Narendra Modi government’s demonetisation triggered financialisation of savings, which in turn helped the stock markets and mutual funds industry to bloom further, says Nirmal Jain, Chairman of India Infoline (IIFL) group. The billionaire founder of now India’s biggest private wealth management firm is very bullish on the outlook for the Indian economy. “India’s rise is unstoppable,” Nirmal Jain tells Ashish Pandey of FE Online in an exclusive interview. In a wide ranging interaction, apart from the major factors propelling the meteoric rise of Indian economy, he shares his vision for the company and strategy behind IIFL’s demerger. Nirmal Jain says that maintaining a transparent company structure assists a business in growing faster. He further says that upholding the highest governance standards has become much more important today than ever before.
Here are the edited excerpts from Nirmal Jain’s exclusive interview with FE Online.
IIFL plans to demerge the company into three separately listed businesses. What’s the strategy behind this?
We have three distinct businesses: NBFC, where our philosophy is retail lending and digital delivery; then we have Securities, where we do broking and investment banking; and third one is the Wealth and Asset Management business, where we are the market leaders. If you look at these three businesses, all of them have a very different set of clients, and people managing them.
Historically, what most companies would have done is maintained a holding company structure and controlled it through a little bit of convoluted structure. Such practices are not good from the perspective of transparency, highest governance standards and compliance.
What we realised, in modern times, when governance is gaining much importance, a clean structure with separate entities is good from a transparency perspective. It allows us to hire senior people and incentivise them with ESOPs and stocks of their own business. If you get quality people, you can grow faster. Right from the very beginning, we have been very transparent and clean.
But, why are you coming up with a demerger now. Why didn’t you go for it before?
Unless we had a certain size for all three businesses, we couldn’t get them listed separately, as they were too small. Till a business attains a critical mass that is good enough for liquidity and to get listed separately, the listing can wait. A post-tax profit of more than Rs 200 crore for each of the three businesses is something which was basically in our minds.
What was the impact of demonetisation on stock markets and mutual fund industry?
After demonetisation, financialisation of savings has begun. The money moved from unproductive assets such as real estate and gold to productive assets like financial securities which also created employment opportunities.
What is your long-term outlook for economy?
It is undoubtedly very positive and strong. India’s rise is unstoppable. The most favourable factor in India is the demographics. The millennials (aged 18-36 years) are around 34% of the population, but comprise 60% of the workforce and 70% of household income. This segment is growing rapidly. In this backdrop, the economy is poised to grow well over the next few years.
The government has done a slew of reforms with good intent, such as the goods and services tax (GST) implementation. They can have a positive impact if they are not derailed or cut short. The crackdown on shell companies has reduced cash and black money component in the economy. The government is now linking Aadhar and Permanent Account Number (PAN), which if continues, will have a complete trail of transactions. All this augurs well for the economy in the long run. When the money comes through formal channels, it can create jobs.
What are the major triggers for the stock markets going ahead?
Oil prices, monsoons, upcoming general elections and geopolitics.
What are the new businesses that IIFL is coming up with in the financial services sector?
We have applied for Asset Reconstruction Company (ARC) license. We think, there is a tremendous need for that. We are waiting for the RBI to give us the approval.
This interview was originally published on 26 June 2018 on www.financialexpress.com