April 19, 2013The Korea Economic DailyReported by Rho Kyung-mok
Kumar Mangalam Birla, Chairman of the Aditya Birla Group Challenges of a great-grandson of the founder
Leading change from within starting with restructuring after his unexpectedly sudden accession to leadership of the group at the age of 28, amid sneers of incredulity, what could such a young lad know about running a business! Riding on emerging economies
Focusing on infrastructure, with investments of USD 10 billion in aluminum and cement and a foray into the Indian mobile communications market Becoming a leading global business group
20-fold sales increase since his accession, with a payroll topping 130,000 in 33 countries across the globe
The Aditya Birla Group. The name may be unfamiliar to most Koreans, but it is a large conglomerate founded in Mumbai, India back in 1857. Its business portfolio ranges wide from aluminum to communications, distribution, insurance, and finance. Today, the group is headed by Kumar Mangalam Birla, a great-grandson of the founder of the group, Ghanshyam Das Birla.Kumar Mangalam Birla took the helm of Aditya Birla at the tender age of 28 in 1995 and has since grown the group into the third largest conglomerate in India with annual revenues of USD 40 billion (approx. KRW 44.78 trillion), after only the Tata Group and the Reliance Group. Most of the credit for Aditya Birla's rise as a robust global enterprise with 133,000 employees in 33 countries around the world goes to him.
FOURTH GENERATION SUCCESSOR TO 156-YEAR-OLD ENTERPRISEKumar Mangalam Birla is a great-grandson of the founder of the group. The Birla family belongs to the Marwari, a merchant class of the state of Rajasthan in the west of India. The word, Marwari, means "desert" in the Rajasthani dialect. The Marwari merchants have long been proficient in international trade, travelling to and from the Middle East. This seems to explain why Aditya Birla generates about 60 percent of its sales overseas, which is unusual for an Indian enterprise. Perhaps, the family has international trade in its genes.
Ghanshyam Das Birla founded Aditya Birla and heavily involved his family in its management. The Hindi word, Aditya, signifies the "sun." The founder was closer to Mahatma Gandhi than any other colonial-period businessman. Aditya Birla helped fund the Indian National Congress founded by Gandhi and actively participated in the Non-Cooperation Movement and the movement to boycott British goods. Aditya Birla's actions contrast with the close relationship the Tata Group, the largest conglomerate in India, enjoyed with the British colonial government in India.
In those days, the textile business, which was Aditya Birla's primary focus, benefited from Gandhi's anti-British movement, whereas Tata required the British government's help for its businesses: steel and railways. Aditya Birla was able to grow in such key national industries as copper, cement, and aluminum after India's independence in 1947 as its contribution to the national independence movement during British rule was recognized. Inheriting the family tradition of growing together with the community, Kumar Mangalam Birla's Aditya Birla takes corporate social responsibility more seriously than its peers in India: it operates 41 schools and 18 hospitals in remote areas and supports more than 3,700 villages.
INNOVATE TO ADVANCEThe Aditya Birla Group began to make forays overseas when Aditya Vikram Birla, a grandson of Ghanshyam Das Birla and the father of Kumar Mangalam Birla, was in charge of the group. He believed that the Indian government, rigidly adhering to socialist economic policy since the founding of the country, was stunting the group's growth. Aditya Vikram Birla grew the group by opening subsidiaries in Southeast Asia including the Philippines and Indonesia as well as in China, Egypt, Canada, Australia, and elsewhere, starting with the setup of a textile plant in Thailand in 1969.
In 1995, the group was faring well, but Aditya Vikram Birla suddenly died. Kumar Mangalam Birla, succeeded his father as head of the group. He had studied international trade at the University of Mumbai and earned his MBA at London Business School (LBS).
Back then, the group had annual revenues of about USD 2 billion, most of which were generated domestically, except in some areas like textiles. The business prospects in India did not look bright due to chronic problems such as high inflation and consequent high interest rates. Inheriting a large business group at such a young age, Kumar Mangalam Birla did not receive a warm welcome from other Indian businessmen.
Upon taking control of the Aditya Birla Group, Kumar Mangalam Birla initiated sweeping restructuring of the group. In order to raise its competitiveness in core business areas, he consolidated or closed non-core businesses. He invested a great deal of time in seeking out acquisition targets. His benchmark was General Electric Company of the United States, which started as an electric equipment producer but diversified into other industries including even finance and media. The new, young chairman was making major changes within the group, simultaneously looking out for great new growth opportunities.
GROWTH STRATEGY FOCUSED ON EMERGING MARKETSAfter a decade of internal reform, Kumar Mangalam Birla attracted widespread attention by acquiring Novelis, a Canadian rolled aluminum producer with a subsidiary in South Korea, at USD 6 billion (approx. KRW 6.7 trillion) in 2007, making the Aditya Birla Group the world's largest rolled aluminum producer. It was a move to take advantage of the growth of aluminum-related industries stemming from rising demand for non-ferrous metals. The group also has the world's largest copper smelter as a single site of its kind.
The group took over Colombia Chemical, one of the three largest carbon black producers in the world, at USD 870 million in 2011, becoming the world's largest producer of carbon black, which is a primary raw material in inks and rubber products.
Noting that India and other emerging economies are at the stages of establishing infrastructure, this young ambitious chairman endeavors to hone the group's competitiveness in industries connected with infrastructure, such as fertilizer and cement. In an interview with the Financial Times, Mangalam Kumar Birla said that the group would invest USD 10 billion in securing resources such as copper and coal and also in developing new projects in aluminum and cement. The Aditya Birla Group has since 2011 invested USD 7 billion in the booming Indian telecommunications market.
The Aditya Birla Group has grown 20-fold in revenues since Mangalam Kumar Birla took the helm 18 years ago. Last year, he put forth a plan to push up its annual revenues to USD 65 billion by 2015 by aggressive business expansion. Industry players are watching with great curiosity to determine whether the plan will work out since the Indian economy began to slow down in the second half of last year. Will he overcome the crisis with the genius of the Marwari merchants inherited from his great-grandfather, Ghanshyam Das Birla?
Dr. Pragnya RamGroup Executive President, Corporate Communications & CSRAditya Birla Management Corporation Private LimitedAditya Birla Centre, 1st Floor, 'C' WingS.K. Ahire Marg, WorliMumbai 400 030.
91-22-6652 5000 /2499 5000
Fax: 91-22-6652 5741/ 42