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Aditya Birla Group: IndusInd’s Ramesh Sobti likely to join Aditya Birla Capital’s board, pending RBI approval

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Aditya Birla Group: IndusInd's Ramesh Sobti likely to join Aditya Birla Capital's board, pending RBI approval 2

MUMBAI: Ramesh Sobti, who helped transform IndusInd from a small struggling bank into one of the fastest growing private sector lenders, is likely to join the board of Aditya Birla Capital, two people aware of the development said. Sobti’s induction which is subject to the Reserve Bank of India’s (RBI) approval, comes after some prominent investors had expressed concern over the performance of the group’s flagship financial services business, one of the persons cited above said.

Sobti, who is likely to join the board as a nominee from Advent Capital, may also help streamline the financial services business with his more than 40 years of experience across public, private and foreign banks.

“While Romesh Sobti’s appointment is subject to RBI approval he is likely to be more involved in the functioning of the day-to-day business and oversee the future growth plans of Aditya Birla Capital,” said a person in the know.

Another person said that a few investors had expressed concern at the performance of the NBFC business. “While the asset management and insurance businesses have performed well the NBFC has failed to compete with other peers in the same segment, also they have several businesses under the same umbrella which is depressing returns for well even performing segments which has irked some investors,” said one of the persons cited above.

Romesh Sobti could not be reached for comment while Aditya Birla Group did not respond to ETs query.

Advent Capital invested Rs 1000 crore in ABCL last year to hold 4.14%. Premji Invest holds 3.85% and Life Insurance Corporation holds 2% . More than 70% is held by promoter and promoter led entities.

Sobti transformed IndusInd bank during his 12-year reign which ended in March this year. The bank’s market cap was Rs 69,400 crore when his tenured ended from Rs 3,529 crore when he took charge. The bank’s shares which were trading at Rs 110 in 2008 had climbed 732% by time of his departure. Sobti helped diversify the portfolio of IndusInd Bank towards retail and led the merger of micro lender Bharat Financial. Aditya Birla Capital, the flagship financial services business of the Aditya Birla Group houses a non-bank lending unit Aditya Birla Finance, Aditya Birla Housing Finance. It also houses the asset management business under Aditya Birla Sun Life AMC and the insurance businesses under Aditya Birla Sun life Insurance. The market capitalisation of Aditya Birla Capital is Rs 22,422 crore.

ABCL has a total AUM of Rs 3 lakh crore, lending book of over Rs 57,000 crore and more than 20 million customers. The shares of ABCL closed at Rs 92.85 apiece at the close of trade on Tuesday.

Another person said that the group is studying plans to consider a banking license and that it is it’s high-time they reinvented themselves.

“It’s surprising that there is little interest among investors despite a large lending book. They have multiple businesses in the ABCL fold which will not be looked upon well if and when they plan for a bank license,” said another official aware of the group’s future plans. “The promoter and the group would do well by hiving off the well performing AMC and insurance verticals and listing them separately.”

The biggest bone of contention has been the performance of Aditya Birla Finance which saw its lending book fall to Rs 45,475 crore at the end of September quarter against Rs 48,368 crore in the same period last year. The non-bank lender also stopped lending under its construction finance division and asked several people across India in that vertical to quit recently.

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