Idea is not for sale, it's our core business: Kumar Mangalam Birla

The Economic Times

6 December 2013

Kumar Mangalam Birla, 46, took over the reins of his family business when he was barely 28. In 18 years, he has turned it into a $40-billion global conglomerate by gobbling up big companies overseas as well as entering new businesses. Birla, ET's Business Leader of the Year, plans to participate in the upcoming auction of telecom airwaves and is planning to set up a bank, if the RBI gives him a licence. In an interview with ET, Birla, who steered clear of any discussion of policy paralysis, said that his set of consumer facing businesses would grow in the face of upcoming challenges from companies such as Reliance Industries. Large investments are currently not on the horizon as the group had just completed a number of projects. Edited excerpts:

How does the economy look from your perch? Are there any signs of green shoots?

If you go by macro data like CAD (current account deficit) coming down, I think that probably it is a green shoot for the economy because that is kind of a reflection of the health of the economy. CAD has come down quite smartly, hasn't it? Kudos to the finance minister as always for making things happen.

I think fiscal deficit is a big factor and CAD coming down will have a ripple effect. There are signs of some green shoots.

Are you now encouraged to make more investments?

We have just completed a very large investment tranche in the last two years. I think the priority for us is to digest that and get returns from that large capex. So, large investments are not a priority for us.

Not too long ago, you said it makes more sense to invest overseas. Do you still hold that view?

I don't want to keep sounding negative. Things keep changing. They are sometimes positive, sometimes not. I don't want to sound like a stuck record on that.

Are you seeing a pickup in your core businesses or is demand still slow?

It is a bit of a chequered story. In some sectors you are seeing a pick up, in some others not yet. It is also a reflection of what is happening in those commodities globally. So given the fact that ours is such a closely integrated economy with the world, and we have been for a while, what is happening in the external world is extremely important and it has a bearing on what is happening here in India. So, it is bit of a mixed bag.

How do you see political developments unfolding?

I don't want to comment on politics.

In terms of the group, which are the new areas you are looking at?

It's not a good idea to always look for new frontiers especially when you have opportunities in your existing businesses, in your own backyard. I think that the investments made in the last two years have captured some of those opportunities and have been done with a point of view of returns, filling strategic gaps, building of strategic strengths and I see us having a very interesting portfolio of businesses now.

It is a very interesting blend of so-called new age and tradition, between asset intensive and asset light, between industrial goods and consumer facing. I don't see the need for us to enter into new businesses.

What about banking?

Banking in that sense is a new business, but from another perspective it is part of our financial services portfolio getting fleshed out. But yes, within the financial services portfolio, it's a new business.

Is there anything more planned on the consumer facing side?

A large part of our business now is services, whether it is Idea, retail or garments. And there is significant activity happening in each of those businesses, there is significant amount work to be done and headroom for growth. So, spreading ourselves thin at this point in time doesn't seem to make sense.

Are you open to a foreign partnership in retail business?

Yes, we will be very much interested in a foreign partnership, subject to the policy. We would be looking at learning retail processes, retail systems, retail driven profitability, optimisation and also getting financial capital.

Are you happy with the FDI policy? We don't see much happening there.

I think it requires to be fleshed out, but it is a step in the right direction.

Where is the retail business at this point in time in terms of profitability?

We hope to become profitable in the next two years.

What about Idea? Are talks about selling Idea correct?

Absolutely not; it is our core business. There is no question of selling the company or the business. I think telecom is seeing a much better phase now with consolidation happening and we look forward to participating in the auction. I think Idea is on a strong wicket, has a strong balance sheet, good franchise and quality of network.

Will you be a consolidator in this space, considering it is your core business?

There is a lot of opportunity, again, for growing ourselves organically. I don't necessarily see ourselves as a consolidator and that doesn't mean we won't do it. Growth rates are healthy and high but the possibility of being a consolidator - I don't see that as very high.

How do you see the entry of Reliance Industries (in telecom)?

Reliance has always been a credible competitor, with deep pockets and a great track record of execution. I don't think there is complete clarity on their plans so it's a little difficult to give you a very specific comment but needless to say that it is something that could be a potential game changer.

What kind of changes do you expect? Does the entry (of Reliance) worry you?

I don't know what their plan is, so I may be speaking a little bit prematurely. But my sense is that everybody in the industry is waiting to see what happens and when you have such a credible competitor coming, there is some anxiety, which I think is good.

What does the award mean to you?

I think it's in a sense the triumph of collective leadership across the length and breadth of the organization. Very often we think of leadership being at the very top of an organisation. I think what's unique about ABG is that we have a very strong cadre of leaders across the organisation who are highly empowered and therefore play a very major role in the growth and evolution of the organization. So it's really recognising the leadership across the company.

You have said that in the next five years or so a substantial portion of your top management will be overseas nationals? Where are you on that?

I think that's not something that you can have targets for. It is something that I think, I could be wrong, but it's something that I think will happen in the natural way. As we become more and more international your senior most management team, I see, will reflect that international character of the group. But one doesn't have any milestone as to it has to be 10% by so and so year and 30% by so and so year. It's a generic comment.

In the next three years, where will more of your investments be, in India or overseas?

I think that if you look at it longitudinally over the next five years, our mix of 50% revenues from India and overseas will remain. It could change from time to time because of specific investments from time to time that kick in, but I see the group as having half its revenues from outside the country and half from here.

What is view on new companies, start-ups that have a billion dollar valuation?

I think it's very positive thing. Reflects the spirit of entrepreneurship in India and that it is alive and kicking and it's a very good feeling to have, to see this.

Who do you admire as a business leader? Any role model?

Jack Welch is someone who I have always admired. In India, Narayana Murthy is someone who I have great respect for.

Any advice for policy makers... We are getting into another uncertain phase for the next 6 months?

I think let's just focus on building high quality infrastructure.