Subhadip Sircar, Namrata Singh and Prasanna Upadhyay
The Financial Express
Mumbai, 5 June, 2004

Kumar Mangalam Birla is clearly a man in a hurry. The young dapper chairman of the Rs 26,000 crore AV Birla Group has been busy acquiring and restructuring businesses over the past two years. The cherry on the cake has undoubtedly been the acquisition of Larsen & Toubro’s cement business. In an interview to FE’s Subhadip Sircar, Namrata Singh & Prasanna Upadhyay
Mr Birla talks about the road ahead for the group. Excerpts:

The Group has gone through a major restructuring exercise over the past two years. Is much of it over now?
We have put behind a lot of the restructuring now. We have shed a lot of businesses and are a sharper and more focussed group today. Having said that, we have traditionally been a conglomerate and have a track record of successfully running diverse businesses. Now we are looking at businesses where we can focus on superior returns for our shareholders. We will concentrate on businesses where we have a leadership position or have clear powers to get there — either among the top two or at worst, third.

In a large group, there is something always happening at the periphery. We might get into or get out of something. Consolidation is an ongoing process. So some amount of getting into some business and getting out of some business will happen.

We might be in one more large business though I cannot tell you which. I am kind of crystal ball gazing. However, five years from now, we will look much similar in the kind of businesses we are in. We will not be changed completely or transform ourselves. We have a track record. There is enough leeway and elbow room in our existing businesses to consolidate further. I don’t think we want to spread ourselves thin by getting into too many businesses.

Is a foray into biotechnology on the cards?
As a large business house, we will look at new opportunities and study new businesses but that does not mean we will get into it the next day. One wants to be aware of what is happening in new sectors. We have not made up our mind on biotechnology.

Grasim still has a textile business while overwhelmingly being a cement company. Indian Rayon is also into multiple businesses. Is some amount of business restructuring among the group companies still on the cards?
We had the cement businesses in Indian Rayon and Grasim. We brought that under the Grasim umbrella. We completed the change by moving copper from Indo Gulf to Hindalco. There isn’t any other overlap as such across companies. We don’t need to do that across companies that do not add value.

Graviera, which is under Grasim broadly comes under textiles but Graviera is a different part of the value chain. The whole time and cost of doing that exercise would not create value for Indian Rayon or Grasim shareholders.

How do you see the textile business growing given the fact that the quota regime would be disbanded from 2005?
We have good opportunities in textiles. Textile manufacturing has moved from west to east. Madura Garments has opened up a whole lot of contract exports. If you are cost effective, it can only add to the returns.

Madura has grown very well and turned around. It will be a Rs 500 crore company this year. A couple of brands will be over Rs 100 crore. The idea is to consolidate and grow them.

You had earlier mentioned that the group would look at creating a balance between asset-heavy and asset-light businesses. How far has it progressed in this regard?
When I say create a balance, it cannot happen overnight. When we talk about the BPO, insurance and mutual funds businesses, these are more for the future. But they are growing very well. The balance cannot be created so soon, it can happen only over a period of time. That’s a process that will take its own time. We are talking of lots of different brands for different businesses.

International expansion is clearly a major thrust area for the group. Which are the businesses and geographies that will form a part of your future plans?
We have made two large investments in mines in Australia. We forayed into China last year with carbon black where we are increasing capacity from 10,000 tonne to 60,000 tonne. Egypt has also grown exponentially. It will soon become the largest single location plant in July. Growing internationally is a logical part of the growth of some of our businesses. It is more driven out of business necessity than the desire to be international. But it has to make business sense, that is the philosophy.

Largely, our international businesses will be textiles, chemicals and carbon black.

The government seems to be clear that disinvestment is off its radar. Since the group had been interested in some of the major disinvestments like National Fertilisers and Nalco, this development will it hamper our growth plans?
We have no issues as long as there is clarity on the subject. It gives us an idea as what we need to do going forward. The problem arises when there is no clarity.

We have to relook at our growth plans. If we have kept some sort of provision for a possible acquisition or some kind of investment, that obviously would not happen. We have to recheck our plans. It is not a setback. Again it does not really affect us, it just means that you rework your plans. NFL has always been around and are not in our area of operation as of now. Probably we will look at more brownfield and greenfield expansions.