On the first floor of Dalamal House, Yashovardhan Birla, is referred to as "babu" by all. On a Friday, the head office of the Yash Birla Group at Nariman Point, South Mumbai's commercial district, turns into a sartorial melange with younger men and women in casuals—blue jeans, Tshirts or kurtis—in serious discussion with an older generation in formals and ties. The picture is of an organisation in transition—one that is as comfortable making and selling steel pipes, shell castings and cutting tools as it is blueprinting forays into more with-it sectors like wellness and lifestyle, solar power and education.
Change started sometime in 2004 for Yash Birla, who inherited the family wealth early and through misfortune. His parents Ashok Vardhan Birla and Sunanda Birla as well as his sister Sujata were killed in an air crash in 1990 when Yash was 23 years old. The extended Birla family pitched in to manage the diversified businesses of Ashok Birla. In 2005, Yash Birla met P.V.R. Murthy, then with the Sunflag Group, and asked him to join his group. Murthy joined as Director, Finance, and started the process of re-organising, bringing in fresh people and getting rid of dead wood. "In the first 10 years my relatives helped manage the businesses.
However, in the end it was too many relatives handling too many things. Some companies were sick. It made no sense to the people, the managers. It was time everybody exited and I managed my own show," Yash Birla says.
The group also went through structural and cultural changes after Murthy's entry. "There was hardly any debt," says Murthy. "You need to borrow to grow and now we have debt of over Rs 1,000 crore (on an equity base of slightly more than Rs 1,000 crore)," he adds. Murthy started a re-structuring exercise wherein group companies were divided into verticals, some companies were merged, a few demerged, and a few sold. Ernst & Young were called in to do a report on health and wellness sector that the group wanted to enter. E&Y looked at opportunities and evaluated possible partners.
By the end of it all, the group was reorganised into six clusters, with most of the traditional manufacturing companies brought under two verticals: Auto & engineering (including companies like Zenith Birla, Birla AccuCast, Birla Precision Technologies) and textiles and chemicals (Birla Cotsyn, Birla TransAsia Carpets).
Along the way, new opportunities, primarily in the services sector, were identified to propel the group on a different trajectory. The objective: A three-fold increase in the group's revenues to Rs 10,000 crore by 2013-14. Much of that growth will come from ventures in education, health and wellness, solar power, thermal power and textile retail where Birla plans to invest at least Rs 2,500-3,000 crore over the next three years.
With such a king-sized ambition, the immediate question that comes to mind is: Is the man serious? That question springs even quicker to mind when the promoter harbouring the ambition is Yash Birla—a man known more for his over-the-top dress sense, and an apparent obsession with the party highlife. Where's the time for balance sheets, spread sheets and business plans, you would be tempted to ask. In the last five years the old legacy businesses have grown by around 75 per cent in absolute terms and total profits have doubled— a performance that can't be called dismal but surely one that won't set the Ganges on fire.
Hardly any of the group companies are tracked by analysts regularly. Says V.K. Sharma, Head of Business for Private Broking & Wealth Management at HDFC Securities: "The total market capitalisation of the group's listed companies is only Rs 500 crore. They are now investing in emerging areas. While the market is open for new ideas, the story will have to be that much more credible."
He points to the Birla Cotsyn stock that had listed in July 2008 and is down almost 45 per cent today. Also, if we compare the stock prices with those fives years ago then Birla Power is down 33 per cent and Zenith Birla is down 31 per cent.
Suggest to Birla that he is in a place where his heart isn't, and his reaction isn't one of displeasure. It's one of exasperation that the bohemian image persists. "I am not really worried about it (the image)," he shrugs. "My only indulgence may be my clothes—but that is for myself." If, by now, you're expecting some big "vision-mission" statements from the man, there aren't too many coming. "A vision cannot be mine alone—it has to be debated, it has to be interactive," Birla quips.
Yash Birla may not be known for his business bluster but don't mistake that for a lack of focus or hunger to excel. He agrees that parameters like market share and market value are important, but success for him is something deeper—almost spiritual— driven by the concept of dharma (duty). "I believe I was born in a business family for a reason, and it is my duty to excel in this role. I believe I have been given all this (the business) to fulfil a purpose and I am prepared to do that," says Birla. "Even if my emotions ever take me away from my goals, I think my conscience will override my emotions," he adds.
For now, his emotions are driving him to businesses that are closer to his personality, like wellness for instance. Whilst Birla admits that such ventures would be "getting more of my attention," it's the sheer prospects of those businesses—rather than personal tastes—that are driving such forays.
If medical spas and destination spas are on his drawing board, so are plans to generate solar power—50 MW in Andhra Pradesh and two 5-MW units in Rajasthan—and to also integrate backward, into making solar panels. Birla Surya, the company that will handle the solar power generating stations, is headed by Mohan R. Datari, a professional who worked in Singapore and came back to India when Murthy offered him this assignment. "We have built a team of 25 professionals over the past two-and-a-half years. We started long before the central government announced incentives for this industry and we will be the first to come up with large solar power plants by 2012," says Datari.
A bigger investment (Rs 3,000 crore) has been planned for thermal power—the group has bought out a project with all its licences in Dhule district of Maharashtra and wants to start up a 300-MW plant by May 2012.
Having professionals run the new businesses is clearly an imperative for Birla. The health and wellness foray is headed by Devang Vyas, an MBA from Stanford who worked for AT Kearney in the US before heading back to India four years ago. Vyas says that the health and wellness platform being built by the group will span from hospitals to destination spas. It will also have ayurvedic medicines, which will be sold under the brand name Chant, at the retail front end.
The stores in which they will be sold will be called Rebirth. The group acquired a 51 per cent stake in Kerala Vaidyashala earlier this year and had formed a joint venture with Pacific Healthcare of Singapore to launch Birla Pacific Medspa in 2008. In addition, the Yash Birla Group has tied up with the Apollo Group for its first multispeciality hospital in Thane on the outskirts of Mumbai, and such alliances may be the way to go for Birla in the health-care segment.
He is thinking big in education too. Spearheading these efforts is N. Srikrishna, CEO, Birla Edutech, who has been a consultant with the group for more than a decade and joined in 2007 to head this venture. The Yash Birla Group has a school—the Gopi Birla School—in south Mumbai, started by a foundation of the family in 1944. Birla is now seeking to build on this legacy by straddling the entire education spectrum that begins with playschools and could end with a university.
The plan is to have 100 K-12 (KG to class 12) schools in the next three years. The group is working around the current regulatory mandate that schools have to be run by non-profit trusts. It is therefore identifying partners who will create trusts and own the schools while the group will take over the management of schools through a management service.
"In our second phase we will undertake school-transformation programmes. We will take over existing schools and run them according to our curriculum and systems," says Srikrishna.
Clearly, Birla has all the highgrowth irons in the fire to prove that he's a biz whiz kid with mettle rather than just a party-hopping page three poster child. Much, however, depends on how he and his core team go about executing the strategy. Fund-raising will be crucial, too.
The group generated just Rs 125 crore in cash in the last fiscal; it is also fairly leveraged with the debt-equity ratio around 1:1. Market appetite for a public issue from a group that's not on the radar of most investors is a matter of conjecture; and although there have been parleys with private equity investors nothing has materialised yet.
Those who work closely with Birla swear by his leadership style. Vyas, who is also Group President for Corporate Strategy and Business Development, is encouraged by the fact that he can get into one-on-one debates with Birla over business decisions and what the group can do and what it cannot.
Adds Birla's Man Friday, Murthy: "I have worked with a lot of promoters who say they do not want yes-men around them, but not many are really true to their words. Mr Birla is open to changes. He is open to ideas and if we give reasoned argument he is even ready to change his views." At 43, with a highly-charged team behind him and exciting prospects for his new fledglings, the years ahead will offer Birla the best opportunity to prove that he is not just another inheritor who lost his way.