Covid-19 Pandemic An ‘Episodic Setback’, Not Structural: Kumar Mangalam Birla

Kumar Mangalam Birla: That’s a very good question, I think that it’s important to put context to this. So, we are as Aditya Birla Group, a global cooperation, we have a presence across the world, we have had a presence outside of India from way back in 1965. We, just for example, celebrated our 50th year in Thailand the year before last, and our 25th in Egypt last year. We have a presence across sectors, so we are multi-sectoral and we have a presence in 36 countries. I think that that kind of footprint allows you to place many bets and you learn from each of those bets. I would say that our pace of activity, the breadth of businesses provide very unique insights on how the world operates and I think that you can always move these pieces of knowledge around into the future. I think that we’ve kind of made a shift in our mix of businesses, we’re a conglomerate. We’ve loaded on and indexed on the services footprint of services businesses like let’s say, financial services today as a business, is much more important than was in the past, and I see that as a complimentary counterpart, let’s say a large manufacturing footprint. I think that whole theme of globalisation just has a much more regional pattern now. I think it’s a reflection of the times that we’re in, people are looking for shorter value chains as we keep hearing all the time. We are looking at regionalism as a very big theme—regional hubs, our regional presence, regional employment catering to regional demand. For example, I would say that we at Aditya Birla Group, we are a global company, but rooted in local economics. Having said that, we still remember, we still remain very much a global corporation. For example, last year, our aluminium roll products company—Novelis acquired a company in its space called Aleris, what was the largest outbound M&A, from India, at a transaction value of $2.8 billion. So, I think whilst global linkages will remain as of now in the current context and I see that being this way for the next several years, globalisation will have a very sharp dimension of regionalisation to it.

Kumar Mangalam Birla: I think that goes back to question on the issue of regionalisation. I think that, again, we’re talking about more local, more regional. If you look at the current protectionism sentiment, if I remember right, intra-regional trade, whether it’s the ASEAN Trading Bloc, or the Eurozone, intra-regional trade is a much larger part of global trade today than it was in the past. I think different countries, different governments, follow different policies to create for example homegrown champions. Hopefully by giving incentives, and not by creating barriers to international trade. Having said that, I mean we know globalisation has helped economies across the world for several decades. It’s helped developed economies in terms of making accessible to them low-cost goods and services, consumer goods at low inflation. For the less developed economies, it’s been about creating and generating employment opportunities by investing in export-oriented businesses. I think globalisation, does not need to be a zero sum game. If I look at data in the last couple of years, the impact of contraction of global GDP has had a far lower impact global trade than what one would have imagined. That speaks to the fact that the fortunes of economies are still dependent on global interlinkages.

Kumar Mangalam Birla: So, fair to say, we have four or five really large global businesses, each one of them offers opportunities to grow inorganically and the question we ask before making any acquisition for example is, will this add value to our stakeholders or to our shareholders? What is the specific objective of making this acquisition? What do we seek to achieve and how will we measure what we’ve achieved three or four years down the line after having made the acquisition? So, I think cross border M&A is something that we still look at very much. We keep scanning the environment for opportunities that add value to our portfolio.

Kumar Mangalam Birla: It is difficult to make a very specific comment. Let’s just say that our team is constantly looking at opportunities, scanning global candidates for acquisitions, so to speak. So whilst on the one hand you have regionalisation, nationalisation, we’re also looking at international acquisitions, cross-border M&A activity. But the important thing is that in these acquisition targets that we’re looking at, there needs to be a strong element of regionalisation. So, you have for example, our aluminium roll products company has regions within which value chains operate from the point of sourcing, to the point of selling to the customer. We wouldn’t look at a company or a business where you source in one corner of the world and sell the other corner of the world. That I think would be a phenomenon that would not be acceptable to most global corporations. That’s the reset that has happened on account of growing protectionism.

Kumar Mangalam Birla: I think the alphabets keep changing but I would say that the economy is pretty much back in shape and is coming back into shape. After the first wave, I think we’ve come back into shape pretty much completely. I think this time around it’s been a setback for a little longer, maybe a month longer than it was last time around, but I pretty much see the economy coming back. I see vaccinations happening much more now, the pace of vaccination is going up, one is looking for a stronger stimulus to the informal sector, which has been impacted much more this time around, and the last time around. I believe that the rural economy will rebound on what is supposed to be an astounding record on agricultural output and I think the medium, long term view on that that I have on India pretty much remains intact. Some of the underlying trends of the economy have got accelerated because of this pandemic, for example, formalisation of the economy, digitalisation. So, I don’t think that anything changes from an economic perspective. This is more of an episodic setback, than a structural setback, as I see it.