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Kumar Mangalam is not afraid to pay for size

Speed and focus are key to his expansion strategy, reports Sabarinath M.

india Updated: Feb 12, 2007 01:24 IST

When India Inc tries to unravel the logic behind Aditya Birla group's gigantic acquisition of the North American firm Novelis on Monday, the 39-year-old chairman of the group, Kumar Mangalam Birla will be busy attending a quiet function in Mumbai to release his grandfather BK Birla's autography — One day ata time.

The title of the book aptly sum up Kumar Mangalam's business strategy: give aggressive focus on sectors which are delivering growth. He brings sharp-edged attention to each of his business through financial restructuring and acquisitions. "He is back to his favourite game of mergers and acquisitions. That is how he had transformed the group into a $12 billion conglomerate. It's interesting to see how he raises money for the acquisition," said a Mumbai-based investment banker who had worked with Birla on many transactions.

When he took over the reins of the Aditya Birla group 11 years back after the sudden demise of his father, many were not willing to appreciate his soft and shy approach. He proved his detractors wrong by taking the group to Rs 30,000 crore in just eight years. In 2004, he had found a novel way of unlocking shareholder value by merging his group companies Indo Gulf and Birla Global Finance with Indian Rayon to form Aditya Birla Nuvo. Birla is now doing several things to raise finances for group companies. The group's telecom company Idea Cellular is coming out with an IPO of Rs 8,000 crore.

After turning his group into a $12 billion metal-to-retail giant, Birla is now expanding the scope of acquisitions. In 2000, he bought the Rs 1,750-crore sales Indal, which added a third to his existing aluminium capacity. Then, he fought a pain-staking acquistion battle to take over a Rs 2,200 crore cement business of rival L&T.

Five years later, Kumar Mangalam is paying about Rs 27,000 crore to buy US-listed Novelis to push up the ranking of its flagship company Hindalco in the global pecking order of aluminium majors. Novelis, the company that is being taken over, has almost half the size of the AVB group's turnover. Birla is thinking really big.

"Mr Birla is now willing to take more bigger bets. This shows the higher degree of confidence," said Sumant Sinha, director, Birla Management Corporation (BMC).
Birla, who is an MBA from the prestigious London Business School,loves speed and he does transactions to get a quick access to markets, customers and technology. A few days after his groupannounced its foray into the organised retail business, Kumar Mangalam acted siwftly to take over Bangalore-based retail company Trinethra for Rs 350 crore.

"I do believe that the Aditya Birla group had a very higher price for Trinethra. The rising property prices may justify the valuation," says the CEO of a Mumbai-based retail chain.

Such criticism does not deter Birla who had spent a better part of his time trying to untangle his existing jumble of businesses and driving operational efficiencies.

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First Published: Feb 12, 2007 01:24 IST