Listing to make it easier for Aditya Birla Capital to raise funds: Kumar Mangalam Birla
The listing will help the company to quickly tap the market in case it wants to.
The listing will help ABCL — engaged in non-banking financial services, mutual funds and insurance — tap the market for funds and access the cash flows of Grasim Industries, a major shareholder. ABCL shares ended at Rs 248.15, down 0.74 per cent, for a market value of Rs 54,615 crore.
“The whole idea is that we have been in the business for more than 10 years now… We need to unlock value for our shareholders, who have been invested for so long,’’ group chairman Kumar Mangalam Birla said in an interview.
“It gives us capital and gives us currency in the stock… Being a subsidiary of Grasim, we have access to cash flows from Grasim to the extent we require and as and when we require and gives us access to the market.”
The listing will help the company to quickly tap the market in case it wants to. “I don’t think there is need for fundraise at this point of time… As and when we do, it will be a much easier thing to do,” Birla said. Grasim Industries, which has interests in cement, viscose staple fibre and chemicals, owns 57 per cent of ABCL.
Another 17 per cent is owned by Birla and the rest is with the public. Employees hold 1.3 per cent .
Shareholders and regulators approved a scheme this year to merge Aditya Birla Nuvo with flagship Grasim Industries while hiving off the financial services business and listing it. Grasim Industries has become the diversified holding company of the group.
It also owns stakes in India’s No. 3 mobile phone company Idea Cellular, which is in the process of merging with Vodafone India, besides having a majority holding in India’s largest cement maker UltraTech.
“Large reasons for keeping it (ABCL) as a subsidiary of Grasim was strong parentage that helps in rating, which is significant for this business and access to capital,’’ Birla said.
ABCL rivals Piramal Enterprises and Bajaj Finance have announced plans to raise money by selling shares via qualified institutional placement (QIP).
“Going forward, financial services will require lot of capital on its own,” said Abizer Diwanji, national head of financial services at EY. “Most NBFCs are trying to take the listing route since it gives easy and quick access to capital. On the other hand, internal accruals may not be enough for NBFCs to fund their businesses.
Demonetisation was a big destabiliser for NBFCs but companies like Aditya Birla Capital will have better resilience in adverse situations”
ABCL sees abundant growth potential in its individual businesses, such as life insurance, in which it has partnered with Sun Life Financial Inc for more than two decades. It is open to acquisitions too.
“We think there is a long way to grow in the life insurance businesses… We have seen strong flows in the asset management business… There is huge opportunity in the NBFC (non-banking finance company) space given the credit-to-GDP (ratio) is low,” said ABCL CEO Ajay Srinivasan. “From a macro perspective or industry perspective, there is headroom to grow. We will look to grow each vertical.’’
“The criteria is value creation, whether organic or inorganic. That has been the theme of the group. In principle, we are open to both,” said Birla, who took the group from $4 billion in revenue in 1994 to $40 billion now by purchasing companies in India and abroad besides investing in newer businesses.
“The group has got a lot of experience in acquisitions,” Srinivasan said. “It has to make sense from a strategic financial perspective. It will be on the agenda if it makes sense… It has to integrate culturally.”
The company has no plans to list life insurance business Birla Sun Life as it needs to scale up even as rivals SBI Life and HDFC Life have started working with bankers on such plans.
“No plans of listing as of now… Our performance has improved over the last one year. It is a matter of great joy,’’ said Birla. “Insurance is a hugely under-penetrated market.’’
The company, which has tied up with India’s largest private lender HDFC Bank, is planning to scale up the business. “With HDFC Bank on our side, it gives us opportunity to grow. We took the route of listing our holding company,” he said.
Besides the financial services business, the group is working to launch a payments bank as a joint venture between Idea Cellular and Grasim, which was earlier with Aditya Birla Nuvo, and an asset reconstruction company to buy stressed assets. That strategy hasn’t changed.
“We have no plans to change it. That is not located in this holding company,” Birla said.
“It’s part of a bigger scheme of things of Idea and Vodafone… It is little bit fluid on payments bank,’’ he added.