With the completion of the copper capacity from 250,000 tpa to 500,000 tpa, Hindalco will be among the top 10 copper producers in the world. It will also elevate Birla Copper, the copper arm of Hindalco, to the world's single largest copper smelter in one location.
Indian Rayon is focussing more on high growth businesses, says Birla. Indian Rayon, which is being renamed Aditya Birla Nuvo has been deploying cash from its value businesses - viscose filament yarn, carbon black, textiles and insulators - into high growth businesses, namely garments, insurance, IT\ITeS and telecom.
Over the past five years, the company has recorded cumulative cash flows of Rs 764 crore (Rs 7.64 billion) from value businesses and deployed Rs 793 crore (Rs 7.93 billion) in high growth areas. Aditya Birla Nuvo aims to expand its high growth businesses in the near future.
For example, Madura Garments intends to transform itself into a lifestyle brand, a strategic tie-up with global brands is on the cards, and it aims to double retail space in three years. Transworks, the BPO division, wants to build scale and diversify. Aditya Birla Nuvo intends to enter pension funds and banks, if it is allowed to.
At the same same time, the group is focusing heavily on cost reduction. "The cost reduction exercise differs from company to company, from one plant to another," adds Rathi. If you take cement, for instance, he says, the initiative is three-pronged -- reduce cost for power generation, consumption of coal, and transportation.
Does that mean consolidation within the group is over? "This is a continuous process. At the moment, we are more focused on expansion," says Rathi. Industry sources say UltraTech Cements and Shree Digvijay Cements, a privately held company of the group, may be merged with Grasim.
Birla, however, is not forthcoming on his plans: "UltraTech is a subsidiary of Grasim. Therefore, you can say that the cement business is being managed by Grasim. It's premature to say whether we will merge these companies."
Industry sources also say the textiles business will be brought under one umbrella. That may not happen very soon. A merchant banker says Birla will do this after he takes charge of Century Textiles and Century Enka whenever that is.
Birla himself does not like to talk about the issue as his grandfather manages them now. BK says, "Kumar Mangalam insists I continue. He will take charge as and when he finds time."
BK feels the most important reason for Birla's success is his education, which has taught him to think big. After returning from London, where he did his MBA, Birla was given charge of new projects -- such as a carbon black plant in Egypt, existing businesses like Indo Gulf Fertilisers, running Grasim's portfolio cement division, and HR.
"Kumar Mangalam's working model is completely different from his father's. Kumar Mangalam believes in delegation of power. His style is more group-oriented," BK says.
But even his grandfather was surprised by the speed with which Birla broke down all barriers in his quest for success. First, he started building a team. "We have a policy of not recruiting people from outside. He changed it," BK says, adding that Birla let 350 vice-presidents, who were over 60 years old, go at one shot -- unheard of in those days at the Birla empire.
He created a new team and put HR systems in place by roping in Santrupt Misra from Hindustan Lever in 1996. Then followed Bharat Singh (1996), Debu Bhattacharya (1998), Sanjeev Aga (1998) and Sumant Sinha (2002). This removed at one shot the impression that those who were not sure of finding a suitable job outside join the Birla companies.
The next thing he did was to replace the partha system of daily financial reporting with an economic value-added model. Partha was a manual system to determine input costs and the daily cash profits as compared to budgeted profits.
Ghanshyam Das Birla had developed the system of accountability based on partha, in which each company in the group had to draw up a series of informed estimates of how much it would cost to manufacture a particular volume of production, sell it and meet a profit target based on this estimate.
The amount of capital it takes to support the manufacturing was also taken into account. This has been replaced with a cash value added method that emphasises three aspects: profitability, asset productivity and growth.
No one today doubts Birla's ability to expand his empire even though concerns remain about what some say could be an uncertain line of reporting and accountability.
At the top sits Kumar Manglam Birla, and despite the delegation of authority, people still prefer to wait for "Babu's" orders directly. Changing this mindset is clearly Birla's biggest challenge now.
WYD Team
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