AV Birla Group bullish on US for manufacturing

The Economic Times
29 June 2013

Aditya Birla Group Chairman Kumar Mangalam Birla on Friday said the US has reemerged as an attractive manufacturing destination because of the availability of cheap energy following shale gas discoveries. Birla feels that the country, which presently contributes approximately $4 billion to the group's total turnover, offers an interesting opportunity and makes manufacturing much more competitive.

Birla was in the city on Friday for an interaction with Bengal Inc. The two-hour special session on 'Leading Business in Uncertain Times' was organised by the Calcutta Chamber of Commerce. Asked if the AV Birla group was considering the US for a greenfield investment, he said: "We are yet to identify a sector for investment."

Though he was bullish on opportunities in the US, Birla does not agree with the general perception that China is a global player. "China," he said, "is self-focused and does not comply with several rules and regulations, including the WTO norms. On the contrary, China can learn a lot from India. India diligently follows the WTO norms and has a strong legal system." Birla also shared his views on the difficult global economic situation as well as the policy uncertainties in India.

"While India Inc has benefitted from the policy changes announced by the government, there is policy uncertainty. There is no denying the fact and the India Inc is well within its rights to speak about that," he said.

Speaking to journalists after the session, Birla said India still needed to c;reate an enabling environment for corporate entities to set up projects without hassles and cited the example of Brazil where his group was able to commission a greenfield project within a record two years.

"The government should c;reate an enabling environment. It is not a case of 'about India versus outside India'. I still feel that all is not lost. I am optimistic about the future," Birla said. If he were the CEO of India, Birla said, he would have focused on infrastructure.

"With the kind of infrastructure that India currently has, it will not be able to achieve an 8% GDP growth year-on-year." The group has diligently stayed away from power because of excessive regulatory interference that makes a company's destiny dependent on a stroke of a pen. The group, however, forayed into telecom, which too is bogged by regulatory interference, primarily because the rate of growth in this business more than compensates for any interference.

Incidentally, Aditya Birla Group is yet to apply for a banking licence. "I can't talk much on this. If the country wants to grow at 8 % per annum year-on-year, we need much more credit, and hence, many more banks in the country. We will have to follow the RBI rules and regulations on dilution of stake or whatever else is required to be done to be eligible for a banking licence," he said.

He said that licence has been sought through Aditya Birla Nuvo, the company which controls the financial services business of the group. Asked about organised retail, he said that it was a much tougher business than what was thought of. "Since we have already got into the business, we will have to make a success of it," he said.

The group runs retail stores under the brand name More. On FDI in multi-brand retail, Birla said the regulations were complex and foreign retailers would find it hard to navigate. Birla said that the existence of local kirana stores would not be under threat from FDI in multi-brand retail.