‘No business can survive without scale’: Aditya Birla group aims for expansion with $20 billion investment

The Aditya Birla group has invested about $20 billion, mainly in the manufacturing space, as it looks to be among the top two players across the segments it operates in.

Speaking at the Hindustan Times Leadership Summit, Aditya Birla group chairman Kumar Mangalam Birla said the group firm had taken tough decisions, including the acquisition of Novelis by Hindalco, to build scale and aims to expand the 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 on the ground. You look at it because many 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 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 tonnes in the next five years and 200 million in the next 10 years.

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

“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 G.D. Birla, who was a close associate of Mahatma Gandhi, to make the nation self-reliant after Independence. However, things have changed now, and businesses are not set up based on the growth curve the nation is in, he added.