MANTRAS FOR SUCCESS
Author : Suhel Seth
Publisher : Maven, Rs500
living up to the Birla surname comes naturally to Kumar Mangalam Birla. What stands out, though, is how he transitioned from being an Indian entrepreneur to someone who has reached out to the world, writes SUHEl SETH
Kumar Mangalam Birla sums up his success mantras in four simple lines:
‘Your attitude determines your altitude.’
‘People are your biggest asset’.
‘There are no shortcuts’.
‘There is no substitute to smart, hard work’
Takeover Tales
Over the years, Kumar Mangalam has spread the group’s business to 42 countries, with about half of the company’s money coming in from international operations. Almost 20 years since he took over, the Aditya Birla Group is a $40 billion conglomerate and a leader in viscose staple fibre, palm oil, integrated aluminium, insulators, carbon black, copper and cement; India’s third largest telecom company; with businesses in financial services, retail, trading, natural resources and agriculture.
Unlike most other businessmen, Kumar Mangalam believes in what is called the Parta system, which, essentially means that at the end of the day, there should be cash flow coming in - a very traditional Marwari way of doing business. As he charted his global expansion plans, acquisition was on the top of his mind. One of the companies he wanted to acquire, American aluminium maker Novelis Inc., was four times the size of Hindalco (Hindustan Aluminium Company), the Birla Group’s aluminium manufacturing unit. At the time, Novelis was going through a very difficult phase. In a luncheon meeting in 2006 with then Novelis CEO Brian W Sturgell, Hindalco’s managing director Debnarayan Bhattacharya and group CFO Sumant Sinha proposed a takeover.
After the acquisition, which finally happened in 2007, Novelis had to be put back on track. One of the biggest problems was that before it was acquired by the Birla Group, it had signed multiple contracts to deliver aluminium products, but had bought the raw material at a much higher price. The cost ripped the profit margins. Finally, the company was turned around by merging the high-cost business of Noveis with the low-cost business of Hindalco and taking out redundancies. The acquisition made the Birla Group the largest producer of aluminium of the world.
In 1998 too, Kumar Mangalam had acquired Dharani Cement ltd and Shree Digvijay Cement Co. ltd, in a move to consolidate the company’s leadership in the cement business. In 2004, Grasim, the Birla Group’s flagship cement company, acquired larsen & Toubro’s (l&T) cement division for Rs2,200 crore, which was renamed UltraTech Cement limited. At the time, this was ranked amongst one of the largest business deals in India. It also made Grasim India’s largest cement producer, and doubled its capacity And, more recently in 2014, UltraTech completed the acquisition of Jaypee Cement for $600 million, making Kumar Mangalam the undisputed cement king of India.
The Birla Group became the leader in producing carbon black (a form of carbon used in rubber products) with the help of US-based Columbian Chemicals. The deal was for $875 million — it doubled the company’s capacity to two million tonnes and got it a foothold in European and North and South American markets.
Chickening Out
The Birlas are Marwaris, a successful business community originally hailing from the State of Rajasthan, who are vegetarians and teetotalers. None of their office campuses prepares non-vegetarian food. But how could the no non-veg practice continue when 60 per cent of the company’s revenue came from international operations, spread across 36 countries and five continents, employing 1,36,000 peopleIJ
In 2003, Kumar Mangalam bought a small copper mine in Australia for $12.5 million. The employees were worried about the new culture that would be brought in with the change in ownership-no alcohol and no meat. But then finally, he saw what he had least thought of. ‘And as I was reminded (of) the first time I saw butter chicken being served in a Birla canteen (...) the most difficult challenges turn out to be the ones you least expect’, he writes in Reimagining India.
At one point of time, Kumar Mangalam would be impressed by anyone who spoke the Queen’s English, but as he went to Brazil and Egypt, he came across people who were not particularly proficient in English, but extraordinary at their work. So he started respecting his chartered accountants more, who often came from the smaller towns of Rajasthan, and didn’t speak English fluently.
Playing on Trust
In 2001, he launched Idea Cellular ltd, which was started as a joint venture between Birla and AT&T Communication. Tata Cellular joined in later. The trio got the acronym BATATA. But soon, the Tatas exited the business and so did AT&T, in 2006. Kumar Mangalam decided to carry on with Idea Cellular. But a few years later, Idea started to fizzle out. Kumar Mangalam decided to make his company a pan-India player. He bought telecom licences.The telecom firm also started to focus on central India, instead of the metros, unlike most of its competition.
He wanted Idea to be one of India’s top three telecom companies. When Himanshu Kapania became the managing director of Idea in 2011, the mobile telecom industry was already changing courses — social networking sites like Facebook were becoming popular and India was embracing the smartphone revolution. The future was all about Internet data. And Idea had just won third-generation (3G) spectrum in nine out of 22 telecom circles in the spectrum allocation auction by the Government in 2010.
The biggest challenge was to see that the Idea 3G network and services’ rollout happened properly. After that, it was all about creating customer stickiness, so that more people rode the Idea network. In the next phase, the emphasis was on offering services, whether it was Facebook or instant messaging services like Whatsapp at cheap rates, entertainment services in sachet packets and, later, bundling 3G services with affordable smartphones. Today, Idea has reached a market cap of over Rs60,000, and is highly profitable. It also has the lowest debt equity ratio compared to its peers, Airtel and Reliance Communications.n
Excerpt taken from Mantras for Success: India’s Greatest CEO’s Tell You How To Win, written by Suhel Seth with Sunny Sen, with permission of Maven (Business Imprint, Rupa Publications)
