This reorganization exercise is a part of the ongoing efforts to further institutionalize Indiabulls Housing Finance Limited (IBHFL), the flagship company of Indiabulls Group and India’s second largest housing finance company (HFC) in the private sector. This reorganization is in addition to the proposed induction of Dr K. C. Chakrabarty, former Deputy Governor of the Reserve Bank of India and Mr. R. M. Malla, former Chairman of IDBI Bank. The two promoters Saurabh Mittal and Rajiv Rattan have decided to step down from the Board of Directors of IBHFL.
The Board of IBHFL wants to delink ownership from management and has decided to elevate the current CEO, Gagan Banga as the Vice Chairman and Managing Director of the company. This added responsibility is a step forward toward greater professionalism of the Board and indicates the strong intent of the promoters to empower, with accountability, the top echelons of the management team.
IBHFL is the country’s second largest housing finance company in the private sector and the Board felt that the induction of experienced financial markets experts will enable the Board to better handle the complexities which come with size, and also enable effective risk management as the company strives to continue to grow at 25%. IBHFL reported profits of Rs. 1,569 Cr in FY 2013-14. IBHFL has been growing at CAGR of 26% over the last 6 years and closed FY 2013-14 with a balance sheet size of Rs. 44,418 Crs. Indiabulls Group paid out Rs. 1,200 Crores as dividends last year and was ranked 10th amongst all Indian Private Corporate Houses for dividend payouts in FY14.
The reorganization exercise amongst the promoters will also allow IBHFL to be completely ring-fenced from the Power Business. Mr. Rajiv Rattan and Mr. Saurabh Mittal will control and supervise the Power business and Mr. Gehlaut will relinquish all control, management and supervisions rights of the Power Business. The businesses not controlled by Mr. Gehlaut viz. Indiabulls Power Limited (IPL) and Indiabulls Infrastructure and Power Limited (IIPL), will change their names and delete reference of ‘Indiabulls’ within their names.
This reorganization will bear very positive results for IBHFL as it strives to grow in size and stature and will empower the board to effectively govern through the presence of four executive and four knowledgeable independent directors. The reorganization will also enable the group to continue with its efforts of ring-fencing IBHFL from contagion risks of any other business besides bringing in specialized focus towards the real estate business and power business.
This amicable reorganization exercise will enable all three young entrepreneurs to focus on their areas of expertise, consolidate their shareholding of the companies they want to run on a long-term basis and continue to maximize shareholder value.
For IBHFL this is a key development, as a large and systemically important financial institution it is vital that the company maintains the highest standards of corporate governance. It is important that the board is comprised of people with demonstrated skill sets and relevant experience that actively involve themselves in risk management and strategic planning. Over the course of the last few years, large financial services companies are de-linking the role of their owners, who are the Non-Executive Directors of the Company from management and control of the operations of the Company. It is toward this end that IBHFL has inducted eminent bankers such as former Deputy Governor of RBI, Dr. K. C. Chakrabarty and former Chairman and MD of IDBI Bank, MR. R. M. Malla as independent directors subject to shareholders’ approval in the ninth AGM to be held in August. With coming on board of such distinguished stalwarts, not only will IBHFL benefit from their intellectual leadership, but it will also strengthen corporate governance befitting an institution of IBHFL’s size and scale.
With the steady growth of IBHFL across all business parameters, the balance sheet of the company has expanded to amongst the largest in the Housing Finance business. The realignment of promoter control, the induction of independent directors and the empowerment of the company’s management have set the company firmly on the path to be a large financial institution that is independently managed and run with the highest standards of corporate governance.
