MUMBAI: Aditya Birla Capital which reported its highest-ever quarterly net profit during the January-March period has drawn elaborate plans to increase digital customer engagement during the pandemic and unlock value across the company's various businesses. In an exclusive conversation with Mint, Ajay Srinivasan, chief executive of Aditya Birla Capital discusses how the company has realigned its businesses during past few years and is also on the look out for strategic acquisition opportunities.
What has been your key focus and strategy during the pandemic?
Our main focus was to make sure from a digital perspective that we were enabled so that we could continue to do business. Retail business is backed by digital and analytics. You need an environment like that if you want to reach everybody. Second is a focused look at collections. At such a time you need to see your underwriting is good quality and your ability to collect is also good. So, we ramped up our collections and we focused on which sectors we want exposure to. We also looked at tightening norms, constantly evaluating portfolio wherever corrective action was needed. Risk collections at one level and being digitally prepared on the other level. Our book has grown year-on-year and our margins have expanded. We have reduced our non-performing assets. We have resolved ₹725 crore of stressed assets during the courses of the year.
What has been the impact of the second covid wave on your NBFC business?
Credit growth has been muted for a while. Personal loans segment has been growing faster than other segments. Self-employed segment will continue to grow faster. But credit demand has been hampered in both April and May. But the portfolio quality has been good. Bounce rate has been good in April and May. We think rebound can be rapid and upwards depending on vaccination. Also the bulk of economic activity is focused on a few areas. Compared to last year, the impact in terms of fatality has been worse this year. Economic impact has been slightly less. We can see a 9-10% growth in GDP. Economy wise, mobility wise we are doing better.
You have been looking at restructuring your business. How is it progressing?
The unlocking of values is the key focus we have. The value of the platforms is fairly significant. All of the value may not be reflected in the current value of businesses. The first step in that direction is the DRHP (draft red herring prospectus) we filed for asset management business. Our focus is also on how to unlock value and how to create more value from the platform. Together we look at life and health insurance, the premium is at ₹11,000 crore. If you look at AMC (asset management company) business, you have 2.8 lakh crore of AUM (assets under management). If you look at lending business, we have ₹60,000 crore of lending. These are significant in their own domain. We want to ensure the value of businesses is adequately reflected.
How much would be your share from digital channels and how much is it growing?
If you look at our AMC business, we have our digital assets. Many distributors are also digital. 80% of our transactions and purchases in AMC are digital, either directly through us or through other platforms. Digital has become a central part of mutual fund business. Health insurance would be digital. Life insurance is picking up. Only where you need physical KYC or to go for collection, most of the processes are online.
Would you look at inorganic ways to expand your retail and SME business? Would you look at Citi’s retail assets on sale?
Inorganic opportunities to the extent it meets our strategic requirements and passes our filter, definitely we will look at. We will look at it to beef up the area we are interested in. If it gives us a distribution advantage and customer segment that we are focused then we will look at it. Licences we won’t need.
Any plans of applying for a banking licence?
If you want the economy to grow at 7-8% per annum, the need for supply of credit is high. We need banks with adequate capital for the kind of economic growth we are looking at. Question is where do you get this capital from. Do you get it from existing players or do you allow foreign capital to come or do you look at alternatives? That’s the question to ask and where those pools of capital will come from. But you will need pools of capital to grow banking and lending that will meet the needs of the economy.
Do you foresee a post pandemic boom?
I do see some pent up demand coming up especially in travel and tourism. In the last 2.5 years agriculture has done well, industry has bounced back, but the service sector has actually taken a beating. If that comes back, you will see that showing up in GDP numbers.
You are also focusing on cross-selling a gamut of financial products across your customers. What are your plans?
One is acquiring more customers and the other is increasing revenue and product per customer. We already have a lot of businesses focusing on this. If you look at NBFC (non-banking financial company) for instance, a lot of loans get tied up with life insurance plans. Lots of loans have critical illness plans that come from the health insurance business. We have a product in MF (mutual funds), which is a combination of mutual fund and life insurance policy put together. Automatically we are selling two products from two businesses. We are looking at many ways of selling product per customer which is called upsell. We also sell more health to life customers and more life to health customer through a common distributor. Third area we are looking at is partnerships and how to acquire customers and drive product per customer. We have done a partnership with Vi, which recently did a pilot to do health insurance product along with a package they are offering. As a result we are adding 10,000 customers per month.
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