EXECUTIVE SUMMARY The financial sector in India has always been considered as a sector where people invest money to end up losing it. This report discusses the reasons behind this myth as lack of education and large rural population. This has been further deteriorated by disparity in the number of branches across different districts in India, Although RBI is taking measures to improve the situation by issuing new bank licenses but they also have to keep a check on these issues to save the interests of the depositors. The other factor contributing to this lack of interest is risk-averse attitude of the population. India is among the countries with highest savings ration as %age of GDP. In this context the financial services of Aditya Birla Group are analyzed in this report. Birla Sun Life insurance (BSLD, the flagship company of Aditya Birla Financial Services Group (ABFSG), is the leading revenue contributor of the group. Although LIC existed from past many years, BSLI was able to increase its revenue 5 times from 2007-12. But due to IRDA regulations, its major revenue source ULIPS was affected halving its revenue in a single year. Unlike Insurances, mutual funds have to go a long way convincing investors of their credibility of being a stable short as well as long-term investment. This is mainly because of risk-averse attitude of the investors. This has created many challenges for the distribution system to sell these funds. The cultural bias towards tangible assets (gold and real estate) along with improper documentation is keeping investible money away from the market, Like insurance this sector is also regulated by government, which affected the distribution system of funds through cutting of fees. One of the fastest growing businesses of ABSFG is Aditya Birla Finance (ABF), which surprisingly is lightly regulated by government. It is involved in the lending activities to corporations, SMEs as well as project financing. Although regulations free it is not risk fre ABESG is trying to get a banking license so that it could complete its portfolio of financial services. Other businesses of ABSFG include Aditya Birla Money (wealth management) and Aditya Birla insurance broker (personalized insurance solutions provider), The two major tenets of the group continuing with a business are market leadership and scalability. Also the employees are given freedom to choose the work of their interest by mobilizing them through various businesses. They are also encouraged to take up leadership roles because company believes in grooming the talent from inside. The long-term objectives are also in line with the principle to become the market leader in financial services. It is recommended that ABFSG change its agent incentive structure in B3LAMC and BSLI in line with proposed less risky product offerings. Further investments in analytics backed by technology are also suggested to aggregate firm level risk along with optimization of distribution network capabilities. Apart from utilizing these synergies, other division specific recommendations have been included along with a proposed implementation plan. (Count: 494 words) ADITYA BIRLA FINANCIAL SERVICES GROUP | 51.0 MACROECONOMIC CONDITIONS India has shown remarkable growth post liberalization in 1991 but achieving financial inclusion ~ measured through branch penetration, deposit penetration, credit penetration — still remains an open challenge. ‘There have been two major challenges in increasing the scope of financial services penetration, namely education levels and large rural population. Education level determines the understanding of the availability of financial services and objective evaluation of risk associated with the financial instrument. This is bolstered by the fact that adults completing secondary education form double the number of bank accounts opened compared to adults with less than primary education (Figure-1). Percentage of adults having accounts based on. education oS EB EEES ‘Account at formal financial inetusion, Account at formal fancial ington, primary education ores Secondary education or more EIGURE JAGE OF ADULTS HAVING BANK. OUNTS BASED ON EDUCATION LEVEL! Further, the costs associated with reaching the rural customers has been high due to the distribution and operational challenges. Though the basic service penetration levels in adults are higher in urban regions than the rural levels, the total service reach is still very low providing a huge growth potential (Figure-2). Percentage of adults having accounts based on region FIGURE-2: %AGE OF ADULTS HAVING BANK ACCOUNTS BASED ON REGIONS"! A study on the concentration of bank branches reveals that top 6 cities in India consist of 11% of the total number of bank branches and there are four districts in India with only a 6 | ADITYA BIRLA FINANCIAL SERVICES GROUP