Tuesday, March 25, 2008

Punitive action

The year was 2002, when Ratan Tata resorted to punitive action against one of his closest associates Dilip Pendse, MD, Tata Finance for alleged FERA regulations causing substantial losses to the company as well as its hapless investors. It was a scandal that rockeed the nation, as the Tatas were always a name synonymous with trust & faith. This company then literally became a ‘trash cow’ and was subsequently merged with Tata Motors. Besides this dark chapter in its history, the company failed to set up a bank, and its forays into financial services are broadly divided into insurance, financing services and asset management. The Birlas don’t have much to take home either, as their forays are also broadly into these three categories only. Insurance is one sector where one can clearly see how these giants have taken massive blows ever since they entered. Tata AIG’s individual premiums underwritten for the month of April 2007 stand at Rs. 40.9 crores while that of Birla Sun Life were at Rs.25.4 crores. Even if they are put together, they aren’t a patch on ICICI Prudential, which underwrote individual life premiums for Rs.190 crores. Even Reliance Life has overtaken Birla Sun Life, with premiums underwritten for around Rs.30.84 crores! When we look at mutual funds, Tata Asset Management is managing assets of Rs.140.82 billion, while Birla Sun Life is managing assets of Rs.237.19 billion. But when one sees the AUM of ICICI Prudential at Rs.507.03 billion and Reliance Capital at Rs.591.44 billion, you see how, the Tatas and the Birlas are far far away from the dominant positions they are so very used to.

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