Aditya Birla Group makes $20B investment as it sets eyes on scaling biz: KM Birla

Aditya Birla Group has invested about $20 billion, mainly in manufacturing space, as it looks to be among the top two players across the segments it operates in, a top company official said on Saturday.

Speaking at the Hindustan Times Leadership Summit, Aditya Birla Group Chairman KM Birla said the group firm has taken tough decisions, including the acquisition of Novelis by Hindalco, to build scale and aims to expand cement business from 100 million tonnes to 200 million tonnes over the next 10 years.

He said most of the group's investments are long-term, with a business outlook over the next 15-20 years, while consumer businesses have a shorter span.

"We have $20 billion of announced investments that are on the ground. Obviously, you look at it because a lot of them are in the manufacturing space. You would look at the next 15-20 years. Shorter than that doesn't make sense in that kind of business... If, on the other hand, you're looking at fashion retail or jewellery retail or financial services, then you are looking at a much shorter time frame," Birla said.

He noted that values, people, scale and running businesses for the long term are key strategies that define a group's way of doing business.

"We want to be number one or two in every business that we are in or get into. So, like they say, scale is in everything, but it's the only thing. Without scale, I think it's very difficult to survive today unless you have something very unique, very high technology, which gives you very high margins. So, scale is very important," Birla added.

He said the company has built 100 million tonnes of cement capacity over 36 years but will be scaling it up to 150 million tons in the next 5 years and 200 million in the next 10 years.

Birla also pointed out that Hindalco acquired Novelis for $6 billion to build scale.

"In fact, I acquired a company (Novelis) which was much larger...The stock took a beating, investors wrote us off. It took about a year to come back. Any professional CEO who had taken that decision would have been sacked because it just seemed at that time to be the wrong thing to do...I think as a promoter, I had the prerogative and the desire to see much beyond not just quarters, but years. So, running businesses for the long run is something that is a culture with us," Birla said.

When asked about business alignment with national priorities, Birla said the Grasim and metals businesses of the group were set up by his great grandfather GD Birla, who was a close associate of Mahatma Gandhi, to make the nation self-reliant and self-sustaining after the Independence.

However, things have changed now, and businesses are not set up based on the growth curve the nation is in, he added.

"I think there is an intrinsic involvement of what national priorities are. For example, when we started financial services. It was a nation coming of age financialisation. The average person was becoming more aware about his or her savings, and becoming more financially literate. So, there is always, always an element of the phase of the country's growth curve that you are in (and) that will determine which business you want to get into," Birla said.

He said investments in infrastructure, digital technology, consumer etc provide a lot of opportunities but depend on one's appetite as there is no dearth of growth opportunities in the country.