Indian entrepreneurs are now taking advantage of economic reforms as profound as those in 1991 with the twin balance sheet problem of stressed loans and over-leveraged corporates behind them, according to Kumar Mangalam Birla, Chairman, Aditya Birla Group.
“The coming decade will see an upsurge in capital expenditure across many sectors. I believe, we have upon us a forthcoming decade of Capex Mahotsav in India,” Birla said in a post sharing his thoughts for this year.
According to him, there will be a ‘double-engine growth’ in the private sector, benefitting both, the conventional and the new-economy. Both conventional sectors like cement, steel, power and auto and emerging areas like digital and renewables hold the promise of high and sustained growth, as per Birla.
According to Birla, the coming decade will be one of innovation and increased capital expenditure. “The exigencies of the pandemic have pushed the boundaries of innovation. A world where traditional rules didn’t apply, freed thinking from its conventional shackles. And we are staring at an extraordinary decade,” wrote Birla.
Economic outlook
Birla shared his thoughts on how economies around the world have been recovering amid the pandemic. The industrialist, citing the example of the United States job data, stated that not only old jobs were being replaced, but also new job roles are being created by firms “reimagining business models in sectors like retail, healthcare, and financial services.”
Speaking about the stock markets, Birla said though the markets have been bearing the brunt of “imminent liquidity tightening,” the decadal view remains “unambiguously positive.” The upcoming decade will see an increase in capital expenditure.
He also shared his views on valuations, adding that concepts such as cash flows and gross margins will continue to guide behaviour and actions.
“The world is awash in capital and there has perhaps rarely been a better time to be an entrepreneur, as everyone from angel investors to the public markets line up to back ideas. The competition for investment opportunities and the Fear of Missing Out (FOMO) have driven up valuations of many fledgling companies to stratospheric levels,” Birla said.
According to the industrialist, the hallmark of some new businesses currently is seeking to use the “brute force of capital, combined with smart technology and operations,” to create new needs among consumers that one never knew existed.
“Ultimately, my own view is that at some stage unit economics will have to matter. And trusty old concepts like cash flows and gross margins will guide behavior and actions. The only sustainable moat is the one based on intellect. Large waves of cheap capital will eventually erode all other entry barriers,” he said.
“From Aditya Birla Group’s experience in multiple businesses, across multiple geographies, I can say that in the long run sustainable and successful businesses are those that generate tangible profits, prosperity, livelihoods quarter after quarter. Valuation and business longevity will automatically follow,” he added.
Talking about the ongoing supply chain issues and shortages faced by businesses, Birla said, “the nuances of supply chains and the intricacies of multi-modal optimisation have now become central to our discourse.”
“In times of disruption (which we should increasingly expect with climate change), efficiency wins in the short term, but resilience translates to value in the long term. Near shoring, reasonable inventory holding, multiple supplier alternatives and more sophisticated supply chain solutions are the near-term outcomes from this realisation,” Birla said.
Gen infinity
Birla also shared his views on generational labels and the differences between generations.
“Even though there are implicit behavioural markers of every generation, the ability to co-exist could well be a defining trend of the new decade. Outside of the workforce, multi-generational friendships are already starting to add texture to lives – perhaps hastened by the pandemic,” Birla said.
“I often get asked how to deal with the highs and lows of life, and I think the biggest factor is equanimity. It is an acceptance that both adversity and windfall gains are impermanent. And that real success lies in the quiet acceptance of both. Equanimity helps one make sense of the vagaries of the world with the ability to dispassionately learn from the past and plan for the future,” he added.
In the spirit of the times, borrowing a “philosophical insight” from the so called “cryptosphere,” Birla added, “WAGMI! Indeed, We Are All Gonna Make It!”