Kumar Mangalam Birla: A Man For All Seasons
Image: Dinesh Krishnan
Award: Entrepreneur for the Year
Name: Kumar Mangalam Birla
Chairman, Aditya Birla Group
Why He Won: For changing the profile of the century-old conglomerate, earlier dominant in old economy segments. For entering new businesses and for gradually increasing international operations and geographic spread, through mergers and acquisitions.
What you are is a creation of the choices you’ve made until now. What you will be is a function of the choices you make today. For all practical purposes, it sounds like an immutable truth. Because there seems little else that explains the likes of Kumar Mangalam Birla. Why is the man who presides as chairman of the Aditya Birla group where he is now? And why is he driving the group into making the kind of choices it is today?
To put things into perspective, in the buoyant year that was 2008, Indian entrepreneurs seemed a frothy lot. The business press was bursting at its seams in trying to document stories of their ambitions and frenzied action in corner offices. Companies based out of India were trying their damndest best to acquire or merge their assets in other parts of the world. It was “India Shining”, many said.
Birla was among the first who stoked the frenzy. In February 2007, he announced his group would pay $6 billion to acquire an American company, Novelis. Debt-ridden and in distress, Birla thought it a good time to buy the world’s largest aluminum-manufacturing company. In a text-bookish statement, he then said, “It is in line with our long-term strategies of expanding our global presence across our various businesses and is consistent with our vision of taking India to the world.”
Be that as it may, coupled with Tata’s landmark acquisition of Jaguar Land Rover a year earlier, that was perhaps the reason why in 2008, 1,270 deals with Indian participation were announced. Research and Markets, a firm that tracks such activity across the world, computed the total value of these deals at $50 billion. For a while, all looked pink and pretty and a world dominated by companies from emerging markets like India seemed inevitable.
It is a while away before numbers for the current year are computed. Anecdotal evidence indicates that though the emerging markets theory continues to hold good, all is not well. It is not uncommon to hear Indian entrepreneurs use a quaint term to describe their current predicament—an ‘investment holiday’!
But it is an alien term in the corridors of the group’s Mumbai-based headquarters. On the contrary, Kumar Birla wants turnover to touch $65 billion by 2015 from the $40 billion it is right now. While the goal was set during more sanguine times, Birla refuses to budge. In fact, as recently as this May, he announced the group’s intent to acquire Pantaloon Retail for Rs 1,600 crore. The proposal is pending regulatory approvals. “Our success rate on M&A is 85 percent—this is for results that have exceeded our benchmarks,” claims Dev Bhattacharya, the group head for corporate strategy.
Given this kind of numbers, we thought it an interesting exercise to dig deeper into the choices Kumar Birla exercised in the past to understand what his future could look like.
Choice #1: Persist
When Kumar Birla was 34, a Barcelona-based acrylic fibre company showed up on his radar. That was in 2001. This was the kind of company the group would do well to acquire. His team put a proposal in place and shot it off. But those were the days when Brand Birla was unknown outside India. And so their calls went unanswered. When they finally got through, the chairman of the Barcelona-based firm thought it a pointless exercise and gave the meeting a skip. Instead, he sent a junior executive to find what the ‘upstarts’ had in mind. Nothing came of the meeting.
On his part, Birla kept his head and thought waiting it out was a good idea. Two years later, the firm went bankrupt and the Indians had an awfully good time picking and choosing from the debris assets they thought would be useful to their business.
While it is easy to think of the Barcelona-based chief executive as myopic, fact is, he was going by his perception of the world—companies that originate from emerging markets like India are bottom fishers out to squabble for a cheap deal. He wasn’t the only one.
Around the same time, Columbian Chemicals was up for sale. Birla told his team that if they got Columbian, then owned by US-based Phelps Dodge, they would be the world’s largest manufacturer of carbon black—an ingredient used to manufacture automobile tyres. But because the Americans didn’t have a clue about Birla, his executives weren’t as much as granted an audience and Columbian was auctioned off.
But the company refused to go off Birla’s radar, and in July last year, a full 10 years after he had first set his sights on it, he was told JP Morgan, which held a majority stake in Columbian, was looking for a buyer. He offered $800 million and got it.