Future Capital sees its financial stores raking in Rs1,000 crore business

A vibrant and youthful company that provides great convenience and great service—that’s the image V Vaidyanathan, vice-chairman and managing director of Future Capital Holdings (FCH), wants to project. For fiscal 2012 he is eying a loan book size of `5,000 crore. With India growth story continuing, there would be continuous demand for credit in the market by businesses. In an interview with DNA he shares his company’s plans for the current fiscal. Excerpts:

You moved from an established company to an emerging company with ownership stakes. How has been the experience in the last few months?
FCH is not a start-up. It’s an existing, profitable company with a net worth of over Rs750 crore. We have built an excellent team of senior management personnel from big corporates like Citigroup, JM Morgan Stanley, Standard Chartered Bank and Merrill Lynch. Our business is really doing very well; we have doubled our business this financial year, so all good things at this point of time for us. And the stage is well set for a very good ride ahead.

What are 3 most important things you did after taking over?
We already had good business platform, we scaled it up. Second, we sharply defined the business focus. Third, we have done certain balance sheet activity, which has released capital and has given us a lot of room to breathe and grow.

Under your leadership what are your plans for FY12 in terms of loan book size, capital raising, employees, branches etc?
For FY12, a Rs5,000 crore loan book will be a fair guess compared to Rs2,900-3000 crore in FY11. We won’t need to raise any equity capital because our capital adequacy is quite high — about 23%-24%. We are all set to open 100 financial superstores this financial year. We may have to recruit 200-300 employees as we build this up.

You have a presence in loan against gold, loan against property, consumer durable loans and many other areas. But there are many players present in these areas. So what is your USP?
Even without the new financial superstores, we are doing a business of disbursals of about Rs150-200 crore every month. With the financial stores, we will have more access to customers, so our cost of origination will be much less than the rest of the financial system. And this reduced cost of operation will be our USP, which ultimately will benefit our customers in the form of offers.

Which are the areas you would be focusing in FY12? Any new areas of business are you planning to venture into?
Well, the customers usually have four needs — borrowing, investing, protecting, and financial planning. We can meet all these needs as they walk into the stores. SME loans to traders against pledge of property will be one of the focus areas. Home loans, auto loans and gold loans are other areas. We expect the stores to generate Rs1,000 crore business by the next financial year. There are millions of customers and we can’t do enough justice to the traffic anyway.

With the cost of borrowing expected to rise further as more rate hikes expected from the RBI, what impact will it have on your customers?
With the India’s growth continuing, there is a continuous demand for credit in the market by businesses. All businesses — whether an SME or mid-size corporate — want to borrow to invest, as they can see demand coming through continued consumption. For example, even after we raised our interest rates by 100 basis points (Bps) last quarter, business was never an issue. Also, we can’t be too sure that rates will keep going up; if food inflation comes down there could be a let up in the raises too.

Do you see growth getting impacted due to high interest rates?
Rate hikes of 100 basis points have already happened during the last few months, that have not affected the growth story at all. May be another 50 bps also wouldn’t affect it as the core demand continues to be strong. So I don’t think it’s a very big issue at this point in time. Liquidity too has eased.

What are the major changes you are planning to introduce in your organisation in the next few years and where do you see it heading? What image you would like to create in the eyes of the customers?
Well, basically we mapped the opportunities. Then we built our team according to the opportunities. The opportunities we have mapped are evergreen, as people will always need loans. Businesses will also need loans to grow. Further, we want to keep our cost of operations really very low. The image that we would like to have is that a company that provides great
convenience, great service, and is seen as vibrant and youthful.

Is Future Group planning to enter into banking?
Any guesswork at this stage will be speculative. We would like to see the eligibility norms and the guidelines first, and then we will make up our mind.

Can you give us details about restructuring and holdings of the company?
We have progressed. We merged Future Capital Holdings with Future Capital Financial Services that gave us a stronger balance sheet. We have sold our stake in the forex joint venture. As part of the deal, we took full control of the wealth and broking company. The new management team was hired in anticipation of this deal happening. We are now replacing old borrowing, which was raised when we were not rated, with new borrowings.