This part of our journey is value discovery: Kumar Mangalam Birla
Kumar Mangalam Birla on Aditya Birla Group’s several M&A deals—Idea-Vodafone merger, Grasim-Nuvo, UltraTech-Jaypee—and GST impact on business
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Mumbai: The $43 billion Aditya Birla Group is in the midst of mergers and acquisitions in its major businesses. On Thursday, group company UltraTech Cement Ltd concluded the Rs16,189-crore ($2.5 billion) acquisition of Jaiprakash Associates Ltd, marking the largest acquisition in India’s cement industry. In the works is a merger of Idea Cellular Ltd with Vodafone Plc.’s Indian business. And group companies Grasim Ltd and Aditya Birla Nuvo Ltd are in the midst of a merger. “We are in the value-discovery phase is how I would describe this part of our journey,” Kumar Mangalam Birla, chairman, Aditya Birla Group, said in an interview on Thursday. Birla also spoke about the transition to the goods and services tax, consumer sentiment and the broader economy.
What is the growth drivers for the group overall?
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We are seeing robust growth across our sectors. Our mission has always been to be leaders in each of our businesses which is one, two or three.
There is a significant change happening in all of your main businesses...
Our financial services business gets listed sometime in middle of August. Premji Invest has just come in as a sort of anchor investor...I think robust growth and value discovery is how I would describe this part of our journey.
The economy, though, continues to be in some kind of flux. Especially sectors like infrastructure and housing.
Housing is one sector that is yet to take off. It has to reach a certain scale to really have an impact. As of now, it doesn’t have significant enough demand. But the trajectory is great. Not just from the point of view of cement, but for the economy as a whole. One is banking on housing and infra development when we do a deal of this magnitude. Some sectors like roads, railways, metro, irrigation are doing well. But there is headroom for improvement in infra. The investment is premised on infrastructure development in the country.
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When can we see the payments bank happening?
Sometime in July.
Any update on the Vodafone-Idea merger?
It is on track. It will be implemented by middle of calendar year 2018.
What is your view on GST?
GST is a structural move in the right direction. It could take a few months to settle down. It is another one of the government’s fundamental shifts which are all very well thought through...It will make us a much more robust economy.
What is the impact on your group? Have you assessed it?
We have small positives and small negatives in each business.
Do you think the business environment today is stable enough?
I think that confidence is coming back. One of the key stumbling blocks is that many companies are stuck with large debt, which they have accumulated over a period of time and therefore they don’t have the room to invest. Personally, I think it will be a while before full-throttle investment happens. You look around and how many corporates do you see who have debt within a manageable level. So, I don’t see any significant corporate investments happening in the next four to eight quarters. Our debt levels are very much under control. We are investing around Rs2,600 crore in a new cement plant in MP. We are looking at similar greenfield investments across several of our businesses. Some of these are fresh plans. We continue to believe in the inherent India story.
Any new areas of growth that you are looking at?
None at all. We are just focused on where we are.
What is the update on the e-commerce business?
We are looking at growing it. They are doing around 3-4,000 orders everyday. But margins have come down significantly due to heavy discounting in the industry. Until investors don’t turn off the taps at some of the larger players in the segment, discounting seems to be the order of the day.