Table of Contents

ADITYA BIRLA MONEY .............................................................................................................. 2

About company: .................................................................................................................. 2
VISION AND MISSION STATEMENT ........................................................................................... 3
THE EXTERNAL ASSESSMENT ..................................................................................................... 4
Porters Five Force Analysis .................................................................................................. 4
THE INTERNAL ASSESSMENT ...................................................................................................... 5
Internal Factor Evaluation (IFE) Matrix ............................................................................... 5
Internal Factor Evaluation Matrix for Aditya Birla Money Ltd.: ....................................... 5
STRATEGY-FORMULATION FOR ADITYA BIRLA MONEY ......................................................... 6
The Strategic Position and Action Evaluation (SPACE) Matrix ....................................... 6
Conclusion ........................................................................................................................... 10
Recommended Strategy for Aditya Birla Money........................................................... 11
Appendix ................................................................................................................................. 12
Balance sheet ..................................................................................................................... 12
Profit & Loss - Aditya Birla Money Ltd. .............................................................................. 13
Industry Overview ............................................................................................................... 14
Internal Issues ...................................................................................................................... 15

ADITYA BIRLA MONEY

About company:
Aditya Birla Money is a single brand offering the combined products and
services of Aditya Birla Money Limited, Aditya Birla Money Mart Limited &
Aditya Birla Customer Service Limited
Aditya Birla Money Limited is a broking and distribution player, offering Equity
and Derivative trading through NSE and BSE and Currency Derivative on MSEI.
It is registered as a Depository Participant with both NSDL and CDSL and also
provides commodity trading on MCX and NCDEX through its subsidiary
company.
Aditya Birla Money Mart Limited is a wealth management and distribution
player, offering third party products like company deposits, mutual funds,
insurance, structured products, alternate investments, property services and
has a premier wealth management service arm to cater to HNI customers.
The services of My Universe are provided through Aditya Birla Customer
Services Limited.
These offerings are delivered through a strong pan India distribution network
of about 1000 self - owned and franchisee branches, a robust online and
offline model with a strong technology backbone to a large customer base,
in excess of 4 lakhs.

VISION AND MISSION STATEMENT

Aditya Birla Money does not have vision and mission statements. In strategic
management model, clear vision and mission statements are needed before
alternative strategies can be formulated and implemented. As many
managers as possible should be involved in the process of developing these
statements because through involvement, people become committed to an
organization. Following are the suggested vision and mission statement:
Vision statement- To attain best standards and become a best financial
services enterprise in India guided by its purpose to deliver maximum value
to our clients.
Mission statement- To help those who are at the bottom of the pyramid and
all the stakeholders. To work with vigour, dedication and innovation to
achieve excellence in service, quality, reliability, safety and customer care as
the ultimate goal. To be a technology-driven, efficient and financially sound
organisation. To be a responsible corporate citizen nurturing human values
and concern for society, the environment and, above all, the people. To
promote a work culture that fosters individual growth, team spirit and
creativity to overcome challenges and attain goals.

THE EXTERNAL ASSESSMENT

Porters Five Force Analysis
Competitive Rivalry
Competitive rivalry between big players is intense in the industry
Financial services companies often compete on the basis of offering lower
financing rates, higher deposit rates and investment services

Threat of New Entrants

Stringent regulatory norms prevent new entrants
Customers prefer to invest their money with a reputed financial services
company offering a wide range of services

Substitute Products

Low threat of substitutes

Less number of substitutes available for financial products

Bargaining Power of Suppliers

Low bargaining power of suppliers as the industry is highly regulated by RBI

Bargaining Power of Customers

Medium bargaining power of customers. Although customers do not have
much bargaining power, they can easily switch to another company
based on the terms and quality of services provided

THE INTERNAL ASSESSMENT

Internal Factor Evaluation (IFE) Matrix
This strategy-formulation tool summarizes and evaluates the major strengths
and weaknesses in the functional areas of a business, and it also provides a
basis for identifying and evaluating relationships among those areas.
Internal Factor Evaluation Matrix for Aditya Birla Money Ltd.:
Key Internal Factors

Weight Rating Weighted

Score

Strengths
1. Increase in reserves and surpluses from 0.05

0.15

20.43cr to 21.63 cr.

2. Existing distribution and sales networks

0.2

0.6

3. Employee morale is excellent

0.15

0.45

4 Return on equity

0.05

0.2

1. Decrease in sales

0.2

0.2

2. Decrease in profit after tax

0.2

0.2

3. increase in debtors from 91.4 to 134.22

0.1

0.2

4. EBITDA has declined by 2.45cr.

0.05

0.1

Total

1.00

Weaknesses

2.1

Evaluation: Aditya Birla Money scored 2.1 on IFE matrix which shows weak internal
position. This weak position is mainly due to weak financial position. Company does
have resources of distribution which can be utilized to increase sales.

STRATEGY-FORMULATION FOR ADITYA BIRLA MONEY

The Strategic Position and Action Evaluation (SPACE) Matrix
The Strategic Position and Action Evaluation (SPACE) Matrix is a four-quadrant
framework

indicates

whether

aggressive,

conservative,

defensive,

or

competitive strategies are most appropriate for a given organization. The

axes of the SPACE Matrix represent two internal dimensions (financial position
[FP] and competitive position [CP]) and two external dimensions (stability
position [SP] and industry position [IP]). These four factors are perhaps the
most important determinants of an organizations overall strategic position.
This matrix is used to identify an appropriate strategy for ADITYA BIRLA MONEY
which is as follows:
Financial position (FP)

Ratings

Return on investment (1.17%)

Leverage (0.4)

Liquidity (1.71)

Working capital (99.69cr)

Inventory turnover

(NA)

Earnings per share(rs0.22)

Price earnings ratio (112.5)

TOTAL

19

Aditya Birla Money has a weak financial position as it has been seen in the IFE
matrix also. All the rankings have given on the basis of comparison with peers
in the industry. Data was used from the internet
(http://economictimes.indiatimes.com/aditya-birla-moneyltd/stocks/companyid ). Company has a good net working capital which is
higher than most of its peers which earned it 5 points. Company has a low
ROA which is responsible for the rating of 2. Similar ratings were given after
thorough analysis.

Stability Position (SP)

Ratings

Technological changes

-3

Rate of inflation

-5

Demand variability

(NA)

Price range of competing products

-2

Barriers to entry into market

-4

Competitive pressure

-6

Ease of exit from market

-4

Price elasticity of demand

-4

Risk involved in business

-5

TOTAL

-33

It earns the sum of 33 in the ratings, which is largely due to high risk and rate of
inflation in this sector. Companies revenues can get hurt in case of changes in
inflation as most of the financial products are linked with rate of return which further is
linked to inflation. There are low barriers to entry. Technological changes are
expected to generate revenues for the companies in this industry.

Competitive Position (CP)

Ratings

Market share

-4

Product quality

-2

Product life cycle

(NA)

Customer loyalty

-3

Capacity utilization

-4

Control over suppliers and distributors

-2

TOTAL

-15

Companies competitive position is good. It has a market share which is medium in

size. Product quality is good. Customers are loyal there is control over sippliers as most
of the rules are set by the RBI . overall the company scored -15 on this scale.

Industry Position (IP)

Ratings

Growth potential

Profit potential

Financial stability

Extent leveraged

Resource utilization

Ease of entry into market

Productivity, capacity utilization

TOTAL

34

As we can see from the porters five foeces analysis that it is good industry to
operate in. A very few people in India use financial services which is leading to
increase in the market penetration year after year. Therefore industry has a huge
scope of growth and profitability which earned it 6 points. Capacity utilizaztion is
good in the industry. Overall the financial industry has huge potential in the near
future which can prove to be beneficial for the company.

Conclusion
SP Average is

-33.0 8 = -4.125

CP Average is -15 5 =

IP Average is

-3.00

+34 7 = 4.86

FP Average is +19.0 6 = 3.17

Directional Vector Coordinates:

x-axis: -4.125 + (+3.17) = -1

y-axis: -3 + (+4.86) = 1.86

FP

CP

IP

Competitive

SP
10

Recommended Strategy for Aditya Birla Money

On the basis of the results given by the SPACE matrix Aditya Birla Money
should

follow

competitive

strategy.

Following

are

the

strategies

recommended for the company:

Market Development:
Market development involves introducing present products or services into
new geographic areas. It can be seen that aditya birla money is likmited to
only metropolitan cities, it should reach others market like Ludhiana, Kanpur
etc. it can help it to increase sales.
Market Penetration
A market penetration strategy seeks to increase market share for present
products or services in present markets through greater marketing efforts. This
strategy is widely used alone and in combination with other strategies. Market
penetration includes increasing the number of salespersons, increasing
advertising expenditures, offering extensive sales promotion items, or
increasing publicity efforts. It should run investor awareness programmes to
increase market penetration.

11

Appendix
Balance sheet
Particulars

Mar'16

Mar'15

Mar'14

Liabilities

12 Months

12 Months

12 Months

Share Capital

15.54

15.54

15.54

Reserves & Surplus

21.63

20.43

21.76

Net Worth

37.17

35.97

37.3

Secured Loan

5.33

Unsecured Loan

69.42

69.06

9.87

TOTAL LIABILITIES

111.92

105.03

47.18

Gross Block

43.19

47.58

48.95

(-) Acc. Depreciation

36.47

40.05

28.44

Net Block

6.72

7.53

20.51

Capital Work in Progress

0.08

Investments

5.5

5.26

5.01

Inventories

Sundry Debtors

134.22

91.41

88.38

Cash and Bank

59.24

79.37

40.32

Loans and Advances

30.89

28.81

41.99

Total Current Assets

224.35

199.59

170.68

Current Liabilities

121.67

104.95

147.87

Provisions

2.98

2.47

1.15

Total Current Liabilities

124.66

107.43

149.02

NET CURRENT ASSETS

99.69

92.16

21.66

Misc. Expenses

Assets

12

Profit & Loss - Aditya Birla Money Ltd.

Mar'16

Mar'15

Mar'14

12Months

12Months

12Months

111.56

112.01

65.09

111.56

112.01

65.09

118.38

118.72

69.91

Manufacturing Expenses

Material Consumed

49.64

45.74

31.65

56.7

58.47

37.95

Expenses Capitalised

Provisions Made

106.33

104.21

69.6

5.22

7.79

-4.51

12.05

14.5

0.31

3.78

5.72

6.12

EBIT

8.27

8.78

-5.81

Interest

6.38

1.99

2.39

EBT

1.88

6.79

-8.2

Taxes

0.68

-0.29

1.2

7.08

-8.2

Non Recurring Items

Other Non Cash Adjustments

Other Adjustments

1.2

7.08

-8.2

Preference Dividend

Equity Dividend

Equity Dividend (%)

Shares in Issue (Lakhs)

554

554

554

EPS - Annualised (Rs)

0.22

1.28

-1.48

INCOME:
Sales Turnover
Excise Duty
NET SALES
Other Income
TOTAL INCOME
EXPENDITURE:

Personal Expenses
Selling Expenses
Administrative Expenses

TOTAL EXPENDITURE
Operating Profit
EBITDA
Depreciation
Other Write-offs

Profit and Loss for the Year

REPORTED PAT
KEY ITEMS

13

Industry Overview
A robust banking and financial sector is critical for activating the economy and
facilitating higher economic growth. Financial intermediaries like NBFIs have a
definite and very important role in the financial sector, particularly in a developing
economy like India. They are a vital link in the system. The role of NBFIs in both
manufacturing and services sector is significant and they play the role of an
intermediary by facilitating the flow of credit to the end consumers particularly in
transportation, SMEs and other unorganized sectors. The major intermediaries that
are included in the NBFI group are Development Finance Institutions (DFIs), Insurance
Companies, Non-banking Financial Companies (NBFCs), Primary Dealers (PDs) and
Capital Market Intermediaries such as mutual funds. The NBFCs as a whole account
for

11.2

per

cent

of

assets

of

the

total

financial

system.

The Banking sector has always been highly regulated, however simplified sanction
procedures, flexibility and timeliness in meeting the credit needs and low cost
operations resulted in the NBFCs getting an edge over banks in providing funding.
NBFCs have been pioneering at Retail Asset Backed Lending, Lending against
Securities, Lending against Gold, Consumer Product Loans, Transport/Vehicle Loans,
Microfinance, etc and have been extending credit to retail customers in underserved

areas

and

to

unbanked

customers.

This higher economic growth and expanded liberalization has given tremendous
opportunities to the financial sector. Indian economy finds its major strength to the
Domestic Consumption Theory as growth in new sectors like agriculture, education
and communication has resulted in higher demand for Consumer Goods, Textiles
and Phone/Mobile product and services. Also, it has resulted in growing number of
investors for the financial products, thus giving new opportunities to the financial
sector.
The Indian Capital Market is showing more strength and stability due to better and
transparent systems introduced by Government and administrative authorities. This
has resulted in higher valuations and excellent investment opportunities to the
Company.
Thus, there is a great potential for growth of the Company in the near future.
14

Internal Issues
The Strategy Unravels:
Many broking firms created similar options strategies for their customers. But
when the market started to move up by mid-September, most of these
brokers booked some losses and moved on. Nobody attempted complex
strategies for their investors. Those who did, knew that heavy FII flows would
take the market higher in September itself. Aditya Birla Money was managing
something around Rs. 600 crore through this strategy and was not ready to
lose the fee income. No one is quite sure about the exact reason why the
strategy unravelled. From the first week of September, the market became
volatile. From September 2, within a span of 20 days, the volatility index (VIX),
which measures the volatility of the market, moved from 16 to 24, while the
Nifty moved by 9 percent. Since the market shot up, the premium on the calls
also moved up and that is how the losses accumulated. The premium on the
Nifty which was around Rs. 6 in the first week of September, began trading at
around Rs. 200 and thus call writers had to suffer heavy losses. Investors in
Options Maxima, which used a short strangle strategy, made some money by
writing simultaneous put options, but that income was not enough to
compensate the huge losses incurred by writing call options. It isnt clear why
Aditya Birla Moneys risk management didnt throw up warning signs even
though

the

VIX

indicator

had

already

turned

red.

Investors need to understand that options premium is not only sensitive to the
price of underlying [asset] but also to the volatility. It can display huge
percentage swings in value as volatility moves, even if the underlying itself has
not moved. Movement in underlying compounds the risk. Short strangle
strategies can prove very risky if a range bound market turns volatile, says
Johnny Bhatkar, a derivative expert who runs Pyxis Systems, a derivatives risk
management company.

15

No Comebacks:
When Ramaprasad came to know that some investors had actually got their
money back, he contacted the Birla Money office. I asked them if other
investors were refunded their money and Aditya Birla Money told me that was
not the case. I have been reading in the newspapers that some investors
were paid back. So why not me? he says. We only acted as a broker to the
transactions of their clients, says a spokesperson from the Aditya Birla
Financial services group. Aditya Birla Money officials told me that it was I who
had given instructions to Aditya Birla Money to trade this complex derivative
strategy. And I had given my shares as a collateral, says Ramaprasad. Aditya
Birla Money maintains that this was not a portfolio management scheme
(PMS)

which

needs

to

be

registered

with

SEBI.

Ramaprasad may not have any legal recourse. Section 11 of the Securities
Act, 1933 of the United States provides a private right of action to take action
in matters related to material misrepresentations and omissions related to
securities. There is no similar direct Indian law which provides an investor with
such rights against a broker, unless SEBI decides to take action, says Diljeet
Titus

of

Titus

and

Company

advocates.

Helter Skelter
Inside the office of Aditya Birla Money, stress levels have begun to rise.
Kanwar has put in his papers and has taken the entire blame on his shoulders.
Yet that hasnt stopped the blame game inside ABN. Old timers are blaming
the former ICICI pros for the entire setback. And the knives are out for them.
The fact that the Birla group is invariably very bottom-line driven compared to
the ICICI culture of driving top-line, is widening the chasm between the old
camps. This has also proved to be the perfect opportunity to hit back at the
incumbents. Earlier we were told that there will be only five-six top guys that
will be in the top and middle level management inside Aditya Birla Money,
Mutual Fund and Insurance firm. But then we saw this place full of ICICI
16

people and obviously we did not like it, says a former Birla employee who
had seen the changing culture inside the Birla offices and left the place.
So far, the Birla groups tryst with outsiders to head its financial services forays
hasnt paid off. Not too many folks have lasted beyond three years. The
mutual fund business itself has seen eight CEOs within a span of 15 years. The
present CEO is the third one during Ajay Srinivasans tenure as the business
head,

Financial

Services,

Aditya

Birla

Nuvo.

FUTURE
The winds of change are slowly being witnessed inside the company. It
seems that Birla wants to get back to his old culture of high profitability over
growth at any cost and that is why he is slowly trying to reposition his people
at

the

top

in

most

of

his

businesses,

says

Birla

employee.

For instance, he has given a free hand to A. Balasubramanian, a Birla loyalist

who has been with the firm for a long time and has been made CEO of Birla
Mutual fund. The insurance business will not have the aggressiveness of the
ICICI culture and Jayant Dua, another old Birla hand has been made the
CEO and managing director of the company. That leaves Aditya Birla Money,
which is handled by Pankaj Razdan, after the ouster of Vivek Kanwar.
If Kumar Birla chooses to make any more senior level changes for the next few
months, it will simply mean the Rs. 103 crore derivatives mess has proven to be
the

final

straw

on

the

camels

back.

17