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New CEO Vishakha Mulye will have to rebalance ABCL portfolio to extract synergies

As the chief executive of the diversified financial services firm Aditya Birla Capital Ltd (ABCL), Vishakha Mulye will have to rebalance the lenders’ portfolio towards retail from wholesale and integrate various arms – from insurance to mutual funds – to extract synergies. Mulye’s banking experience will come in handy as the non banking finance company (NBFC) transitions towards a tougher scale-based regulations as mandated by the Reserve Bank of India (RBI).

“Mulye’s focus will be to accelerate ABCL’s group synergies (including) strong parentage, balanced & lower risk lending portfolio, broad-based offerings across customers’ lifecycle, synergy potential and multi-channel distribution ecosystem,” ICICI Securities analysts said in a note.

Mulye will take over as the CEO for ABCL from June, the company announced on Saturday. Mulye, an executive director of ICICI Bank, in charge of wholesale banking, trading, markets and transaction banking has been a banker for 30 years in various roles and was the CEO of ICICI Venture, the private equity arm of the bank before she took over as executive director in November 2015.

In ABCL, Mulye will look to accelerate the flow of capital, funding cost benefit, expand the 13 segments to create synergies for the 31 million customers that the group has across different businesses to make the whole more than sum of its parts.

“We believe further push and acceleration in the group’s structural strategy of rebalancing its NBFC portfolio (in favour of retail + SME) and its HFC portfolio (towards affordable segment + informal segment) will imbibe confidence…further franchise investment, cross-sell/up-sell and leveraging digital and analytics will help the company boost its RoE profile. The stock is currently undervalued and our target price of Rs169 provides significant upside,” ICICI Securities said.

ABCL shares gained 3% to end at Rs 116 a piece on the Bombay Stock Exchange (BSE) even though the benchmark Sensex lost 1% on Monday. “For ABCL’s NBFC business, we believe strong focus in retail and SME (scaling it up to 65%), investment in distribution franchise (adding 150 lean branches in tiers-3&4 cities), group synergies, operating efficiencies and contained cost will help clock more than 15% AUM CAGR and RoA / RoE of 2.2% / 13% growth by FY23E,” ICICI Securities said.

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