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The dealmaker

Sushil Agarwal     June 3, 2013
Mergers and acquisitions have been an integral part of Aditya Birla Nuvo's growth. The company traces its origin to a modest beginning with the acquisition of Indian Rayon Corporation in 1963. A decade later, the textiles and insulators businesses were merged with the company.

The company has built many of its key businesses from scratch, such as life insurance and non-banking finance. However, mergers and acquisitions have played a key role in the company's transformational journey from a manufacturing company in the late nineties to a $4.5 billion conglomerate today. For instance, the acquisition of Madura Garments in 2000 spawned India's largest premium branded apparel player. The acquisition of Apple and Alliance mutual fund schemes strengthened the leadership position of Birla Sun Life Asset Management. From being a regional player, Idea Cellular emerged as one of the leading national players, aided by acquisitions including that of Spice Communications in 2008.

In line with the company's vision, the underlying strategy of every merger or acquisition has always been to acquire an established platform in a promising sector, followed by capturing growth potential, deriving synergies and achieving leadership position.

Two of our recent acquisitions are worth mentioning - those of Columbian Chemicals and a controlling stake in Pantaloon Fashion.
The acquisition of Columbian Chemicals by Aditya Birla Group was not only aimed at becoming the world's largest carbon black player but also to derive synergistic benefits in logistics, sourcing and technology.

In numbers
Revenue: Rs 21,480 crore, up 20%
EBITDA: Rs 2,877 crore, up 20%
Net Profit: Rs 890 crore, up 8%
ROE: 12.6%
(Figures for 2011/12; Source: Annual Reports)

#Acquired Atlanta-based Columbian Chemicals for $875 million in 2011
#Columbian Chemicals acquisition doubled Aditya Birla Nuvo's carbon black capacity to two million tonnes
#Acquired Future Group's Pantaloon business for Rs 800 crore in 2012

The acquisition of a controlling stake in Pantaloon Fashion by Aditya Birla Nuvo was also in line with our goal to be on the top of the league. It not only extends our footprint into the fast-growing fashion segment but also strengthens our presence in the women wear and kids wear segments. The transaction took around 12 months to complete, considering the complexities involved. The carving of Pantaloon Fashion as a separate business unit out of its listed parent was a challenge. The structuring of the transaction to get a controlling stake was also a milestone.

The acquisition provides an established, popular and fast-growing 'Pantaloon' platform, with a prominent hold in eight urban and 23 other cities of India. The customer reach of our retail channel stands expanded to more than 1,300 exclusive brand outlets spanning four million square feet. Pantaloon enjoys the first-mover advantage in several locations across eastern India. This strengthens our geographical presence. Additionally, the acquisition will result in synergies in terms of raw material sourcing, rentals and so on. These benefits will accrue gradually.

Today, each of our businesses, whether grown organically or inorganically, has attained market leadership - led by our continuous thrust and investment in enhancing competitiveness even during tough times. This is evident from the fact that most of our businesses have been consistently outperforming the industry and its peers.

Sushil Agarwal is CFO of Aditya Birla Nuvo. He has been adjudged as Best CFO in the category - Enhancing Competitiveness through M&As. 

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