Kumar Mangalam Birla says the important thing is to grow steadily
The chairman of the Aditya Birla Group, Kumar Mangalam Birla, comes across as a very modest, self-effacing person. He spoke candidly and disarmingly about his empire, his business philosophy, and the way he runs his work and his life.
Kumar Mangalam Birla with wife Neerja
Few of us know that Kumar Mangalam Birla, Chairman of the Aditya Birla Group, produced the critically acclaimed Hindi movie Black. Or that he has taken up pistol shooting as a hobby. Or that his teenage son is a keen photographer, but he knows a thing or two about pictures and lighting himself. Most of all, Birla comes across as a very modest, self-effacing person. In two-hour-long conversations with Chaitanya Kalbag and Suveen K. Sinha in Mumbai and Delhi, he spoke candidly and disarmingly about his empire, his business philosophy, and the way he runs his work and his life. Edited excerpts:
CK: You have not done very much of expansion in Africa and you are in Latin America through Novelis - so do you have any ambitions…
Birla: Africa is one of the continents of the future. It has a lot of catching up to do in terms of infrastructure. We are looking at investing in Africa but haven't found the right assets. Our philosophy has always been that we wouldn't rush into something without doing our homework well and getting the right asset on board. So I think that for a company like ours that is multinational, it will be much easier to acclimatise ourselves to a foreign country and its way of working, but there is no tearing hurry...we are scanning the environment very intensely. We are looking at coal mining. But there are lots of issues…
CK: There are some areas where you are not very prominent - infrastructure, pharma, education...
Birla: At the end of the day every corporation has a limited pool of capital as you know. And it essentially boils down to capital allocation. It depends on what you believe are the competencies required to succeed in an industry, what the returns would be - relative risk returns compared to other businesses where you could invest. As a family we play a very large role in education. But that is not on a profit basis. Those are run by trusts. So what I am saying is we are not convinced that it is a very good business to be in. We are very convinced of the cause. In fact, the family has set up educational institutions over the last sixty or seventy years. The cause is something that is close to our hearts. The business part of it is something that we are not totally convinced about. Also Chaitanya, I think that when it has been so much a part of the family's role of giving back to society, then to think of it as a business, I think that creates a bit of a problem.]
CK: What are the areas you want to go into...
Birla: I think we have enough on our hands. There are huge growth opportunities in the sectors that we are in. I do not think we need to spread ourselves thin...Having said that there are always one or two businesses one would want to examine. And I think one of them is infrastructure. Because again there's a huge need for infrastructure ...
CK: So what made you go into retail or telecom -both were very very low margin and very competitive...
Birla: Competition is not something that one is scared of. You know we operate internationally, facing international competition all the time. And when we got into telecom the margins were pretty high. We invested about 20 years ago. Retail, because it reflects the new India, it reflects the sort of very significant social-economic trend that's emerging in India. Retail is doing well…our philosophy has again been brick by brick. So we are present in two major sectors - hypermarts and supermarts. And we intend to keep our focus on these segments. So we are growing. I think it is a tough business. You are talking about a business where you are working on a one per cent or two per cent margin...So I think we are on a very steep learning curve. I don't think there's any rush to become the largest in retail because I think, there is space for a lot of people here. I think the important thing is to grow steadily and have high quality of earnings.
CK: About retail, it is your personal investment. Do you intend to keep it that way?
Birla: We will monetise it, or partly monetise it, at the right time. It is a very low margin business, but it is the future. Given the rising consumerism in India, modern trade will grow exponentially. It is about being part of the growth story of India. It is a very tough business, but one has to learn new competencies....If you can't do that, you are shutting off opportunities.
CK: Idea is a takeover and divestment target.
Birla: We have no reason to divest. Idea is as central to the group as Hindalco. We are very committed to the telecom sector. Rumour keeps going around every couple of months, we have no plans to get out of Idea.
CK: Are you seriously interested in a bank?
Birla: Oh absolutely, you know. I think we have the record. Our family had a bank which got nationalised years ago - UCO Bank. It was started by my great-grandfather Mr G.D. Birla. It fleshes out our financial services portfolio and we are very keen on having a bank.
CK: What about the stipulation that you need to be doing a large chunk of the business in rural areas?
Birla: That is quite reasonable. The central bank is coming from a sound point of view. We will be very happy to comply with that...It will be much easier for someone like us. You know in a bank I do not look to be number one or number two...We are a late entrant because of regulation. We had applied for a licence 25 years ago. At that time large business houses were not allowed. It is only now that there is some positive inclination towards allowing large business houses.
CK: Novelis...that was the first time that Aditya Birla Group became a very clear and recognised presence in all the countries that they were operating in...
Birla: We had a presence in Canada and North America and Egypt and Australia. But obviously our presence overseas has gone up significantly. Our confidence level to make large bets outside India has gone up tremendously. Secondly, there's been huge learning on different aspects. How to work with people across cultures, how to work with governments across different countries. Thirdly, a very important and positive thing is that there is a huge amount of respect for Indian companies wanting to invest abroad. That was not the case ten years ago...
CK: How did you do the Novelis deal? That was one of the worst times in business.
Birla: I think it was a very aggressive move, but fortunately for us, and as we had predicted, things changed completely in terms of performance, moved on to a much higher level. At the end of the day that is what matters.
CK: And you are looking for opportunities all the time…you wrote that you are looking to make a quantum leap.
Birla: There is enough in our existing businesses where we can make a quantum leap. We do not want to be tempted into a situation where we spread ourselves too thin as I said. There is enough juice left in the sectors we are in.
CK: One of the issues that came up was promoter holding.
Birla: I think that is a very clear priority area for us. To shore up our holding in each of our companies. I think we will be very happy to do that because we are complete believers in each of our companies so… it's very high on our priorities. It will be nice to have 40 per cent, but that will have to be over time. Grasim and Hindalco..[will be the first].
CK: About doing business in India, if you do ethical business, can your group ever be No. 1?
Birla: I don't think that's the only factor that will determine whether we can be number one or not, but that it is a deterrent to growth is correct.
SKS: You are willing to sacrifice growth in the interest of ethics?
Birla: We have done that in the past...
SKS: You have been untouched by all the scandals
Birla: It's not a case of right or wrong. We just did not want to get into it
CK: How do you keep yourself stimulated?
Birla: You know I love my work. I am passionate about it. That is stimulation, in fact there is over stimulation. When you are working with people who are so energised, committed, it sort of creates a different sense of excitement.
CK: So, personally, you are interested in movies and you have also taken up pistol shooting?
Birla: Yeah, well one has grown up watching Bollywood. Other films as well. Shooting is something that I enjoy...I do not get enough time, I am not very good.
CK: Aren't you into photography?
Birla: No, my son is training to be a photographer as a hobby.
SKS: And he does not listen to you...
Birla: No, not at all. It is quite a big change from our generation. I could not imagine not listening to my father. When you have children I think there is a huge jump, there is a mental adjustment required. This generation questions you and then does its own thing.
CK: You keep an extremely low profile - I hear the word aloof. Do you think you should be more…
Birla: From my point of view it seems I am too much in the media. But everyone says I am low-profile so probably that's the case...I think it boils down to the personality type.
CK: Do you work long hours?
Birla: I work normal Bombay hours, except that I work on Saturday and a few hours on Sunday. My work-life balance is completely messed up.
SKS: How do you see the Birla clan evolving?
Birla: We have very good equations with the whole family. It is a big thing in today's context.
SKS: Would you like your children to come into business?
Birla: I would love that.
SKS: Would you like your group to be led by a Birla?
Birla: Yes.
CK: You have not done very much of expansion in Africa and you are in Latin America through Novelis - so do you have any ambitions…
Birla: Africa is one of the continents of the future. It has a lot of catching up to do in terms of infrastructure. We are looking at investing in Africa but haven't found the right assets. Our philosophy has always been that we wouldn't rush into something without doing our homework well and getting the right asset on board. So I think that for a company like ours that is multinational, it will be much easier to acclimatise ourselves to a foreign country and its way of working, but there is no tearing hurry...we are scanning the environment very intensely. We are looking at coal mining. But there are lots of issues…
CK: There are some areas where you are not very prominent - infrastructure, pharma, education...
Birla: At the end of the day every corporation has a limited pool of capital as you know. And it essentially boils down to capital allocation. It depends on what you believe are the competencies required to succeed in an industry, what the returns would be - relative risk returns compared to other businesses where you could invest. As a family we play a very large role in education. But that is not on a profit basis. Those are run by trusts. So what I am saying is we are not convinced that it is a very good business to be in. We are very convinced of the cause. In fact, the family has set up educational institutions over the last sixty or seventy years. The cause is something that is close to our hearts. The business part of it is something that we are not totally convinced about. Also Chaitanya, I think that when it has been so much a part of the family's role of giving back to society, then to think of it as a business, I think that creates a bit of a problem.]
Birla: I think we have enough on our hands. There are huge growth opportunities in the sectors that we are in. I do not think we need to spread ourselves thin...Having said that there are always one or two businesses one would want to examine. And I think one of them is infrastructure. Because again there's a huge need for infrastructure ...
CK: So what made you go into retail or telecom -both were very very low margin and very competitive...
Birla: Competition is not something that one is scared of. You know we operate internationally, facing international competition all the time. And when we got into telecom the margins were pretty high. We invested about 20 years ago. Retail, because it reflects the new India, it reflects the sort of very significant social-economic trend that's emerging in India. Retail is doing well…our philosophy has again been brick by brick. So we are present in two major sectors - hypermarts and supermarts. And we intend to keep our focus on these segments. So we are growing. I think it is a tough business. You are talking about a business where you are working on a one per cent or two per cent margin...So I think we are on a very steep learning curve. I don't think there's any rush to become the largest in retail because I think, there is space for a lot of people here. I think the important thing is to grow steadily and have high quality of earnings.
CK: About retail, it is your personal investment. Do you intend to keep it that way?
Birla: We will monetise it, or partly monetise it, at the right time. It is a very low margin business, but it is the future. Given the rising consumerism in India, modern trade will grow exponentially. It is about being part of the growth story of India. It is a very tough business, but one has to learn new competencies....If you can't do that, you are shutting off opportunities.
Birla: We have no reason to divest. Idea is as central to the group as Hindalco. We are very committed to the telecom sector. Rumour keeps going around every couple of months, we have no plans to get out of Idea.
CK: Are you seriously interested in a bank?
Birla: Oh absolutely, you know. I think we have the record. Our family had a bank which got nationalised years ago - UCO Bank. It was started by my great-grandfather Mr G.D. Birla. It fleshes out our financial services portfolio and we are very keen on having a bank.
CK: What about the stipulation that you need to be doing a large chunk of the business in rural areas?
Birla: That is quite reasonable. The central bank is coming from a sound point of view. We will be very happy to comply with that...It will be much easier for someone like us. You know in a bank I do not look to be number one or number two...We are a late entrant because of regulation. We had applied for a licence 25 years ago. At that time large business houses were not allowed. It is only now that there is some positive inclination towards allowing large business houses.
CK: Novelis...that was the first time that Aditya Birla Group became a very clear and recognised presence in all the countries that they were operating in...
Birla: We had a presence in Canada and North America and Egypt and Australia. But obviously our presence overseas has gone up significantly. Our confidence level to make large bets outside India has gone up tremendously. Secondly, there's been huge learning on different aspects. How to work with people across cultures, how to work with governments across different countries. Thirdly, a very important and positive thing is that there is a huge amount of respect for Indian companies wanting to invest abroad. That was not the case ten years ago...
CK: How did you do the Novelis deal? That was one of the worst times in business.
Birla: I think it was a very aggressive move, but fortunately for us, and as we had predicted, things changed completely in terms of performance, moved on to a much higher level. At the end of the day that is what matters.
Birla: There is enough in our existing businesses where we can make a quantum leap. We do not want to be tempted into a situation where we spread ourselves too thin as I said. There is enough juice left in the sectors we are in.
CK: One of the issues that came up was promoter holding.
Birla: I think that is a very clear priority area for us. To shore up our holding in each of our companies. I think we will be very happy to do that because we are complete believers in each of our companies so… it's very high on our priorities. It will be nice to have 40 per cent, but that will have to be over time. Grasim and Hindalco..[will be the first].
CK: About doing business in India, if you do ethical business, can your group ever be No. 1?
Birla: I don't think that's the only factor that will determine whether we can be number one or not, but that it is a deterrent to growth is correct.
SKS: You are willing to sacrifice growth in the interest of ethics?
Birla: We have done that in the past...
SKS: You have been untouched by all the scandals
Birla: It's not a case of right or wrong. We just did not want to get into it
CK: How do you keep yourself stimulated?
Birla: You know I love my work. I am passionate about it. That is stimulation, in fact there is over stimulation. When you are working with people who are so energised, committed, it sort of creates a different sense of excitement.
CK: So, personally, you are interested in movies and you have also taken up pistol shooting?
Birla: Yeah, well one has grown up watching Bollywood. Other films as well. Shooting is something that I enjoy...I do not get enough time, I am not very good.
CK: Aren't you into photography?
Birla: No, my son is training to be a photographer as a hobby.
SKS: And he does not listen to you...
Birla: No, not at all. It is quite a big change from our generation. I could not imagine not listening to my father. When you have children I think there is a huge jump, there is a mental adjustment required. This generation questions you and then does its own thing.
CK: You keep an extremely low profile - I hear the word aloof. Do you think you should be more…
Birla: From my point of view it seems I am too much in the media. But everyone says I am low-profile so probably that's the case...I think it boils down to the personality type.
CK: Do you work long hours?
Birla: I work normal Bombay hours, except that I work on Saturday and a few hours on Sunday. My work-life balance is completely messed up.
SKS: How do you see the Birla clan evolving?
Birla: We have very good equations with the whole family. It is a big thing in today's context.
SKS: Would you like your children to come into business?
Birla: I would love that.
SKS: Would you like your group to be led by a Birla?
Birla: Yes.
