While applying for fresh licences requires very deep pockets, IndiaBulls.com is looking at the cheaper acquisition route and has earmarked Rs 10-15 crore for the takeover of a bank. Since the primary aim is to acquire a licence, the acquisition target will be an old private bank with a paid-up equity of around Rs 20 crore. Says Mr Gehlaut: ``We would be looking for an equity swap.'' The e-broker is venturing into banking to capture customer loyalty by offering a full-service portfolio.

Following the acquisition, Orbis Infotech will be restructured and have three 100 per cent subsidiaries. Orbis Securities Pvt Ltd will take care of the brokerage and depository services. The second subsidiary will be an asset management company-Orbis Infotech applied for an AMC licence in October 2000 and expects to get approvals by the first quarter of 2001.

The banking operations will be the focus of the third subsidiary. IndiaBulls' focus will be on converting the acquired bank into a `virtual bank' and focusing only on clients interested in the equity markets.

One of the direct benefits of the takeover will be the acquisition of customer assets and access to low-cost capital for funding IndiaBulls' margins lending business. Margin-lending is slated to account for 30 per cent of IndiaBulls' total revenues in the next 12 months. Says Mr Gehlaut: ``The virtual bank will offer cash management accounts to our customers to optimise interest rates. This is in line with our vision to be a full-services brokerage house.''

The dotcom has already begun an all-India search and claims to have ``initiated dialogue''with a bank based in the South. It is expected that Arthur Andersen will be brought in at the due diligence and regulatory approval stage.

In order to win approvals faster, Orbis Infotech has already moved an application with the RBI for registration as a non-bank finance company (NBFC). It expects to be registered as an NBFC sometime later this month.

The acquisition will be funded through a two-part deal: while IndiaBulls will pick up a controlling stake in the bank, in turn, it will offload equity to a new strategic partner. While Mr Gehlaut admits that IndiaBulls has already found a ``private equity fund based outside India'' which is interested in funding the acquisition, he refuses to share specifics.

In terms of the corporate vision, the dotcom claims that while it began operations by attracting clients through e-trading, the growth strategy hinges on gathering clients' assets and managing them effectively. A key issue, however, is to ensure that the clients have the comfort factor of liquidity in return for parking their assets with IndiaBulls.

However, currently, with the e-trading model, while IndiaBulls offers liquidity within two days, it has no way of ensuring real-time crediting of money into a client's account. The acquisition of a bank will allow IndiaBulls to get around regulatory restrictions-in India, cheque-books can currently be issued only by banks, for example.

IndiaBull has strategic alliances with UTI Bank to provide integrated banking services and Citibank NA to provide margin-lending services.

IndiaBulls, which was launched in May 2000 by founders Mr Sameer Gehlaut, Mr Rajiv Rattan and Mr Saurabh Mittal, raised its first round of financing in February 2000 from LN Mittal Internet Ventures and Transatlantic Ventures.

It then raised an additional Rs 10 crore from the Infinity Venture Fund and existing investors in November 2000. IndiaBulls has a presence in 11 cities and claims to have achieved cash breakeven in September 2000. With 21,000 registered users, it claims to have an average daily online trading turnover of more than Rs 60 million since December 2000.