India’s top business houses are readying for a big leap into the financial services’ business.
The Bajajs, Kumar Mangalam Birla, the Tatas, Anil Ambani and Kishore Biyani are lining up huge investments for the financial services business.
While the Tatas’ financial services arm, Tata Capital, is planning to make an initial investment of Rs 5,000 crore, the Bajajs will invest Rs 6,000 crore.
Kumar Mangalam Birla has roped in Ajay Srinivasan from ICICI Prudential to head the financial services business. Srinivsan is building a new team. ICICI Prudential Asset Management Company CEO Pankaj Razdan is tipped to join the group.
The Bajajs have de-merged their finance business from the automotive arm and set up a consolidated company in financial services. “The group is looking for a CEO, ” Bajaj Auto Chairman Rahul Bajaj had said in April.
Praveen P Kadle, head of finance at Tata Motors, is set to head Tata Capital, which was formed by consolidating Tata Financial Services, Tata Investment Corp., Tata Securities and Tata Asset Management.
“Big industrial houses are building up a framework,” said the CEO of a life insurance company. The focus on financial services will help them to start banks when regulations go. “It is only a matter of time before the government allows corporates to start banks,” the CEO added.
Projections also justify the rapid expansion in financial services. According to Mumbai-based brokerage firm SSKI Research, mortgage disbursements will rise from Rs 60,000 crore in 2004-05 to Rs 1,27,500 crore in financial year 2008-09, a compounded annual growth rate of 20.7 per cent.
The growth rates it projects over the same period for other categories are: car finance (Rs 26,000 crore to Rs 47,700 crore; 16.4 per cent), two-wheeler finance (Rs 11,500 crore to 27,200 crore; 23.9 per cent), consumer durables (Rs 4,000 crore to Rs 6,600 crore; 13.5 per cent), personal loans (Rs 12,500 crore to Rs 48,000 crore; 40 per cent), and credit cards (Rs 8,400 crore to Rs 26,200 crore; 33 per cent).