Aditya Birla Group

views updated

Aditya Birla Group

Worli
Mumbai, 400 025
India
Telephone: +91 56 52-5000
Fax: +91 56 52-5750
Web site: http://www.adityabirla.com

Public Company
Incorporated: 1870
Employees: 72,000
Sales: $7.59 billion (2005)
Stock Exchanges: India
Ticker Symbol: BIR
NAIC: 331491 Nonferrous Metal (Except Copper and Aluminum) Rolling, Drawing, and Extruding; 551112 Offices of Other Holding Companies; 423990 Other Miscellaneous Durable Goods Merchant Wholesalers; 331111 Iron and Steel Mills; 313210 Broadwoven Fabric Mills; 325120 Industrial Gas Manufacturing; 325131 Inorganic Dye and Pigment Manufacturing; 325221 Cellulosic Manmade Fiber Manufacturing; 327124 Clay Refractory Manufacturing; 313210 Broadwoven Fabric Mills; 322110 Pulp Mills; 322121 Paper (Except Newsprint) Mills; 325181 Alkalies and Chlorine Manufacturing; 327310 Cement Manufacturing

Aditya Birla Group is one of India's largest conglomerates and also claims to be the most international of the country's major corporations. The company acts as a holding company for more than 72 manufacturing and services subsidiaries throughout India, and in Thailand, Indonesia, the Philippines, Malaysia, Australia, China, Egypt, and Canada. Aditya Birla's major subsidiaries include Grasim, the world's leading producer of viscose staple fiber, and a manufacturer of rayon grade pulp, cement, sponge iron, textiles, and chemicals; Hindalco, a leading producer of aluminum and copper; UltraTech Cement, which produces portland cement and related products; Aditya Birla Nuvo, which manufactures clothing, textiles, and carbon black and is India's second largest producer of viscose filament yarn; Indo Gulf, a fertilizer producer; Birla NGK Insulators (a joint venture with NGK of Japan), which is the world's leading producer of insulators; and Idea Cellular Ltd., a mobile service provider jointly owned with fellow Indian conglomerate Tata Industries. The company also produces software and provides IT services, and operates a number of financial products subsidiaries. The company's Birla Sun Life Insurance Co. is the second largest private sector insurance company in India, and its Birla Sun Life Asset Management Co. is the country's fourth largest assets manager. In other areas, the company claims to be the world's eighth largest producer of cement and the world's fourth largest producer of carbon black. These operations combine to generate revenues of nearly $7.6 billion per year. The company is led by Kumar Mangalam Birla, son of Aditya Birla.

INDIAN FINANCIAL DYNASTY IN THE 19TH CENTURY

The Aditya Birla Group was founded in the 1960s by Aditya Birla, who started building his business empire at the age of 24. By then, however, the Birla family had been one of India's most prominent industrial and financial families for nearly a century. The origins of the Birla family fortunes lay in the second half of the 19th century, when in 1870 Seth Shiv Narayan Birla launched a cotton- and jute-trading business in the town of Pilani, in Rajasthan, India. Despite the British occupation, and the attempt to establish monopolies by the British trading companies, Birla succeeded in building the family's first fortune.

The next phase of the family's success came at the beginning of the 20th century, when Birla's grandson Ghanshyamdas took over as head of the family fortune. The younger Birla led the family into the industrial sector, setting up a jute mill in 1919. The Birla family also became important supporters of the independence movement led by Mahatma Ghandi. Ghanshyamdas Birla not only provided the financial backing for Ghandi, he also participated in the talks with the British that ultimately led to the country's independence. The company's wealth, and its intimate connection with the new Indian government, enabled it to emerge as one of a small number of Indian families that dominated India's quasi-socialist economy through the end of the century.

With independence, Birla began developing his industrial empire in earnest. The family quickly branched out into a number of sectors. Just days after the country's declaration of independence, for example, Birla founded Grasim Industrial Ltd., opening a small weaving plant in Gwalior. By 1950, Grasim had begun importing the recently developed rayon fiber, and it began producing rayon-based fabrics. In 1954, Grasim launched its own rayon production, opening a factory in Nagda. By the mid-1960s, Grasim also had launched production of the rayon pulp itself.

The family's interest in textiles and rayon in particular led it to acquire another branch, Indian Rayon Corporation, in 1966. That company had been founded just a decade earlier, and in 1963 had expanded with the construction of its own viscose filament yarn factory in Veraval. As part of the Birla family holdings, Indian Rayon, which later evolved into the Birla group's largest subconglomerate, Aditya Birla Nuvo, developed diversified operations, including the production of garments, textiles, carbon black, and insulators. The company also entered cement production, launching its own factory in 1985.

In the meantime, Birla's industrial interests had led it into a new area, the production of metals, and specifically aluminum. The family established a new company, Hindalco, in 1958 and began construction of their first smelter. That complex, in Renukoot, launched production in 1962. By 1967, the company had set up its own power plant, in Renusagar, described by the company as "a significant strategic move." The company later branched out into copper production as well.

The development of the family's business interests had been turned over to Ghanshyamdas Birla's sons, K. K. Birla, C. K. Birla, and B. K. Birla. While B. K. Birla took over the family's raw materials and related industrial operations, his brothers took charge of other Birla family holdings, including Hindustan Motors, part of India's big three automakers, and the Hindustan Times, one of the country's major newspapers.

INTERNATIONAL PIONEER: 1970–80

In the mid-1960s, Aditya Vikram Birla joined his father, B. K. Birla, in that branch of the family business, which by then consisted of Grasim, Hindalco, and Indian Rayon. By the end of the decade, Aditya Birla, then 24 years old, was placed in charge of these companies, which formed the basis of the Aditya Birla Group.

The younger Birla soon proved himself a visionary, leading the company's development from an Indiafocused industrial group to India's first and largest internationally operating conglomerate. The company enjoyed the advantages of India's "License Raj," a license-permit-quota system devised by the country's first prime minister, Jawarharal Nehru, that made it difficult for new domestic competitors to emerge. Although this system protected and reinforced the Birla family's interests, it also subjected the Birla group to strict capital controls. At the end of the 1960s, however, Aditya Birla recognized a means of skirting these controls, through the development of foreign interests.

COMPANY PERSPECTIVES

Our Vision: To be a premium global conglomerate with a clear focus on each business.

Our Mission: To deliver superior value to our customers, shareholders, employees and society at large.

Our Values: Integrity; Commitment; Passion; Seamlessness; Speed.

In 1969, Birla launched its first subsidiary, Indo Thai Synthetics, to produce and export synthetic yarns in Thailand. Into the 1970s, the company continued to invest in Thailand, launching two new subsidiaries in 1974. The first of these, Thai Rayon, launched produc-tion of viscose rayon staple fiber, which it marketed on a global basis as Birla Cellulose. That company quickly grew into a major exporter, while also supplying the Thai textile industry. The company set up in 1974 was Century Textiles Co., which operated a weaving and dyeing plant, producing Centex-branded fabrics, including polyester, rayon, linen, and later lycra and others. By the end of the 1970s, the company's Thai holdings included Thai Carbon Black (TCB), founded in 1978. Carbon black, also known as soot and lampblack, was used as a black pigment for inks, food colorings, and especially for the production of rubber tires. TCB grew strongly, building the world's largest carbon black facility on a single location, and counting among its customers the global big three tire manufacturers. The company was particularly successful in Japan, where it captured more than half of the total carbon black market.

Birla's success in Thailand encouraged the group to extend its operations elsewhere in the region. In 1975, the company launched a joint venture in the Philippines, to produce spun yarn. The operation became the basis of the group's other Filipino holdings, grouped under the Indo Phil name. Malaysia became the company's next foreign market, with the opening of an edible oil production subsidiary in 1978. That business, Pan Century Edible Oils, became the world's largest single-location palm oil refinery.

STEADY GROWTH THROUGH THE END OF THE 20TH CENTURY

The Birla group's expansion continued through the 1980s. The company moved into Indonesia in 1982, setting up PT Indo Bharat Rayon. In Thailand, in 1984, the company expanded into the production of sodium phosphates for the detergents industry, establishing Thai Polyphosphates and Chemicals. The company added yet another Thai unit in 1987, deepening its interests in that country's textile sector with the founding of Thai Acrylic Fibre. The company also expanded into the chemicals market in Thailand, founding a joint venture, Thai Peroxide Co., with the United States' FMC Corporation in 1989.

KEY DATES

1870:: Seth Shiv Narayan Birla launches a cottonand jute-trading business in the town of Pilani, in Rajasthan, India.
1919:: Grandson Ghanshyamdas Birla sets up a jute mill, establishing the family's industrial holdings.
1947:: The Birla family sets up the Grasim weaving plant, later adding production of rayon.
1958:: The company establishes Hindalco for production of aluminum.
1966:: Indian Rayon Corporation is acquired.
1969:: Under Aditya Birla, the company launches international expansion, founding Indo Thai Synthetics in Thailand.
1978:: Carbon black production is launched in Thailand.
1988:: Indo Gulf is formed under Hindalco for the production of fertilizer.
1995:: Aditya Birla dies and is succeeded by son Kumar Mangalam Birla, who later leads a restructuring and streamlining of the group; a joint venture, Birla AT&T, is formed.
1998:: Info Gulf begins copper production; Birla enters Canada with the purchase of Atholville Pulp Mill in New Brunswick.
1999:: Birla adds financial services through an insurance joint venture with Canada's Sun Life.
2000:: Birla AT&T merges with Tata Communications; Hindalco acquires Indal.
2002:: Hindalco restructures and spins off Indo Gulf Fertilizers; Anapurna Foils is acquired.
2003:: Birla acquires Nifty Copper and Mt. Gordon Copper mines in Australia; the company enters China with the creation of the carbon black joint venture, Liaoning Birla.
2004:: Indal merges into Hindalco.
2005:: Construction of a new aluminum facility begins in Orissa, India; the St. Anne Nackawic Pulp Mill in Canada is acquired.
2006:: The company announces plans to build a new viscose staple fiber plant in Laos.

In the meantime, Birla's Indian holdings continued to expand and diversify as well. Grasim, for example, added cement production in 1985, launching the Vikram Cement plant at Jawad, in Madhya Pradesh. By the beginning of the 1990s, that operation had tripled its production capacity. Through the 1990s, Grasim added other diversified businesses, including merchant exporter Birla International Marketing Corporation in 1992, and Vikram Ispat, a gas-based sponge iron factory, in 1993. Grasim also expanded its cement holdings, opening two new cement plants, Grasim Cement in Raipur and Aditya Cement in Shambhupura, in 1995. The growth of Grasim's cement operations led Birla to transfer its other cement production operations from Indian Rayon into Grasim.

This restructuring was launched under the leadership of Aditya Birla's son, Kumar Mangalam Birla, who took over the company after his father's death in 1995. Until then, the Birla group of companies had been described by Institutional Investor International Edition as a "murky empire." The younger Birla, who had been educated at the London Business School, now became determined to transform the company into a modern corporation. Birla now led a restructuring of the company's holdings, grouping all of its businesses under the single umbrella holding, Aditya Birla Group. Birla also continued to streamline operations, regrouping various industrial operations into a more coherent structure.

LEADING DIVERSIFIED CONGLOMERATE IN THE NEW CENTURY

Aditya Birla nonetheless remained committed to its structure as a highly diversified conglomerate. The company also took advantage of the liberalization of India's economy, launched during the country's economic crisis in 1991, to enter a number of new areas. In 1988, for example, the company launched a petroleum refining joint venture with Hindustan Petroleum Corporation. The company then entered the telecommunications market, forming a joint venture with AT&T of the United States, Birla AT&T, in 1995. That company merged with Tata Communications in 2000, becoming one of the country's leading telecom groups.

Through Hindalco, the company launched fertilizer production, under subsidiary Indo Gulf in the late 1980s; in 1998, Indo Gulf added the production of copper as well. In 2002, Hindalco was restructured, with its fertilizer production spun off into a separate company, Indo Gulf Fertilisers. Indo Gulf's copper business was placed directly under Hindalco. By then, Hindalco had acquired major rival Indal, an aluminum producer founded near Kolkata in 1938. That acquisition was completed in 2000; two years later, Indal boosted its aluminum foil production through the purchase of control of Anapurna Foils. Indal was merged into Hindalco in 2004.

Other new markets for Birla included software development and IT services, which were regrouped into Birla Technologies Ltd. in 2001. The company entered the power generation market through a joint venture with Powergen PLC. In 1999, Birla added financial services to its range, forming a joint venture with Canada's Sun Life Assurance.

Into the mid-2000s, Birla also continued to expand its international network. The company made its first entry into the North American market, acquiring the Atholville Pulp Mill in New Brunswick, Canada. The purchase, completed in 1998, established Birla as the world-leading producer of viscose staple fiber and also marked its first major foreign acquisition. In 2003, the company turned to Australia, buying up the Nifty Copper mines in Western Australia. The purchase enabled Birla to develop into an integrated copper group, supplying its factories in India with raw material. Later that year, the company bought up a second Australia copper mine, at Mt. Gordon. In that year, as well, Birla extended its reach into the mainland Chinese market, where it established a carbon black production unit, Liaoning Birla Carbon. Back at home, the company launched a project to build a new aluminum production complex in Orissa, beginning construction in 2005.

Birla's international expansion continued to drive the company's growth into the mid-2000s. In 2005, for example, the company reached an agreement to acquire the St. Anne Nackawic Pulp Mill in Canada. The company also sought out new markets; in March 2006, the company announced its plans to build a $350 million viscose staple fiber plant in Laos. Aditya Birla had grown into one of India's leading conglomerates, and a major player on the world market.

PRINCIPAL SUBSIDIARIES

Aditya Birla Chemicals (Thailand) Ltd.; Aditya Birla Nuvo Ltd.; Alexandria Carbon Black Company S.A.E. (Egypt); Alexandria Fiber Company S.A.E. (Egypt); AV Cell Inc. (Canada); AV Nackawic Inc. (Canada); Birla Mineral Resources Pty. Ltd. (Australia); Birla Mt. Gordon Pty. Ltd. (Australia); Century Textiles; Grasim Industries Limited; Hindalco Industries Limited; Indo Gulf Fertilisers Limited; Indo Phil Textile Mills (Philippines); Indo Thai Synthetics; Liaoning Birla Carbon Co. Ltd. (China); Pan Century Edible Oils (Malaysia); PSI Data Systems Limited; PT Elegant Textile Industry (Indonesia); PT Indo Bharat Rayon (Indonesia); PT Sunrise Bumi (Indonesia); Thai Acrylic Fibre; Thai Carbon Black; Thai Peroxide; Thai Rayon; TransWorks Information Services Ltd.

PRINCIPAL COMPETITORS

RPG Enterprises; Tata Sons Ltd.; Murugappa Group; Jaypee Group; Amalgamations Ltd.; Dabur India Ltd.; Balmer Lawrie and Company Ltd.; Escorts Ltd.; HMT Ltd.; Greaves Cotton Ltd.; Bombay Burmah Trading Corporation.