You just have to be connected to India

The Economic Times 20 November 2009

If you want to be part of the global growth story, then you have to be connected with India in one way or the other, depending on the kind of business that you are in. That’s the message Mr. Kumar Mangalam Birla, Chairman, Aditya Birla Group has for global investors. In a free-wheeling chat with Mr. Vallabh Bhansali, Chairman, Enam Securities, Mr. Birla recalls his struggles in his initial years and charts out the road map ahead for the Aditya Birla Group.

Vallabh Bhansali: You are the sixth or the seventh-generation legacy — history shows that it goes back to sometime in 1857 in Pilani when the first significant enterprise started. You came in at a very young age. So how difficult was it and what do you recall of your early days?
Kumar Mangalam Birla: The circumstances were such that it was very difficult, but I think that the family, my father, what they left behind was a legacy of goodwill and that bank of goodwill saw me through a lot of the initial years. Yes, it was very tough, but we had a very good team. It was a team that had built up the organisation in the 30 years prior to that. I was very fortunate to have their support to take me through the first three or four years.

VB: We find that the market cap of the Indian market has done better. It has had a compounded growth of over 15 per cent, assets have grown around 23 per cent and sales have grown 25-26 per cent. How do you look at the financial performance, as the stock market is rather unimaginative and we think only in terms of market cap?
KB: Couple of things. I think that the market cap is obviously a product of the kind of businesses that you are in and we are even now fundamentally, to a large extent, in the manufacturing businesses that has been our forte. I think that there is a lot of value creation to be done there. We have a track record of running those businesses successfully. There is a huge opportunity for growth in those businesses. So although it means lower P/E and lower market capitalisation, I do not see the reason for us vacating that space. We are very comfortably poised to take advantages of all the opportunities that we have in those businesses. But what we have done over the years is to c;reate a mix and match of the portfolio of the group. We have tried to balance it out by having on the one hand assets like businesses, and on the other hand, more asset-intensive or the more manufacturing kind of businesses. Again, value businesses, as we call them, are the slower growing, more mature businesses than the newer age businesses, for example, telecom or financial services.

VB When your market cap behaves in a certain manner, it also measures your wealth in a certain manner, and it’s very interesting that you are not a number-conscious person. The Birlas were known for their cash flow or cash-flow management. So, what is your inspiration, were there any guides and any gurus. What drove that conviction to do that?:
KB: No, there were no guides and gurus at that point in time, but I think a sound educational base and the fact that I had interned with my father for about five-six years, helped. I was looking after some businesses for about three years before he passed away so there was some sense of what the real world is all about but I think it was more intuitive. It was based on what we thought was hurting at the moment, and like they say necessity is the mother of invention. Around the time that I took over, the economic environment had changed very much, duties had gone down, the whole investor base complexion of that change you had, all the FIIs coming in more ferociously than before. So the whole liberalisation theme had actually started to play out. We, for example, felt that we needed a skill set that we did not have in the organisation at that point in time. We did not have the luxury of time, so we needed to import them. So, it’s like saying that you know, you have a good cricket team, you have some good batsmen, you also need some people who can take good catches, so we had a lot of people coming in on lateral moves.

VB: What would you like to tell global investors — about either India or your group or anything else?
KB: I think India as we all recognise is at a very interesting point in its growth cycle. I think that what happened over the past one year is that we have been able to sustain a shock so well. And the fact that we have come out of it looking even fitter and stronger and relatively unscathed is a fact that has not gone unnoticed across the globe wherever we have our operations. I think there is a very clear message that goes out to investors and that is that India has clearly bucked the trend, that the banking system in India is much healthier than probably in most other parts of the world, the fact that our monetary and financial fiscal prudence that we have over the past 10 years has stood us in very good stead and the fact that India is one of the few economies that is continuing to grow at 6-7 per cent. Hopefully, it will be in double-digits, going forward in the next 2-3 years. India is an economy that you cannot ignore. If you want to be a part of the global growth story, then you got to be connected with India in one way or the other depending on the kind of business that you are in.