Kumar Mangalam Birla likes to express himself in short and simple sentences. He does not throw a lot of numbers at the interviewer and is often happy to answer a question with a single sentence. He spent a lot of time speaking to Business Today editor Chaitanya Kalbag, executive editor Suveen K Sinha and senior editor Suman Layak over two sessions in Mumbai and Delhi.
Here are the full transcripts of the two interviews:
The first part of the interview took place in Mumbai. Birla spoke with BT Editor Chaitanya Kalbag and Senior Editor Suman Layak.
Chaitanya Kalbag: So you said in your essay that you had gone in for inorganic growth and acquisitions and that was one way of expanding. One of the things that strike one as you study the Aditya Birla Group is that - with Novelis you have acquired a presence in quite a few countries - in Latin America and so on. You have not done very much of expansion in Africa and you are in Latin America through Novelis - so do you have any ambitions.
Kumar Mangalam Birla: So you know Africa is one of the continents of the future. It has a lot of catching up to do in terms of infrastructure. We are looking at investing in Africa but haven't found the right assets. Our philosophy has always been that we wouldn't rush into something without doing our homework well and getting the right asset on board. It's definitely on the radar. So I think that for a company like ours that is multinational, for us it will be much easier, to acclimatise ourselves to a foreign country and its way of working, but there is no tearing hurry. So we are scanning the environment very intensely but it's only when something worthwhile comes up.
Chaitanya Kalbag: Is there any particular area that you feel you need to…
Birla: So for example we are looking at mining. But there are lots of issues, for example, availability of infrastructure with mines. Transport…
Chaitanya Kalbag: Bauxite mining?
Birla: Coal mining.
Chaitanya Kalbag: One of the things that Chinese companies say when they go into a continent like Africa, they get a lot of partnership from their government.
Birla: I think that is probably something that is in the past. From whatever one understands, I think, China…their style of functioning - go in and probably kind of asset strip and kind of…control and people you know give employment to Chinese and lay off natives - but this is all hearsay. I haven't had experience with it myself. So I think that an Indian company would be far more welcome in most countries across the world.
Chaitanya Kalbag: The reason I asked you was, ultimately some of those investments are made in a government - for example the government offers to set up infrastructure and the corporation goes in and does the investing or building up of manufacturing capabilities or mining. What Indian companies say is that they are on their own in many ways, they have to do everything themselves. And that makes it tougher for us to expand from India into some of these continents.
Birla: That is true. As we know there is a strong connect between industry and government in China and that works to the advantage of the Chinese industry.
Chaitanya Kalbag: You have to do a lot more on your own?
Birla: In our case we have to fend for ourselves. It has both advantages and disadvantages. Disadvantages because you have to incur that extra cost, you have to make that extra effort, takes longer. For sustainable development of an economy likes ours, you have to have a very strong balance. You cannot be completely dependant on the government. Indian industry has demonstrated over and over again their own resilience.
So I think to be able to become self sufficient, I think it is very important. I would expect government to provide infrastructure in India, if I am setting up a plant. So when I am setting up a copper plant, I have to set up my own jetty, my own water pipeline, all of that I think works against industry. Its puts you at a cost disadvantage from your competitor, globally. But if I was to foray into China, to expect government to put up infrastructure there for me is to expect too much - too much of an ask. That is getting too reliant on the government. My own philosophy is that one has to learn to be self reliant.
So like I said, the government has to strike a fine balance. That is my point of view; it is something that is very subjective.
Chaitanya Kalbag: Aditya Birla Group is in many areas but there are a few where you are not very prominent - for example, infrastructure, pharmaceuticals, education - you have been in education, you are in education but in a really big manner - what do you feel about that?
Birla: So you know Chaitanya, at the end of the day every corporation has a limited pool of capital as you know. And it essentially boils down to capital allocation. So it depends on what you believe are the competencies required to succeed in an industry, what the returns would be - relative risk returns compared to other businesses where you could invest. I think there are different reasons for us not to foray into each of these sectors. I don't see us getting into pharmaceuticals.
Infrastructure is a play that still remains open to us. In pharma we do not have the skills to do. Indian pharma companies are perhaps at a disadvantage for the sheer kind of resources that are required to do original research and development. And that is being borne out by what is happening in the Indian pharma industry. So largely, education because our belief is that it is not scalable enough to create something that substantive in terms of cash flows. It can create value in terms of listing in the market and monetising it, but then for example we have a retail which is a similar play. So you can't be in several industries where the play is essentially in value creation, not on strong cash flows.
Chaitanya Kalbag: How is the retail part doing?
Birla: Retail is doing well…our philosophy has again been brick by brick. So we have presence in two major sectors - basically in hypermarts and supermarts. And we intend to keep our focus on these segments. So we are growing. I think it is a tough business. So you have to keep learning each day and make sure that you do not make the same mistakes and make sure that you sort of absorb that learning very quickly. So when you are talking about a business where you are working on a one per cent two per cent margin, every single … counts. So I think we are on a very steep learning curve. I don't think there's any rush to become the largest in the retail sector because I think, there is space for a lot of people here. I think the important think is to grow steadily and have high quality of earnings.
Chaitanya Kalbag: Sure. So what made you go into retail or for that matter telecom, both were very very low margin and very competitive and tough environment.
Birla: Competition is not something that one is scared of. You know we operate internationally, facing international competition all the time. And when we got into telecom the margins were pretty high. We invested about 20 years ago. Retail because it reflects the new India, it reflects the sort of very significant socio-economic trend that's emerging in India.
Chaitanya Kalbag: But telecom there's been tremendous price pressure and do you feel…
Birla: But that's happened off late…but I think the good news there is that in the last two quarters prices haven't fallen any further. And I think there is… a time is coming when we will see a consolidation in the sector. Can't yet say how and depends on what sort of policies the government comes out with.
Chaitanya Kalbag: Did I see you saying somewhere that you might be willing to look for a buyer for Idea?
Birla: No. We are very committed to the telecom sector. Rumour keeps going around every couple of months, we have no plans to get out of idea.
Chaitanya Kalbag: What about entertainment. You did something…
Birla: So we had a very small outfit. They did some content for television. They produced a movie - Black. But then we believed that it is not something that a large corporate is really suited to do. That's again an individual point of view so we shut it down.
Chaitanya Kalbag: So my feeling is that you went into services in quite a few areas, and yet manufacturing continues to be the bedrock of Aditya Birla Group.
Birla: That depends, I mean, Idea is today the largest market-cap company in the group. So it depends, what parameter…
Chaitanya Kalbag: It is larger than Hindalco?
Birla: As of now I think as metals stocks have come off quite a bit. So yeah when you are talking about financial services, when you are talking about telecom, when you are talking about garments, these are very intense involvement categories as the marketing guy would call it, for the consumer. You don't just wear any shirt, either the wife or you want to see what you are wearing. You have a choice to make. When you are talking on the mobile, connectivity has got relevance to you, so has financial services. Financial services is about saving, investing, all of that. So these are very high involvement categories and in a sense very different from manufacturing.
Chaitanya Kalbag: Can we talk about financial services for a few minutes? Are you going to be seriously interested in setting up a bank?
Birla: Oh absolutely, you know. I think we have all the track record, we fit in with the objectives already announced, have been announced yesterday. And you know, our family had a bank which got nationalised years ago. At the time when all banks did. UCO Bank. It was started by my great-grand father Mr GD Birla. So I think we fit the bill completely. It fleshes out our financial services portfolio and we are very keen on having a bank.
Chaitanya Kalbag: Every time I meet people from RBI they keep talking about lack of financial inclusion.
Birla: So I think financial inclusion is a very big part of issuing licences for the new bank. Given the fact that we have physical presence across so many points within the country, across the country and we do very significant CSR work across the country, for us to kind of get started in terms of the inclusion part of it would be very kind of easy and sots of fits in with our philosophy of doing things. Fits in with our social conscience. Clearly it is very important for RBI and the government as I understand it to have inclusion as a very big criteria for selection.
Chaitanya Kalbag: I take it for granted that you would want to be number one…
Birla: You know in a bank I do not look to be number one or number two. It is clearly understood. We are a late entrant. We are a late entrant because of regulation. We had applied for a licence 25 years ago. At that time large business houses were not allowed. Even as of now, it is only now that there is some positive inclination towards allowing large business houses. But having said that it fits in with our financial services - we have the confidence that we can make a success out of it, we have the confidence that we can make very credible institution.
Chaitanya Kalbag: What about insurance where you are number 6 or 7…
Birla: Number five.
Chaitanya Kalbag: Don't you want to grow to be top one or two?
Birla: Oh absolutely, that is the mandate that we have to be in top three so that is clearly understood by the insurance team. And we have come up the pecking order and I think we are in the right trajectory. We have got strong competition.
Chaitanya Kalbag: What's your feeling about the regulatory environment is for areas like insurance or investing in pension funds and things like that?
Birla: So I think, the environment for these sectors in terms of regulations and stuff…
Chaitanya Kalbag: You think it is over regulated?
Birla: To an extent yes. I think that even as a country we are over regulated.
Chaitanya Kalbag: Do you really feel that the licence raj has gone away?
Birla: I wasn't around - I wasn't working at the time of the licence raj. So I have only heard about it from my father…
Chaitanya Kalbag: But you must have heard enough horror stories…
Birla: I am sure this is how it must have felt. Because there are so many sort of … on almost every issue you have interfaces with the government.
Chaitanya Kalbag: So you do not feel that it is yet a stage where it is a very clear open level playing field for an entrepreneur?
Birla: Level playing field vis-a-vis who?
Chaitanya Kalbag: Each other…
Birla: I do not think it is a level playing field to your international competitors. Which is not a very good thing. With tariffs not being there, which is right and with India being votary of globalisation, it is very much the thing to do and you have to have business conditions and business environment which is as conducive as or better than another country.
Chaitanya Kalbag: No, but what I have heard is that the problem we have is that some of the new areas - telecom, infrastructure, mining are all deeply enmeshed with government.
Birla: But that's true, I think that's very true. And I think that is unfortunate. Essentially it requires transparency, it requires a fine balance between what the role of the regulator should be and what should be left to the industry. But I think stability in policy making, transparency, and visibility in terms of consistency of policy making is very important for all of these sectors.
Chaitanya Kalbag: And you do not think we have very much of that?
Birla: I don't think so. Unfortunately not. If you compare with other countries in this part of the world, if you compare with most of the countries where we have a presence, I think this is an area which is a weak area for us. And it is a very important area for growth of industry. Just to get that sense of comfort for Indian industry.
Chaitanya Kalbag: You have worked with a lot of governments in south east Asia in the course of your business…
Birla: South east Asia is very different, because the lessons are that the policy making there is transparent. They spell out policy which is visible for at least for the next five years.
Chaitanya Kalbag: So even countries like Indonesia or Thailand where there has been quite a bit of political unrest, you believe the policies are…
Birla: Thailand, for sure. And political unrest seems different from the outside. But hasn't really impacted our operations in the country.
Chaitanya Kalbag: That's what…I watched some of the countries very closely in my earlier role…you may have military coups and yet business went on…
Birla: You may be down for a day or two.
Chaitanya Kalbag: The board of trade was very active and a one stop shop and you have predictability of policy.
Birla: All of these things make huge differences when you are planning your investments or planning where to invest.
Chaitanya Kalbag: So why are we not getting this right. You have been doing this for 15 years now in this country. Why is that not getting better?
Birla: How do you see it, is it getting better in journalism?
Chaitanya Kalbag: We are trying with more ethical and balanced reporting…
Birla: Actually it is a few things. We are a very much larger country, a more complex country. So it's many countries within one country. But also it is a question of attitude. Question of wanting to get it done. If there was sense of recognition for the need for these things and the sense of determination then we can do it.
Chaitanya Kalbag: So Novelis was one of the biggest and most ambitious thing you have done. Not one of the, but the biggest. Columbian was more recent.
Birla: We have Columbian, we have the takeover of cement from L&T.
Chaitanya Kalbag: In terms of Novelis. That was the first time that Aditya Birla group became a very clear and recognised presence in all the countries that they were operating in…has that brought new insights for you? Because so far, you were very much of an Asian continent kind of.
Birla: Not really. We had presence in Canada and north America and Egypt and Australia. But obviously our presence overseas has gone up significantly. So our confidence level to make large bets outside India has gone up tremendously. Secondly there's been huge learning on different aspects. How to work with people across cultures, how to work with governments across different countries. Thirdly a very important and positive thing is that there is a huge amount of respect for Indian companies wanting to invest abroad. That was not the case 10 years ago, when we used to go to make an acquisition we would have to sell ourselves. We have to sell India. That clearly has changed completely.
Chaitanya Kalbag: Why is that?
Birla: I think that because there are more and more companies that have made investments abroad. Also the fact that India's track record is strong, India is very much in the focus globally.
Chaitanya Kalbag: And also you are seen as going in and adding value…
Birla: We are also seen as people who have good governance standards, people who have only the interest of the company, at heart and that you respect people. You don't go in and rock the boat needlessly. All of this put together.
Chaitanya Kalbag: That also brings me to the whole issue of talent. One of the things… in India we have a demographic advantage probably - well certainly - but we have a serious problem coming up on skills. Right kind of skills and talent. What's your feeling about that. You are talking about growing to $65 billion. As you grow….
Birla: So talent is perhaps our biggest challenge. To get the right kind of talent, to get enough of it is our biggest challenge in achieving our ambitious plans. At the country level I think just - the number of technical institutes we have… they are just too few for the kind of numbers we should be churning out.
Chaitanya Kalbag: That ties in with what I asked you earlier on education and what…
Birla: As a family, we play a very large role in education. But that is not on a profit basis. Those are run by trusts. So what I am saying is we are not convinced that it is a very good business to be in. We are very convinced of the cause. In fact the family has set up educational institutions over the last sixty seventy years. The cause is something that is close to our heart. The business part of it is something that we are not totally convinced about. Also Chaitanya, I think that when it has been so much a part of the families role of giving back to society, then to think of it as a business, I think that creates a bit of a problem. I am beginning to realise as they are very different perspectives.
Chaitanya Kalbag: You have 1,33,000 employees. That could populate a mid-sized town in most parts of the world. That itself leads to the question - how do you incubate future talent?
Birla: Incubating talent is one of the most important things for us. I spent a lot of time on it. All my business heads spend time on it. It is one of the top two or three things on each ones agenda. And it has to be worked to a rigorous plan…
Chaitanya Kalbag: You had set up something… Aditya Birla Management Centre… is that still on?
Birla: Yes. Absolutely. We have about 1000 executives who have passed through Gnanyodaya every year. Picking up competencies, new skills, also getting exposure to people from other businesses. But here now there is a huge need to induct talent from outside. And now in the last 10 years we have enough experience and good experience of making lateral inductions. So our need for talent is voracious. And having said that, we are fortunate that we are seen as a good employer. Someone who is fair, someone who as an employer respects people, someone who is willing to invest in a meritocracy. So people who join know, if they have the merit they will rise to the top. They will not need any patronage. So I think we are very much on the radar as the first one or two or three companies where people would want to join.
Chaitanya Kalbag: Specially in areas where you are going where you need edgy talent. I also saw your essay that you wrote for our anniversary issue about younger component growing in your group and managing that…
Birla: So that doesn't mean that Gen X isn't important any more. I think all bring different attitudes and different skills to the table and also think that each business has its own requirement, in terms of the profile of talent. All are equally important. It's just that if you get into new businesses, the profiles of people you require can be quite different. I do not think that in retail the profile of people who are at the top of the organisation, we do not have very young people at the top, it is not required. We have very young people on the shop floor for example. Managing them and their aspirations, it requires a different kind of approach. So I think when there is a war for talent, we can't be focusing only on generation A or B or C. It is across the board. So you, sort of draw the net as wide as you can.
Chaitanya Kalbag: So what are the areas you want to go into over the next decade or two decades…
Birla: So Chaitanya, I think we have enough on our hands. There are huge growth opportunities in the sectors that we are in. I do not think we need to spread ourselves thin. We shouldn't do that. Having said that there are always one or two businesses one would want to examine. And I think one of them clearly is infrastructure. Because again there's a huge need for infrastructure … one feels the pinch of lack of infrastructure. Huge potential. One needs to be comfortable with the operating environment, in the infrastructure space and the revenue models. Being comfortable with the sector just in terms of the fact that you need infrastructure.
So infrastructure across the border. It means power, it means ports, it means roads, it could mean water. So when I say infrastructure, it would mean all inclusively.
Chaitanya Kalbag: And you think it is one area where you would like to...?
Birla: We would examine that very carefully. Doesn't mean we will get into it, but we think it is an area worth spending time on.
Chaitanya Kalbag: You are among the top three business groups in the country. What are the areas besides infrastructure?
Birla: I don't think there's anything else that I can think of as of now.
Chaitanya Kalbag: One of the issues that came up was promoter holding in some of your companies…
Birla: So I think the point there is that we want to shore up our holdings.
Chaitanya Kalbag: Under the takeover code now….
Birla: I think that is a very clear priority area for us. To shore up our holding in each of our companies. I think we will be very happy to do that because we are complete believers in each of our companies so… it's very high on our priorities.
Chaitanya Kalbag: Do you pay a lot of heed to the way the market reads these companies in terms of …
Birla: Not that we spend a lot of time on it. Having said that, it is important. The fact that the market undervalues our stocks requires some working on. And we are drawing up plans for that.
Chaitanya Kalbag: Do tell us a little about how you managed the Novelis funding and the debt. You yourself are an expert on finance.
Birla: Nom I am not an expert on finance.
Chaitanya Kalbag: You are not? I thought you are a chartered accountant.
Birla: I am, I am. Finance is a very complex subject.
Chaitanya Kalbag: How did you do the Novelis deal? That was one of the worst times in business.
Birla: I think it was about - what would I say - I think it was very aggressive move, but fortunately for and as we had predicted things changed completely in terms of performance moved on to a much higher level. At the end of the day that is what matters.
Chaitanya Kalbag: So your projections were accurate?
Birla: Our projections fortunately turned out to be very accurate and there was fortunately a step jump in performance. And at the end of the day, I think that's what matters. Financing is a lot about structuring and balance sheets and that is important but… it has to be driven by a conviction that you are doing it for the right cause.
Chaitanya Kalbag: It was a fantastic bet to take. It is almost like a case study.
Birla: It is very kind of you to say that. I think our team did a fantastic job, both at Novelis and Hindalco - they worked well together pretty seamlessly.
Chaitanya Kalbag: So do you have a group of wise men or wise women and men…who is your think tank…..
Birla: Everyone is wise. But I do have a corporate strategy and corporate finance group, whose mandate is to look at opportunities across businesses across the group. Very often businesses get so caught up in running the businesses that most naturally sometimes the time required to spend on spotting opportunities is not something that they can do efficiently.
Chaitanya Kalbag: What about you yourself. Do you travel a lot overseas?
Birla: I do not travel a lot. Having said that, technology helps. You have people. You can talk to 20 people across 20 locations. People travel…
Chaitanya Kalbag: And you are looking for opportunities all the time…you wrote that you are looking to make a quantum leap.
Birla: There are enough in our existing businesses, Chaitanya, where we can make a quantum leap. We do not want to be tempted into a situation where we spread ourselves too thin as I said. There is enough juice left in the sectors that we operate in.
Chaitanya Kalbag: Again there the ambition probably needs to be that you become the world's number one…
Birla: Absolutely. And we've got what it takes. We got the orientation and we got the skill and talent. It is about keeping the ammunitions ready and waiting for the right opportunities.
Suman Layak: Is there some unfinished reorganisation in the group?
Birla: Not really, not as of now.
Chaitanya Kalbag: Grasim's viscose fibre plant could do well with the Nuvo's viscose yarn business…
Birla: No they are very different business actually. Grasim as it looks now it is a very strong structure. We do not find the need to tweak it as well.
Chaitanya Kalbag: So Aditya Birla Nuvo for example, it is quite an omnibus group in the sense, financial services, apparel, Idea.
Birla: It is a diversified company. It has been an incubator for several of the businesses of our group, particularly financial services and Idea. And we never shied away from the fact that it is a conglomerate and a unique conglomerate from the group in terms of legal entities and I think they have used the cash extremely well in creating some hugely value added businesses - largely financial services. We have been very upfront about it.
I personally don't feel there is anything wrong in being a diversified company as long as there is transparency in reporting. But I think it requires a different kind of analyst who can track a company that is a conglomerate - rather than a sector specific analyst.
Having said that Chaitanya, I think over the last 10 years quality of analysts has gone up tremendously. The depth of their work is pretty sound. They understand a company.
Chaitanya Kalbag: Nitin Nohria speech on JRD Tata… innovation… unless India becomes truly innovative….
Birla: I think as a country we need to be more innovative. Let's see what China did with their free trade zones. They started in one region and I think Shenzhen. And when it worked they rolled it out to other parts of the country. If it hadn't worked they would have tweaked it or they would have dropped it. There is a sense of a need to innovate. We haven't seen any such large scale innovation happening at the national level. I think again it is a matter of some amount of courage, and understanding the fact the innovation is so important and it can do so much in terms of valuation for a nation like ours.
Chaitanya Kalbag: Do you think the urge to innovate and be entrepreneurial is not widespread enough in this country?
Birla: I think there is enough entrepreneurship in the country. I think innovation at the national level, I do not think that is at the top of the agenda for anyone.
Chaitanya Kalbag: The SEZs did not work out as they…
Birla: I don't know too much about it. But my sense is that it seems to have promised much more than it has delivered so far.
Chaitanya Kalbag: So personally you are interested in movies and you have also taken up shooting?
Kumar Mangalam Birla: Yeah, well one has grown up watching Bollywood. Other films as well. Shooting is something that I enjoy.
Chaitanya Kalbag: Are you a good marksman?
Kumar Mangalam Birla: I do not get enough time, I am not very good. I wish I could be much better.
Chaitanya Kalbag: How do you keep yourself stimulated?
Kumar Mangalam Birla: You know I love my work. I am passionate about it. That is stimulation, in fact there is over stimulation. So there's lots to be done. When you are working with people who are so energised committed competent, that sort of creates a different sense of excitement.
The second portion of this interview was conducted in New Delhi. This time, Birla met BT Editor Chaitanya Kalbag and Executive Editor Suveen Sinha.
Chaitanya Kalbag: There are some wrong calls one takes in business. You talked about movies, which you decided to get out of. But the courage to make mistakes and that everyone in the organisation learns from it, that's a great thing.
Birla: So you feel what I say and what you heard from the directors resonate?
Chaitanya Kalbag: Absolutely! The fact is that you are one of the three large conglomerates and the fact that you can get to that position with a certain set of values and vision, that's what's important. The last time we met, you told me about raising promoter stakes in group companies. Do you have a threshold in mind? What level do you want to take it up to?
Birla: It will be nice to have 40 per cent, but that will have to be over a period of time.
Chaitanya Kalbag: In terms of the family itself, at some point, there will be parts of the group that are now run by Mr BK Birla. That will also come under your fold. Will there be overlaps?
Birla: I have not thought about it at all, frankly, not even crossed my mind.
Chaitanya Kalbag: There is potential for competition from other parts of the family.
Birla: That's the way the family has been structured. There is no reason why two legal entities should not compete with each other just because their promoters are related.
Chaitanya Kalbag: You said you are definitely keen on getting into banking. What about the stipulation that you need to be doing a large chunk of the business in the rural areas?
Birla: That is something that is quite reasonable. The central bank is coming from a sound point of view. We will be very happy to comply with that. That has been in the guidelines, in different versions. It was always understood that inclusion will be a big criterion for granting a licence, that you have branches in un-served areas. It will be much easier for someone like us. It would impact economics and one has to build that into the business model. But one knew that all along. I quite agree with the objective of inclusion.
Chaitanya Kalbag: On idea, you told me last time there was no question of getting out of it. But Idea now controls 3G spectrum in 11 circles. It has high a price-earning ratio. Idea's market cap is the largest in your group, larger than Hindalco's, isn't it?
Birla: It changes from time to time. At this point in time, it is larger. It's a factor of growth in the sector. It does not mean that Hindalco is any less efficient. Commodities have taken a beating and there has been positive regulatory environment for Idea. So it is like a double whammy.
Chaitanya Kalbag: But Idea is a reasonable takeover target and a divestment target.
Birla: We have no reason to divest. Idea is as central to the group as Hindalco.
Chaitanya Kalbag: Looking at the numbers, it seems metals will be the most important part of the group.
Birla: Some of the other businesses are yet to articulate their own plan. But even after that metals will be the largest in terms of the share of pie in the businesses.
Chaitanya Kalbag: You are facing a coal supply issue in Madhya Pradesh?
Birla: There is a Rs 10,000 crore plant, it is an aluminium smelter, that we are ready to commission in a couple of months. But the coal that we were allocated has been classified as a no-go area. This is when we completely complied with the spirit and letter of the law. So we won't get coal until the issue is resolved. I can't use imported coal because Madhya Pradesh is a landlocked area. The ministry is going back on its commitment. So I hope the new minister will correct the situation. It is very disturbing.
Chaitanya Kalbag: You actually shifted a couple of Novelis plants to India. What was the logic?
Birla: Just cost arbitrage. Great plants but high cost economy, therefore shifting to India where it can serve the export market, as India is well-placed geographically. Also brings down cost of production dramatically.
Chaitanya Kalbag: About retail, it is your personal investment. Do you intend to keep it that way?
Birla: We will monetise it, or partly monetise it, at the right time. It is a very low margin business, but it is the future. Given the rising consumerism in India, modern trade will grow exponentially. It is about being part of the growth story of India. It is a very tough business, very different from what we have done in the past. But one has to learn new competencies. There is nothing that can't be learnt, unless it is something like nuclear technology or something which is so high-tech that it is just completely beyond our grasp. New competencies in businesses can be learnt and should be learnt in an emerging economy. If you can't do that, you are shutting off several opportunities that come your way.
Chaitanya Kalbag: Do you want to get into new areas like aerospace?
Birla: No plan, lots to do in the existing business. But, having said that, one is always on the lookout.
Suveen Sinha: Can we talk a bit more about this no-go area? You had complied with all the things. Where exactly was the problem?
Birla: There was no problem. The minister changed everything. The new minister completely understands everything.
Suveen Sinha: About raising promoter holdings in group companies, you said 40 per cent will be the ideal equity level. Have you set aside an amount to shore up promoter holdings?
Birla: No, that is why it's a slow process.
Suveen Sinha: Do you have a timeframe in mind?
Birla: I think three years. There is also the Sebi regulation.
Suveen Sinha: Will all of it be through the creeping acquisition route?
Birla: The bulk of it.
Suveen Sinha: Which companies will you take up first?
Birla: Grasim and Hindalco.
Suveen Sinha: Can we assume that you will be at 40 per cent in these two in three years?
Birla: That is the intent.
Suveen Sinha: Idea is a fantastic turnaround story in many ways, especially coming from a man who was presumed to be not very interested in telecom. What really was it all about? Idea was at one point one of the also-rans.
Birla: The leadership team did a very good job of understanding the market, understanding the consumer. Cost efficient operations and really well thought-through investments. And just staying at it: cost, cost, cost. At the same time, growing market share profitably. We did not want hollow market share. We wanted high-quality customers.
Suveen Sinha: Will Idea stay inside India, or will you consider going the Airtel way?
Birla: At the moment the focus is totally on India.
Chaitanya Kalbag: Do you think consolidation in telecom is about to happen?
Birla: It depends on the M&A guidelines which will be put out and the exit policy. For, some of the smaller players are looking out. If both of those are forward-looking, there is a story for consolidation in telecom.
Chaitanya Kalbag: In Nuvo, we notice that you have been very good at placing some businesses that generated cash alongside some that did not.
Birla: That was well-thought-through. All the other companies are focused on one business, at most two.
Chaitanya Kalbag: About doing business in India, if you do ethical business, can your group still be number 1?
Birla: I don't think that's the only factor that will determine whether we can be number one or not, but that it is a deterrent to growth is correct.
Suveen Sinha: You are willing to sacrifice growth in the interest of ethics?
Birla: We have done that in the past.
Suveen Sinha: Can you give instances?
Birla: That will be very indiscreet.
Suveen Sinha: You have been untouched by all the recent scandals. Was that because you had this ethics focus from the beginning?
Birla: It's not a case of right or wrong. We just did not want to get into it.
Chaitanya Kalbag: How did you start to realise that there was a group-wide need for an ethical framework?
Birla: That was more a family thing. As we were growing, people from different backgrounds were coming in. A lot of lateral moves were happening and we were going through acquisitions. It was only fair that the organisation explained to new entrants what exactly we meant by seamlessness.
Chaitanya Kalbag: Did you also have workshops where you talked to people?
Birla: Very important.
Suveen Sinha: You said in the earlier interview that you do not want to be tempted into a situation where you spread yourselves too thin. What are the danger levels for you? What is it that you would rather not do?
Birla: We would rather not go into a business where we know we cannot succeed. For example, high technology. The big multinationals spend more on R&D than the turnover of Indian companies.
Suveen Sinha: You talked about investing in art.
Birla: I don't invest in art, I just buy it.
Suveen Sinha: What kind?
Birla: I don't really understand art. I just buy the masters, so there is at least a big name behind it. And I also like their work.
Suveen Sinha: Which ones?
Birla: Hussain and Raza.
Chaitanya Kalbag: Aren't you into photography?
Birla: No, my son is training to be a photographer as a hobby.
Suveen Sinha: And he does not listen to you...
Birla: No, not at all. It is quite a big change from our generation. I could not imagine not listening to my father. When you have children I think there is a huge jump, there is a mental adjustment required. This generation questions you and then does its own thing.
Suveen Sinha: How involved are you at the operational level? Do you visit the More outlets?
Birla: I have, but I do not get involved at the operational level. Unless it is necessitated by something like a recurring problem.
Suveen Sinha: How do you see the Birla clan evolving?
Birla: We have very good equations with the whole family. It is a big thing in today's context.
Suveen Sinha: Would you like your children to come into business?
Birla: I would love that.
Suveen Sinha: Would you like your group to be led by a Birla?
Suveen Sinha: When you wake up in the morning, what do you look forward to?
Birla: To my work. I am fascinated by it.
Chaitanya Kalbag: Do you work long hours?
Birla: I work normal Bombay hours, except that I work on Saturday and a few hours on Sunday. My work-life balance is completely messed up.
Suveen Sinha: Do you follow the Parta system?
Birla: Yes, absolutely. I believe in it.
Chaitanya Kalbag: Is it applicable to a modern organisation?
Birla: It is a timeless concept and can be applied even 20 years from now.