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Mr
Kumar Mangalam Birla on the direction the Group
has taken in the last four years
I
would like to take this opportunity to retrace
the direction of our Group over the past four
years. If one were to encapsulate it in a single
word -- the dominant strategic theme over the
past four years has been consolidation. This is
in line with our vision of being a premium conglomerate,
with a clear business focus at each business level,
relentlessly pursuing value creation. The logic
underpinning consolidation is the push for market
leadership, economies of scale, productivity gains
and operational efficiencies, coalescing to create
value-adding growth.
The major steps
Let us recount some of the major steps that we
have taken in our drive towards consolidation:
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First, I believe the process of consolidation
has been exemplified by our overseas units.
The financial shock that hit the South East
Asian countries in 1997 took until last
year to fully wear off. Whilst several erstwhile
corporate titans in the region have crumbled,
our units, without exception, have not only
emerged unscathed but stronger, and have
continued to grow and excel.
Let me remind you that our units overseas
operate in a far more liberalised environment
than we have in India, and duties on finished
products are from nil to a maximum of five
per cent. I believe that we can be truly
proud of their achievements. In many ways,
they hold a mirror to what the future economic
scenario will be like in India, when duty
differentials reduce to global levels.
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The acquisition of a 74.6 per cent equity
stake in Indal from Alcan, at an investment
of a little over Rs 1,000 crore, has been
a milestone. Bringing Indal into the Group's
fold has helped us position ourselves along
every link in the value-addition chain of
the business, from metal to downstream products,
where the Hindalco-Indal combine accounts
for an over 70 per cent market share. |
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Moving
on to the other metal in the Group's stable,
it is commendable that Birla Copper has attained
a leadership status -- commanding a market
share of over 45 per cent -- within a short
span of three years from its first commissioning.
The de-bottlenecking of the copper smelter
at Dahej last year has resulted in cost efficiently
enhancing the smelter capacity by 50 per cent
to 150,000 TPA last year, and the ramp-up
achieved has truly set a new global benchmark.
The acquisition of the Nifty mines in Australia
from Straits (Nifty) Pty Ltd has elevated
Birla Copper to an integrated copper producer. |
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Yet
another landmark restructuring move has been
the decision to consolidate Indo-Gulf's copper
business with Hindalco. Simultaneously, Hindalco
has made a second open offer for the shares
of Indal. All these moves take us ahead on
the road towards unifying the Group's non-ferrous
metals businesses, and transforming Hindalco
into a globally competitive non-ferrous metals
powerhouse. |
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Post-restructuring,
Indo-Gulf will emerge fully focused on fertilisers,
with a brand that commands a huge equity,
strong cash flows and a leadership position
in the fertiliser industry. It is well positioned
to take advantage of the opportunities that
arise from the disinvestment programme of
the government. |
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The
decision to de-merge the Insulator Division
-- one of the Group's best performing businesses
-- and transfer it to a separate 50:50 joint
venture with NGK of Japan, the leading global
player in the business, is a crucial step
to take the insulator business to new heights.
The partnership with NGK will help to build
upon and strengthen the leadership position
we already enjoy in the domestic market, because
of the access we will have to the latest in
product and manufacturing technology. In addition,
there will be opportunities for getting plugged
into a global marketing network. Through this
route we will take the insulator business
to new heights. |
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A
slew of initiatives have also been taken to
consolidate the operations of Grasim -- among
them, the closure of the pulp and fibre plants
at Mavoor and the sale of the loss-making
fabric operations at Gwalior. Over the past
three years, Grasim has become much leaner
and stronger -- with the debt/equity ratio
improving from 0.93 to 0.58, interest charges
falling from Rs.292 crore to Rs.168 crore,
operating profit rising from Rs. 678 crore
to Rs.1,142 crore, and workforce rationalisation
taking the manpower strength from 24,400 to
16,600. |
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In
the Telecom business, we joined hands with
the Tata Group. Beginning in two states, we
have expanded to seven states - after having
bid successfully for Delhi and Madhya Pradesh
and acquiring the Chattisgarh circle. Our
subscriber base has reached 1.1 million. Our
footprint covers 40 per cent of the cellular
market in India, with a 47 per cent market
share in the circles where we operate and
an 11 per cent market share nationally. |
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We
have divested the Group's stake in MRPL to
ONGC. Although the sale of the group companies'
equity stakes in MRPL will have a one-time
impact on their profits, the exit from MRPL
indicates our firm resolve to rationalise
the Group's portfolio of businesses with a
view on the future, and also bears testimony
of our commitment to a key group of stakeholders:
our lenders. |
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The
Birla Sun Life joint venture, which started
off three years ago, has developed a major
presence in the insurance and mutual funds'
sectors. Birla Sun Life is perceived as a
leading quality market player recognised for
its superior service levels, and we consider
this as a core business with immense growth
potential in the years ahead. |
From
all of this, a clear trend emerges. Our strategy
dictates that we get out of businesses where we
are bit players and strengthen the businesses
where we have clear competencies, so that we get
to the top of the league or consolidate our position
there, as the case may be. This leads to a sharper
and tighter business portfolio with our firepower
being better targeted.
Group
perspective - 2
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