Mumbai: In 1995, when Kumar Mangalam Birla took over the reins of the AV Birla group—built by his late father Aditya Vikram Birla—its turnover was just $2 billion (Rs 9,200 crore today) with overseas operations in Egypt, Thailand and Indonesia. Now the group’s turnover is $30 billion with operations spread across 40 countries. Overseas operations account for 60% of the group’s turnover and it employs 130,000 people.
Unlike his father, who built companies from scratch in India and abroad, Kumar Mangalam Birla, 42, has expanded business primarily through acquisitions, snapping up 22 companies in the past 15 years, both overseas and in India.
In 2005, he purchased aluminium can maker Novelis Plc for $6 billion and turned it around. He has also bought mines in Australia; Star Trading, a cement company in Dubai; and UltraTech Cement Ltd in India from Larsen and Toubro Ltd.
Soon after he announced a deal to buy carbon black maker Columbian Chemicals Co. (CCC), Birla said in an interview on Monday that his group revenue will more than double to $65 billion in the next five years, and he will look at buying copper mines, power companies and enter solar power. Edited excerpts:
You took five years to turn around Novelis. What’s your plan this time?
This (the CCC acquisition) will give us the leadership position. There has been complementarity of skills. Then, the issues of geographies that we were not present in are being added by CCC.
We would want to reach out to North America, Canada, Brazil, Germany, Italy, Spain, Hungary and China
The group has grown through acquisitions since you took over from your father. Are you satisfied with the growth?
We are extremely happy with the kind of growth. We have acquired 22 companies in the last 15 years. We prefer to not take on more than we can chew. That’s always the idea. We have not taken a lot in hand and with that kind of philosophy, we have done well so far.
The seeds of a global company were sown by your father and you have built upon that...
The idea was to build on that base. We have a strong foundation that we had inherited. It would have been a pity had we not been able to grow on that foundation.
What is the target for 2015? How do you see the pace of growth in the next five years?
I see growth accelerating as the platform is bigger. I see the growth much faster than it was so far. The internal target is to take the group to $65 billion by 2015.
Your group has variety of businesses that can grow both in India and overseas. What is your strategy?
Financial services is a very strong growth story. Retail is doing good. Aluminium is doing well out of India and there is pretty much good cash flow. Cement, so far, is growing well in India and there is enough headroom to grow the business in India itself and hence we won’t look too much outside of India for cement.
We are focusing on acquiring mining or copper assets abroad, though we are not close to concluding any buy.
We stay committed to Idea Cellular (the group’s telecommunications business) and we have a strong position financially. I see Idea growing with growing customer base—a fast-track growth in the next few years.
What will be the innovative businesses that you would want to get into?
Alternative energy is something we are keen on. But it will be small. We are looking at acquiring solar assets. This is a new area we need to learn.
We are also interested in power, which is an interesting space, and we are already looking at several assets in power, too. But if we won’t get anything that suits us, we won’t foray into the business at all.
We are waiting for the government’s policy for fertilizer companies.
Investors are keen to buy Indian companies’ shares abroad. Novelis is an ideal candidate to list abroad closer to the home market. Any plans?
We don’t have need for raising money through equity as of now. Equity is the most expensive way of financing.
There is pressure on Aditya Birla Nuvo’s balance sheet with the kind of growth that you have charted out. How do you plan to address this?
Whenever a company is in a high-growth phase, there will be some stress on the balance sheet for a couple of years. The good thing is it’s happening by design and not by default.
Since we know what the future capital flows look like and how much we need to deploy in next two-three years, we are prepared for it. It could be Rs 200-300 crore.
There is no liquidity crunch in the company. Its balance sheet may not be as strong as other group companies’ balance sheets, but that’s a conscious decision as the company is in a high-growth phase. We are at the tail end of our investment in Nuvo.
Are you comfortable with your stake in the group companies?
The idea is to bring the group’s holding to 50% in all group companies through creeping acquisitions. We would try to hike stakes in the companies by 5% every year.
How has the nature of doing business changed over the last 15 years?
The challenges have changed. The level and quality of competition has gone up. The world has become smaller—globalization has done that. We need to constantly keep reinventing ourselves.
How do you see the next leg of growth? Will it be more expensive than what it has been so far?
Not really. I don’t think we would grow unless we are growing on a strong base in terms of other strategic advantages that go with the growth. There is no desperate need to grow.
Your group is present in 40 countries and there are many opportunities in emerging markets. What are your priorities?
Brazil is interesting as it is a growing economy for minerals and resources. South Africa, East Africa are interesting for metals and mining.
We are in China and it is not an easy country to trade in and we have to start small and tread with caution.