Religare, a financial services group based in New Delhi, is setting up shop in the Philippines, citing strong overseas demand for local stocks due to the country’s “attractive” investment story.
The Indian group recently obtained a license from the Securities and Exchange Commission to open a representative office in the Philippines, visiting officials said.
This is also part of Religare’s plan to establish a strong presence in Southeast Asia over the next five to 10 years.
Sutha Kandiah, Religare managing director of investment banking based in Singapore, said the Philippines was an attractive proposition given the benign inflation regime, an economic growth rate of between 6 and 7 percent, policy “certainty,” and favorable demographics.
“We’re putting our roots here,” said Kandiah, adding that the group would also look at other opportunities down the road, including operating a local stock brokerage house.
“It’s the best macro story in the region now by far, if not the best in the world,” said John Sturmey, Religare global head of equity capital markets based in Singapore.
This year, Sturmey said, there is a good chance that the Philippine Stock Exchange index may rise by another 20 to 25 percent, coming from last year’s 33-percent increase.
Despite the many big equities firms already present in the Philippines, Sturmey said, there is still room for Religare to sell local equities to the overseas market.
The strategy is to look for companies that are not usually covered by the big financial houses, he explained.
Religare’s local office is expected to open in the next six months.
Even before opening a Philippine unit, Religare has participated in equity deals of local companies, such as the follow-on offering of STI Holdings and the equity private placement in Philweb Corp. and Puregold Price Club Inc.
But setting up a physical office in the Philippines represents commitment to do more business in the country, the visiting officials said.
“There’s a sustainable business here for us. Even if it’s a small piece of the pie, it will be worth it,” Sturmey said.
Two years ago, Religare made a decision to set up an emerging-focused group. One of the group’s advantage, despite its relatively small size compared to the large western investment houses, is that it has no capitalization issues in its home market.
Religare, India’s largest retail broker, now has operations in Hong Kong, Singapore, London, Sri lanka, Dubai and Indonesia. It is also looking to expand in Malaysia and Thailand. Its sales turnover in Asia, excluding India, amounted to about $50 million.
“We genuinely believe in the Philippines as an opportunity,” Sturmey said.
About two-thirds of Religare’s business comes from investors operating out of Asia, while the rest is from Europe and the United States. It is selling mostly Asian equities such as those from China and India. It also sees the Association of Southeast Asian Nations (Asean) to be an attractive proposition.
“As an asset class in people’s portfolio, equities is underallocated,” said Kandiah.
Religare has a client base of about 500 institutions, including sovereign wealth funds, and hedge funds.
“Every single fund we talk to, they want to look at the Philippines,” Sturmey said.