Portfolio Restructuring @ Aditya Birla Group

The Aditya Birla Group was among the earliest Indian groups to invest in a variety of industries all across the world.Basant Kumar Birla—the youngest of Ghanshyamdas’ three sons—and his son, Aditya Vikram, were always the patriarch’s favourites. When Aditya Vikram returned after completing his education in the US in 1965, he started Eastern Spinning Mills and Industries.

In 1983, when Ghanshyamdas died, Aditya Vikram was appointed chairman of the Birla group of companies.

Three years later, in 1986, the group’s firms were apportioned to family members and since Aditya Vikram and B.K. Birla managed many of the bigger companies, they got a lion’s share of the clan’s businesses.

Aditya Vikram was a farsighted and enterprising businessman. In 1969, he started Indo-Thai Synthetics Co. Ltd, the Birla family’s first overseas venture.

He went on to set up 19 companies outside India—in Thailand, Malaysia, Indonesia, the Philippines and Egypt.

He also shifted his base from Kolkata, where business and industry was slowing, to Mumbai (then Bombay). He turned his companies around. Today, they include the world’s largest producer of carbon black and the largest refiner of palm oil. It is also the largest Indian multinational with manufacturing operations in the US, according to the group’s web site.

At the time of his untimely death in 1995, the firms Aditya Vikram controlled had over ₹ 8,000 crore in revenue globally, with assets of over ₹ 9,000 crore, comprising 55 plants and 75,000 employees.

Five years before Aditya Vikram Birla’s death, his son Kumar Mangalam had begun getting involved in the companies’ operations.

In 1996, Kumar Mangalam consolidated all group companies under the umbrella of the Aditya Birla Group.

Under Kumar Mangalam Birla, the conglomerate entered the businesses of copper, insurance, telecommunications, retail and software services. He consolidated, expanded and went on an aggressive acquisition drive.

For starters, the group divested its stake in the oil refining business to Oil and Natural Gas Corp. Ltd (ONGC) in 2002 in a bid to sharpen its focus.

After several rounds of mergers and demergers, Grasim acquired a controlling stake in the newly-formed cement firm, UltraTech Ltd, from Larsen and Toubro Ltd in 2004.

Three years later, the group’s aluminium company Hindalco Industries Ltd acquired Atlanta-headquartered Novelis Inc., which made Hindalco the world’s largest aluminium rolling company and one of the biggest producers of primary aluminium in Asia.

The Aditya Birla group has created unified management structures for its global chemicals, textiles and fibre business as it embarks on a fresh round of restructuring to realign businesses under different sectors to cut costs and bring sharp focus.

The changes  effective from January 1, 2013 is expected make ABG  grow bigger,  consolidate everything under sectors bringing  business logic, talent logic and structural logic

Group directors KK Maheshwari and Rakesh Jain have been made the heads of the global textiles and chemicals businesses with the $38-billion business conglomerate’s Indian as well as overseas textiles and chemicals businesses coming under the respective structures.

The current restructuring is part of a series of initiatives taken by group chairman Kumar Mangalam Birla to consolidate businesses under different sectors. He started the process by combining aluminium and copper businesses under the head of metals and brought it under the leadership of Hindalco managing director Debu Bhattacharya.

Later, retail and carbon black businesses were brought under common structures.  Aditya Birla, the father of the current chairman Kumar Mangalam, started a carbon black plant in Thailand in the early 1980s. Since then, the group has expanded its presence with plants in other places such as India, Egypt, China and now South America. Atlanta-based Columbian Chemicals was acquired by the group for Rs 3,923 crore. In the chemical business, Lalit Naik will be responsible for all chemical businesses including Aditya Birla Chemicals, Thailand. The group had consolidated four of its overseas chemical businesses under Aditya Birla Chemicals three years ago. Raj Narayanan, the head of Aditya Birla Chemicals, will report to Lalit Naik. Lalit Naik will also have an expanded role with insulators and fertiliser business reporting to him.

He will also take over as deputy managing director, Aditya Birla Nuvo. Naik will report to Rakesh Jain. The Aditya Birla Group was among the earliest Indian groups to invest in a variety of industries all across the world.

Under the new structure in the textile business, Thomas Varghese will be the CEO of the textiles business in India and acrylic fibre & spinning businesses abroad. All unit heads in these businesses will report to him. Mr Varghese will report to KK Maheshwari.

By August 2014, the Aditya Birla Group is a $40 billion ( ₹ 2.45 trillion) corporation and many of the group firms are in the league of Fortune 500 companies. It has over 120,000 employees from 42 nations, and operates in 36 countries. Notably, 50% of the Aditya Birla Group’s revenue comes from its overseas operations.

The group has a presence in non-ferrous metals, cement, textiles, chemicals, agri-business, carbon black, mining, wind power, insulators, telecommunications, financial services, retail and trading solutions.

The group owns one of the top three telecom companies in India, the nation’s largest cement manufacturer and one of its top retailers.