Local funds rich enough to play big

Ajay Srinivasan joined the Aditya Birla Group as chief executive of its financial services business and director of corporate strategy and business development. He is on board all financial services companies of the group. He was handpicked by the AVB group to grow their financial services business.

Before joining AVB, Mr Srinivasan was Prudential Corporation Asia’s chief executive-fund management, where he had built a reputation for growth by taking Prudential’s fund management operations to over £27 billion in assets under management. Mr Srinivasan speaks of what he plans to do to tap the opportunities in the financial sector.

The AVB group has seen its ranking slip in mutual fund and insurance. What do you plan to do to change this?

This fiscal, both asset management and insurance have grown faster than the market. If you look at Birla Sun Life Insurance’s monthly market share, it has grown from 3.7% in April 2008 to 8.2% in October 2008. The momentum in the business is strong. The building blocks for the future are also there. We launched nine products in 2007. In terms of physical infrastructure, we have increased the number of branches from 140 to 340. On the asset management side, we were number six at the beginning of the year and we have now moved to be among the top five. The assets under management have grown from Rs 19,000 at the beginning of the fiscal to Rs 32,000 crore. The number of branches has grown from 32 to 74. The theme has been ‘building up’ both the momentum and infrastructure for future growth.

A few years ago, the companies started losing market share. What was the reason?

A lot of that goes down to the distribution infrastructure. At a time when the market was growing distribution infrastructure very aggressively, we were slightly behind. That is why we are putting in place branches now. We have our strengths in terms of product portfolio, strong brand and good customers. It is only a question of scaling up. We had lagged the market in building the distribution infrastructure and we are now correcting that to position us where we need to go.

So far, corporate houses have not successfully broken into the financial services business. What are your views on this?

I think, there are examples on both sides. From our perspective, the financial services business is a high-priority vertical within the group. The group is committed to building a leading position in the sector. The opportunities are significantly greater than what they were. As long as you have the right model, the right brand and the right people, I think, there is an opportunity to participate in this market.

One of the biggest problems with expanding financial services is scarcity of talent. How do you hope to meet this challenge?

We are in a very fortunate position of being in a group that has a strong pedigree, and was voted the best employer in 2007. We are also working in a sector that is very attractive in terms of the broad employment opportunity. We have a strong talent pool internally, but we are also committed to attract, retain, develop and grow talent. Our view is that we have to build sustainable institutions. So, we not only have to get the right people, but build the right culture. Our focus is on building the culture and building the team.

Do you feel that domestic savings can act as a counterweight to foreign inflows in India?

India is a high-savings market and we have a large pool of savings. The need for the industry is to spread the financial sector and get savings of households more into financial assets. We see a large pool of assets that can make a big difference to the growth of the financial sector and the market. The assets under management of mutual funds and insurance are significant enough to become another pillar to support the markets. But I see a continued interest in India from outside since there are a number of things attractive about India. So, there will be a continued interest in India. I think, external flows will continue to be higher.

You are returning to the Indian market after several years. How do you perceive the Indian market to have changed?

There are seven areas where I feel there have been major changes. The first and most obvious is the area growth. Growth across the financial services industry has been phenomenal. The second has been very strong corporate performance which is backed up by the stock market. The fourth area of change is the spread of financial sector into various parts of India. The fifth trend has been the improvement in general supporting infrastructure, including regulation, stock market infrastructure. India has done a tremendous job on that. The sixth is the greater integration of India with the world. Those are data-based or metric-based changes, but the most significant change in my mind is the ambition and self-confidence of the Indian business system. When you combine that with other advantages that is a huge multiplier.

Are there any new areas that you are planning to get into?

If you look at that, we have already got the platform and bases for a wide financial services business. Besides, insurance and mutual fund, we have three other companies. We have a wealth management company that distributes mutual fund and life insurance. Our finance company, Birla Global, is participating in a number of areas of asset-based financing. We are also a general insurance broking company.

As for new opportunities, the needs of the Indian consumer are changing and we are taking measures to address the consumer’s needs. We clearly see an opportunity both in the corporate and retail segment. In the retail segment from the mass affluent to high net worth. There are a number of services that we aim to target and meet.

Any plans to acquire companies, or to restructure the existing business?

Acquisitions have to be a part of an opportunistic look at any strategy. We cannot build a strategy on the basis that we will acquire. If the opportunity is right and makes sense we will look at it, but our strategy does not depend on acquisition. But there is no reason why we cannot build it on our own. All the businesses are under Aditya Birla Nuvo. We have shareholders who are supportive and are willing to support the growth of this business.