suspended. All the top management took a voluntary salary cut.

But the biggest challenge for us was re-building the team. But we have overcome this problem and now have staff strength of over 600 people compared to 150 before SEBI suspended the operations.

Is the group focusing only on the equity and debt markets or your horizon of business has gone beyond it?Anand Rathi group is into debt and equity broking. But this is just not our business focus. My focus for the group is wealth management, which involves solutions across global financial markets. This includes equity, debt, insurance products, foreign exchange, commodities and real estate.

Globally, wealth management is a big business and India has yet to catch up.

But the kind of services you offer are mainly done by foreign banks in India, do you think your group is capable of offering similar services?I feel that we are better placed than foreign banks, as for big investors who invest large sums of money, personal relations are more important. In a bank, the person handling a particular client can leave and the next person may not offer the investor the same kind of advice.

But in our case, clients who know well only come to us and they are more comfortable dealing with us than a large foreign bank.

Recently your group launched a real estate private equity fund, what is the reason for launching this kind of fund?We feel that real estate is a good investment in the long-term that provides good returns. Due to this, we have launched such a fund. The objective of this fund will be to invest in projects along with the builders.

Our focus will be mainly places near to IT and BPO companies. The fund would buy equity in the projects (residential and commercial) and whatever the profits made out of it, would be shared in the proportion of the equity.

Other area would be buying the properties and leasing out to companies. Our experiences show that leasing out the properties gives returns of around 12 per cent annually through rentals which is higher than bank's fixed deposits.

After 3-5 years, when the value of the property appreciates, we sell it.

Based on this what kind of returns this fund would give?Expectations are that on an annualised basis, 25 per cent returns are possible.

Stock market is at all time high. What is you view on it?The long-term view of the market remains bullish, but when the market goes up some reaction has to be there. But I feel that bigger correction is overdue in mid-cap stocks.

However, I feel that this category will continue to do well, as there would be re-rating of several companies in the wake of good performance.

(This article was published in the Business Line print edition dated July 4, 2005)
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