From private equity to insurance, asset management to equity broking, the Aditya Birla Group is present in almost all segments of the financial services sector. In an interview with Niladri Bhattacharya and Somasroy Chakraborty, Chief Executive (financial services), Ajay Srinivasan, says the company plans to set up a financial holding company once the guidelines are finalised. Edited excerpts:
The Reserve Bank of India (RBI) has released a discussion paper on the structure of financial holding companies in India. Since the Aditya Birla Group has seven companies in this sector, would you consider setting up a financial holding company?
We would look at setting up a holding company, once the guidelines are released. We actually have two levels of a holding company now — we have a holding company which holds financial services. Aditya Birla Nuvo also acts as a holding company for several businesses. So, we already have a holding company in place. Once the guidelines are out, we need to get a formal approval from RBI for our financial holding company. Our current structure broadly conforms with RBI’s proposed holding company model.
The Aditya Birla Group is also interested in setting up a bank. Where do your plans of foraying into the banking sector stand?
We are waiting for RBI’s final guidelines. Once these are released, we would take a call. There are some issues in which more clarity is needed — whether or not there would be two types of banking licences, what the capital requirement would be and what the minimum holding for promoters would be. Till the guidelines are out, these would remain conjectures. However, the banking business fits with our strategy of being present in all segments of financial services.
Aditya Birla’s financial services businesses reported improved earnings in the last financial year. How do you plan to sustain and expand your earnings this year? Which businesses would be the key growth drivers?
In 2010-11, our consolidated revenue stood at Rs 6,296 crore, a rise of seven per cent over the previous financial year. The profit before tax, after one-time exceptional expenses, was Rs 368 crore. Our strategy has been to pursue and deliver balanced growth and therefore, our focus has been on both the top line and the bottom line. The market opportunity is immense. We see a huge potential for all our businesses, since each of them are meeting different needs of our customers.
Does this mean you may exit some of your businesses which are not recording profits?
That is always an option for anyone with multiple sets of businesses. But it is too early for us to take a call on this. Today, we are in the early stages of growth and we see a long runway of growth for all our businesses.
Do you plan to infuse capital in any of your financial services businesses this year?
Our NBFC (non-banking financial company) business would probably need some capital to fund its growth. The size of its (asset) book would decide the quantum of capital we need to infuse. Our life insurance company is, more or less, self sufficient. We don’t need additional money in our AMC (asset management company) business.
Do you plan to list any of your financial services businesses in the near future?
Currently, there are no specific plans to list any of our subsidiaries. However, there are various ways in which value creation can happen. Ultimately, the plan is to unlock value for shareholders. Any management would explore several options, including listing and floating new entities, to create value for its shareholders. We are also working in that direction.
Your first private equity fund raised about Rs 881 crore. How much of it has already been invested? You had also launched a second private equity fund. Please share some details on the size of the fund and the sectors in which this would invest.
It normally takes two-three years for any private equity to deploy all its funds. So far, we have invested Rs 198 crore from our first private equity fund. We are in the process of raising money for our second fund, which will invest in growth-oriented, sunrise sectors like technology, healthcare and lifestyle. As on May 31, we had raised about Rs 140 crore.