ditya Birla Nuvo, with interest in telecom, BPO, garments and insurance, has dipped deeper into the red on the back of high expenses incurred by the insurance business, expansion of cellular operations, cancellation of export orders in the garment segment and shutting down of some non-profitable BPO sites abroad.
Mr Ajay Srinivasan, Chief Executive, Financial Services, Aditya Birla Nuvo, said as long as the new premium income grows, the insurance business would be under strain.
“For instance, for every Rs 100 we get as premium income (new insurance sold), we have to provide Rs 40 as commission to agents,” he said. The new business premium income from insurance in the fourth quarter was Rs 1,200 crore, while for the full year it was Rs 2,950 crore, he added.
Operations in place
The BPO business revenue was down 10 per cent at Rs 387 crore (Rs 428 crore) due to three sites in the US being shut down. The company intends to add 400 seats to increase its domestic BPO capacity to 1,000 seats on the back of a rise in demand from its telecom business.
In line with its plan, the Tamil Nadu circle (including Chennai) will be operational in the current quarter, while the remaining five circles will be operational by the end of the calendar , said Mr Bharat K. Singh, Managing Director, Aditya Birla Nuvo.
The weak demand and cancellation of some export orders proved costly for the garment business. “We have incurred a forex loss of Rs 40-50 crore due to the hedge position taken against the expected revenue from cancelled orders,” said Mr Singh. Despite the losses, Aditya Birla Nuvo intends to invest Rs 1,000 crore as capital expenditure for fiscal 2010.
“Of this, Rs 500-600 crore will be invested in Birla Sun Life Insurance,” he said. It raised a debt of Rs 1,500 crore in FY’09 of which Rs 800 crore remains unspent.
The company has taken various cost-cutting measures, including restructuring of retail outlets, which would save Rs 100 crore during the fiscal, said Mr Adesh Gupta, Chief Financial Officer.
The board of directors has recommended a dividend of Rs 4 an equity share for the year ended March 31, 2009. The Aditya Birla Nuvo scrip was down 9 per cent on the BSE at Rs 530 on Tuesday.
For 2008-09, the group posted a net loss of Rs 430 crore, against Rs 151 crore in same period last year. On a standalone basis, net profit for the year was down 43 per cent at Rs 136 crore (Rs 243 crore).
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