Aditya Birla Capital to set up asset reconstruction arm

Aditya Birla Capital Ltd (ABCL), the asset management arm of the Aditya Bilra Group, made its debut on the stock exchanges on Friday, with plans to set up an asset reconstruction company (ARC) and float a fund for distressed assets.

The financial services arm of the $50-billion conglomerate is awaiting a licence from the Reserve Bank of India (RBI) to start its ARC business,  Kumar Mangalam Birla, chairman of the group, said.

The diversified group, which successfully listed its amalgamated financial services arm Aditya Birla Capital, sees this business as growth vertical.

The plan is still on the drawing board and the company has not decided on capital allocation and the size of the fund Birla said.

Birla also said the amalgamation announced last year and the subsequent listing of the company has ensured that shareholder value has doubled to Rs1,20,000 crore from Rs60,000 pre merger.

He said the group has the experience and the resources to revive ailing businesses and that with so much of stressed assets piled up in the economy and most of it coming into the market, the company sees huge business opportunity.

"Asset reconstruction is an industry that we are looking in. We see it as a very good opportunity," Birla said while interacting with reporters after the stock market function.

"Many more stressed assets will come into the market. We've operating experience across businesses as a group, which we can bring in to this business. I am not talking from strategic point of view but about turning around businesses as part of the asset reconstruction business."

Last year, the group had announced a composite scheme of arrangement under which Aditya Birla Nuvo was merged with Grasim Industries and the financial services undertaking, Aditya Birla Financial Services, was subsequently demerged and renamed as Aditya Birla Capital.

Aditya Birla Capital chief executive Ajay Srinivasan said the company had in April moved an application with the Reserve Bank for entering the asset reconstruction business and that he expects the regulatory approvals to come over the next six months.

Srinivasan said the plan is to start with smaller small stressed assets irrespective of the sector, before snapping up large assets that are in trouble.

On the payments bank venture, Birla said after Idea-Vodafone merger announcement, there will be a joint venture between Vodafone and the group company Grasim and Idea.

He said Idea and Vodafone will have one payment bank and one of the entities will have to surrender the payment bank licence. Both are sitting on separate licences from the regulator now.

"Plans for growth of payments bank have been redrawn because we have a partner now. Both the companies have started out with some initial plans and we need to sit together and work out a new plan," he said while talking about the payments bank venture which he expects this to begin commercial operations in 2018.

Shares of Aditya Birla Capital (ABCL), the financial services company of Aditya Birla Group, debuted at Rs 261.20 and closed down at Rs237.50 on the NSE despite the market rallying around 0.6 per cent.