It’s double delight for Kumar Mangalam Birla, Chairman, Aditya Birla Group, with Novelis Inc, subsidiary of Hindalco Industries, acquiring Aleris for $2.6 billion and the Department of Telecommunication clearing the much-delayed merger of Idea Cellular and Vodafone. Birla shared his views on the way forward for the Group in an interview with BusinessLine . Excerpts:
For how long you have been working on the Aleris deal?
It took us almost one year to close the deal and it was a well-defined process. A deal of this size takes time with various companies competing for the same asset. As we have said before, we evaluate all the opportunity that comes on the table.
Major portion of your investment has gone to finance, telecom and cement. Will these be your focus areas?
No, we made investments in textiles also, for instance. There are smaller and larger business opportunities. If we are in a business, it’s a focus area for us. Otherwise we would rather not be in it. We have got fashion retail, that’s a focus area for us. The business you mentioned are, of course, larger ones. Investment decisions also depend on opportunities. We cannot time it always. There are opportunities in every business. We are looking at it as well. It could be organic or inorganic. The idea being value creation.
How do you compare Novelis and Aleris deals?
I think Novelis was driven by the fact we wanted to move the portfolio to have a larger share of value added products with higher margins. It also protects us from volatile prices. This has been proven in the last 11 years. I think Novelis today is a well-regarded and valuable company. Aleris is step forward in that direction giving us wide range of customers, new verticals like aerospace, automotive and construction.
Do you think global recovery is threatened by the US trade war and Brexit?
If we look at metals points of view. Currently, the demand for metals seems to be quite strong globally. The world economy is doing great. According to the last IMF report, US and Chinese economies are doing well. India economy is growing. There are some distractions, but the economies are really doing well. Indian demand is very strong, but rising aluminium imports is a matter of concern. The growth in India is attracting Chinese and other countries. The aluminium industry is concerned over dumping of aluminium. India should take action to restrict dumping.
How do you see the progress of the Insolvency and Bankruptcy Code?
It’s a new regulation, which is very well intended. Some clarifications are needed. It is aimed to achieve value maximisation. It also takes up the level of governance from the promoters and entrepreneurs. It will be better if the process is made faster. Our own bid for Binani Cement is coming up for hearing in the first week of August.
How confident are you in getting approval in the US and China, when the first buyer from China could not get government approval to buy Aleris?
There are a couple of areas where we are competent than the other company. They had zero presence in the US and we have significant investment in multiple locations. We have operating facilities across locations.
We are constructing a new plant in Kentucky. We have been in business in the US for decades building trust.
The Chinese company which was competing with us, had neither a presence in the US nor made any investment there. As an aluminium industry, we are making 1.5 million tonnes of sheet that go into the automotive sector against 8 million tonnes used. We are competing with steel. The process will take time.
How do you see the see the deal on the back of resistance to foreign companies taking over assets abroad?
We are not going to see any redundancy in operation. No job losses. This deal is about growth. We will be taking over certain plants and continue to grow these plants across the world and particularly in the US.
It’s completely about growth than anything else. It is about making solutions available to customers. It about achieving synergies and cost reduction to make the operations more resilient.
Why are private equity investors quitting when their $900 million investment is going to yield returns?
It is better for them to answer, but I think the private equity investors do not lock their investment in an asset for a long time. They want to exit after a point of time booking profit. This, incidentally, fits into our search for growth.
When do you think the merged Vodafone and Idea will start operations and what would be your strategy when the price war is still on?
We should start operations in the next few weeks. We are still in the process of framing the strategy which will be revealed soon. We will make substantial investments in the telecom sector.
Do you think the rising lending rate and the surging inflation will affect the India growth story?
Our economists are expecting India to grow at over eight per cent and it will be one of the fastest growing countries. It is back on strong fundamentals. Some of the sectors are coming back strongly. Rising lending rates and inflation will have an impact but not much to hamper growth completely. It is a part of doing business in any part of the world.