THE AXA EFFECT

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In July 2006, Bharti ventured into the financial services sector along with the France-based AXA Group with Bharti AXA Life Insurance, General Insurance and Investment Managers. Their performance in the first year of operation was nothing to write home about. Not only did the life insurance business fail to meet the social sector obligation, it had an equity share capital base of just Rs.1.1 crore as compared to others like Shriram Life Insurance (launched in 2005) and Future Generali (2007) who had a base of Rs.125 crore and Rs.185 crore respectively in their first year. Sure, Bharti AXA has picked up since then and recorded a 1355% growth in first year premium collections in FY 2007-08, but does the company have the potential to bring in the next big leap for Bharti? Tough! Given that the Indian market is largely uninsured and under-insured, on the face of it, there does seem huge potential for private insurers to cash in. But Bharti AXA has largely concentrated on the urban market so far, with limited focus on the mass market - lower income sections, semi-urban and rural markets. Moreover, Bharti AXA’s high-cost operating model has been unable to yield profitability in the low ticket high volume business. N. Wadhwa, MD, SKI Capital Securities, sums up, “Bharti entered the sector without appropriate knowledge and expertise.”

There are others who believe that given Bharti’s stature and reputation in the Indian market, it should be easier for them to get customers for their financial businesses. Asserts Ashok Jainani, Vice President – Research & Market Strategy, Khandwala Securities Ltd, “In my opinion, Bharti’s insurance business will succeed mainly because it is a very capital intensive industry and Bharti AXA has the support of its telecom business and can perhaps even take leads from Airtel’s subscriber base.” He further explains that there is a huge untapped mass potential in both urban and rural areas, which has not been exploited. “Bharti AXA may not be the number one player in the segment it operates in, but it will surely prove to be a profitable venture,” Jainani explains. He may have a point given that Bharti AXA recorded a whopping 511.8% growth in industry-wide premiums received in H1 FY’09 as compared to last year. But even then, the insurance sector has a long gestation period. And with deeply entrenched players like LIC and ICICI Prudential in the reckoning, even if Bharti AXA does well in the short to medium term, it will take time to join the league of numero unos in the business.

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Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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Bol India Bol increased Reliance Mobile’s (RM) subscriber base to about 46 million in the FY2007-08. In fact, RM’s revenues shot 34% at Rs.14,468 crore and its profits surged a whopping 612% . Phew!!!

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‘Zav’iation is now in vogue!

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Kishor Zavery, Chairman, Zav Airways, in an exclusive to 4Ps B&M 4Ps B&M: How feasible is it to enter a turmoil hit sector and what are your plans to tackle the same?
KZ: I don’t think this is a time of turmoil in the sector. Our main target is to provide the common people with better services in comparison to others. We are coming up with mid-size aircrafts; seat capacity mostly of 70/80. During our operation, we expect 95% occupancy. Whereas, the big-size crafts with 200 seat capacity are currently operating with just 50% occupancy. The additional 45% occupancy is clearly one of our plus points.

4Ps B&M: What are the challenges that you need to be wary of?
KZ: There is no major challenge as such. The north-eastern region has always been neglected in terms of connectivity. So we witness a sky-high demand for air-taxi services. Looking at this potential, we are entering into the sector. The West Bengal Government and the North-East council are helping us to venture into the market. We are not worried about our competitors in the sector. We would rather, welcome healthy competition in this neglected north-eastern region.

4Ps B&M: Pls share some of your strategies to make Zav’s presence felt?
KZ: Our basic strategy is to provide economical air travel. As we want to connect various destinations with maximum comfort at reasonable prices for our customers. We plan to have a pan India presence in the coming future. Beside fulfilling the aviation need in Eastern and North eastern part of India, providing quality and on-time services with better safety to our customers is high on our to-do list.

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

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All hands on the deck, Captain!

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Great ads, greater roll-out plans, greatest financials... but ‘talent-crunch’ might just play the spoilsport!

Advertising, branding, positioning, geographical outreach... and any other progressive act that you could possibly cook up, were ‘once’ considered just the forte of private sector banks and their foreign counterparts. Not any more! The public sector banks (PSBs) have shed their conservativeness, for good and are tired of being branded as laggards. Today, their approach towards broader outreach, customer acquisition & education and product offerings is anything but the mark of a self-satisfied, complacent public banker. IDBI Bank is one such name, which has opted for an overdrive as far as re-positioning and re-branding are concerned. The project finance institution turned bank, is leading the race and is aptly recasting its business model, strengthening itself through organic growth strategies and basking in the sun of glorified financials!

Its newest taglines: “Not just for the big boys” and “Aao sochein bada” also project the inherent strength of the bank, which, for the first time in a decade, has hit a positive home-run – a positive net interest margin and the highest annual growth in terms of deposits and lendings (30%) amongst all banks in the country. And today, the bank is not just making money for its stakeholders but also working towards ensuring ‘some’ tomorrow for industries across the board. Picture this: IDBI Bank Ltd. is leading a group of lenders to arrange $1 billion debt for Air India (after the airline failed to raise funds from European banks to buy Airbus SAS aircrafts); some reverse osmosis at a time when the biggest of names in the vertical are running around with bailout bowls in their hands (and 9 more for bailout nos.2 to 10). The bank is aggressively pursing the dream of becoming the 5th largest bank by 2011-12, from being the current 8th. This would also help improve its low cost current account savings account (CASA) ratio, which is pegged at 15.22% of the total deposits to somewhere close to 40% (which is the standard for other public sector banks).

So there’s some dream, and happily complemented by ambitious financials. Digest this – it is targeting a growth of more than 100% in its business to touch Rs.3.35 trillion by FY2011 as compared to FY2008. Considering that market reports suggest an estimation of Rs.2.1 trillion by the end of the current fiscal, another good year will just see it get there! So there’s it – great dreams, super numbers and big hopes... but not sans challenges! And what’s the catch? Having obtained the much needed licence from RBI to add 200 branches (at present it has 508 branches and 880 ATMs) by March 2009, its expansion plan had to be ‘carried forward’ for lack of managerial staff. Given the fact that IDBI expects its branch network to grow by 40% (which will indeed enable the desired business growth), ‘talent - crunch’ may just play the spoilsport.

For now though, IDBI is staying away from inorganic diet; having achieved much success in the change process, as Yogesh Agarwal, CMD, IDBI Bank happily quotes, “The bank has indeed come a long way from being a pure development financial institution and is currently transforming into a new generation, full-service commercial bank...” Better safe than dead! But considering that its internal growth plans are paying well, there’s no need to be swept away by the M&A wave... Silent waters run deep... But wait! Is IDBI playing the ship, or is’t the ocean itself? Whatever its intentions, it needs all hands on deck – manpower! [And that one was for you, Captain Yogesh!]

Gyanendra Kr. Kashyap

For more articles, Click on IIPM Article.

Source : IIPM Editorial, 2009

An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.
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