Life At Aditya Birla Group After Rs 1,00,000 Crore Of M&A In Two Years
Kumar Mangalam Birla, the chairman of the $44 billion Aditya Birla Group, is leading the charge to integrate acquisitions worth over Rs 1,00,000 crore ($14 billion) his companies have undertaken in the last two years.
Group companies have since 2016 acquired the cement assets of Jaypee Group for over Rs 16,000 crore, initiated a merger with Vodafone, valuing the India arm of U.K.-based Vodafone Plc. at over Rs 80,000 crore, and today announced a near Rs 18,000 crore acquisition of Aleris Corp.
Each of these transactions has been done with a purpose, said Birla in an interview to BloombergQuint. Each of them is value accretive, if not in the short-term, the medium-term for sure. And each of them takes the respective businesses a few steps forward in their overarching strategy, he added.
The integration of the Birla-promoted UltraTech Cement with Jaypee Cement is complete, and is “beautifully done”, Birla said.
The group will now face the herculean task of integrating its telecom venture, Idea Cellular Ltd., with that of Vodafone. The Department of Telecom approved the merger on Thursday. Idea is hopeful of completing the merger by the end of August as envisaged earlier, Birla said.
The Aleris deal is expected to be completed by end of 2019 and it would take at least two years to bring in the estimated recurring synergies of over $150 million, Novelis said in a press briefing earlier today.
“I think the Insolvency and Bankruptcy Code could not have been timed better,” said Birla of the new law that has created multiple acquisition cum restructuring opportunities.
Organic Growth Plans And Group Consolidation
The Aditya Birla Group is also looking at organic growth for its flagship companies. It plans to invest $1 billion to double capacity of value added products at its aluminium major Hindalco Industries Ltd., and invest in new cement capacity.
“We have had organic growth as well. For example, Hindalco has had organic growth, so has cement. We have invested in increasing cement capacity in Rajasthan and plan to invest further on new capex in the state,” Birla said.
After a spate of demergers and mergers over the last decade, Birla says all group restructuring and consolidation is also done.
Don’t think within the group there is any further consolidation to be done.Kumar Mangalam Birla, Chairman, Aditya Birla Group
While Birla has always been aggressive on the M&A front, he keeps a hawk eye on cash flows and balance sheet vitality. “Each of our investments must hit a certain hurdle rate in terms of returns otherwise we wouldn’t go ahead with it. So I see very strong cashflows going forward as well,” Birla said.