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Aditya Birla Nuvo is in the process of creating a holding company for its financial services business (comprising asset management, insurance, stock broking and distribution) and may divest minority stake in the entity to private equity investors in the future.

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The strategy behind the move is to separate the financial services business of the company from its manufacturing business to unlock shareholder value. Aditya Birla Nuvo has sought the RBI approval for setting up the holding company. This could be a precursor to a possible listing of the financial services business in the near future.

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The $29-billion AV Birla group runs a large asset management and insurance business in partnership with Canada’s Sun Life. Aditya Birla Nuvo holds 74% in the insurance JV, Birla Sun Life Insurance and 50% in the mutual fund entity — Birla Sun Life Asset Management Company. The firm last year also acquired the stock broking unit of Reddy family -- Apollo Sindhoori.

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 Besides financial services Aditya Birla Nuvo(formerly known as Indian Rayon), is engaged in various activities, including viscose filament yarn, carbon black, agri business, textiles and insulators. Over the past few years, it has also entered into telecom, business process outsourcing (BPO), IT services.

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The idea to unlock value could also be linked to the fact that some of the businesses owned by Aditya Birla Nuvo (such as Idea Cellular) are valued much more than the parent itself.

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GROUP PARING STAKE IN RETAIL BUSINESS TO PE FIRM

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Meanwhile, in another development, the group is looking to sell a stake in its loss-making retail venture to private equity firms, eyeing additional funds to scale up the fledgling retail business. Private equity players, such as Warburg Pincus, KKR and Goldman Sachs, are in talks with the group, which operates a retail chain under the More brand according to this report.

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The Group chairman Kumar Mangalam Birla also told the daily that the group was not looking at a strategic partner but was open to the idea of roping in financial investors.

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Aditya Birla Retail, which started operations in 2007, is estimated to have reported a net loss of Rs 534 crore($115 million) in 2008-09, on a sales turnover of Rs 1,030 crore. It is currently revamping the format of its stores and has stepped up its private label offerings to improve margins.

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