ADITYA BIRLA GROUPLETS REACH FOR THE SUNTHE REPORT IS ABOUT THE COMPLETE STORY ABOUT THE ADITYA BIRLA GROUP FROM ITS GENESIS TO DAY OF TODAY. PRATEEK, ANKIT, AVIRAL 9/21/2010

ADITYA BIRLA GROUP

Let`s reach for the sun

OVERVIEW:

Type: Public Industry: Conglomerate Founder: Ghanshyam Das Birla Headquarters: Mumbai, India Area served: Worldwide Key People: Kumar Mangalm Birla (chairman) Products: Aluminum, Copper, Cement, Fertilizer, Textile, Fibre etc. Revenue:US$ 30 billion Employees: 130600 Subsidiaries: Hindalco, Grasim, Indian Rayon, Gulf fertilizers etc. Website: Adityabirla.com

INTRODUCTION:The Aditya Birla Group is India`s largest internationally operating conglomerate, operating in 26 countries like USA, UK, Thailand, Myanmar, Laos, Dubai, Indonesia, Philippines, Egypt, Canada, India etc. Its a US$30 billion conglomerate which gets 60% of its revenues from outside India. All the areas where it operates, it is a major competitor for all others. The group has also been selected as the best employer in India and among top 20 in Asia by Hewett Economic Times and Wall Street Journal Study in 2007.

GENESIS:

The roots of the group date back to 19th century, when in the picturesque town of Pilani, Rajasthan, Seth Shiv Narayan Birla started in cotton and jute, laying the foundation of Birla House. Despite of various monopoly oriented policies, he managed to grow his business at a rapid rate. By virtue of hard and commitment he succeeded to build the family`s first fortune

ROAD TO SUCCESS - GHANSHYAM DAS BIRLA ERA

In the beginning the 20th century, the next phase of Birla family`s success started when Ghanshyam Das Birla took over as the head of the family fortune. He was the person who took the family into industrial sector by setting up a jute mill in 1919. Apart from the business area, Birla became important supporter of the Indian independence movement led by Mahatma Gandhi. Not only he did financial backing for backing for Mahatma Gandhi but also he also participated in the talks to British like in round table conferences, which ultimately led to India`s freedom. As a result of this the company developed a very intimate relationship with new Indian government. It helped them to emerge as one small number of families who dominated the Indian corporate world for a long time. Because of this, just after getting the independence, Birla`s industrial empire grew by leaps and bounds. Just few days after getting the independence, Birla founded GRASIM INUSTRIAL LIMITED; it began importing rayon fiber and started producing rayon based fabric. Later till 1960, Grasim started producing its own rayon and rayon pulp also.

The family`s interest in rayon led it to acquire another branch called INDIAN RAYONin 1966 where they started producing where they started producing viscose filament yarn. This company went on to become Birla family`s largest sub conglomerate. Later ADITYA BIRLA NUVOdeveloped diversified operations like garments, textiles, carbon black and insulators. This company later on entered in cement production. In the meantime, company`s industrial interest led them into a new area-metal, specifically aluminum production and in 1958, Birla founded HINDALCO. The company later branched out into copper production as well. The other Birla Family holdings which developed during these times were HINDUSTAN MOTORSand HINDUSTAN TIMES.

ADITYA BIRLA ERA INTERNATIONAL PIONEER

In the mid 1960`s, AdityaVikram Birla joined the family business at the age of 24, he

was placed in charge of the 3 companies HINDALCO, GRASIM INDUTRIES and INDIAN RAYON, which formed the basis of Aditya Birla Group. He was a great visionary, who totally transformed the Birla Industry from an India focusing industry into India`s first largest internationally operating conglomerate. The company totally enjoyed India`s licensing raj, devised by the prime minister Pandit Nehru. This system made it difficult for new domestic competitors to emerge. Although this system protected and reinforced Birla family`s interests, it also subjected them to strict capital controls. At the end of the 1960`s however Aditya Birla recognized a way of avoiding these controls by the development of the foreign interests. Mr. Aditya Birla dared to dream of setting up a global business empire at the age of 24. He was the first to put Indian business on the world map. In 1969, his ambitions took him to Thailand, where Birla launched its first subsidiary, Indo Thai Synthetics, to produce and export synthetic yarns in Thailand. Into the 1970s, the company continued to invest in Thailand, launching two new subsidiaries in 1974. The first of these, Thai Rayon, launched production of viscose rayon staple fiber, which it marketed on a global basis as Birla Cellulose. That company quickly grew into a major exporter, while also supplying the Thai textile industry. The company set up in 1974 was Century Textiles Co., which operated a weaving and dyeing plant, producing Centex-branded fabrics, including polyester, rayon, linen, and later lycra and others. By the end of the 1970s, the company's Thai holdings included Thai Carbon Black (TCB), founded in 1978. Carbon black, also

known as soot and lampblack, was used as a black pigment for inks, food colorings, and especially for the production of rubber tires. TCB grew strongly, building the world's largest carbon black facility on a single location, and counting among its customers the global big three tire manufacturers. The company was particularly successful in Japan, where it captured more than half of the total carbon black market. Birla's success in Thailand encouraged the group to extend its operations elsewhere in the region. In 1975, the company launched a joint venture in the Philippines, to produce spun yarn. The operation became the basis of the group's other Filipino holdings, grouped under the Indo Phil name. Malaysia became the company's next foreign market, with the opening of an edible oil production subsidiary in 1978. That business, Pan Century Edible Oils, became the world's largest single-location palm oil refinery. In the meantime, Birla's Indian holdings continued to expand and diversify as well. Grasim, for example, added cement production in 1985, launching the Vikram Cement plant at Jawad, in Madhya Pradesh. By the beginning of the 1990s, that operation had tripled its production capacity. Through the 1990s, Grasim added other diversified businesses, including merchant exporter Birla International Marketing Corporation in 1992, and VikramIspat, a gas-based sponge iron factory, in 1993. Grasim also expanded its cement holdings, opening two new cement plants, Grasim Cement in Raipur and Aditya Cement in Shambhupura, in 1995.

LIBERALIZATION: The company also took advantage of the liberalization of India's economy, launched during the country's economic crisis in 1991, to enter a number of new areas. In 1988, for example, the company launched a petroleum refining joint venture with Hindustan Petroleum Corporation. The company then entered the telecommunications market, forming a joint venture with AT&T of the United States, Birla AT&T, in 1995. That company merged with Tata Communications in 2000, becoming one of the country's leading telecom groups. The various open policies allowed the Birlas to produce more and more and export as well. It made him- => largest producer of viscose staple fiber => Largest palm oil refinery => 3rd largest producer of insulator => 4th largest producer of carbon Black

RESTRUCTURING UNDER K.MANGLAM BIRLA-GROWTH STRATEGIES:

Then the year came 1995, passing of a titan, Aditya Birla died and his son took over as the head of the family. K.M. Birla done C.A. and MBA from London School of Business at the age of 28 taken responsibility of business having total revenue of INR 15000 cr and 600000 shareholders. After taking up the change,K.M.Birla decided to consolidate entire entire groups companies under one umbrella of the Adithyasbirla group. Many critics were opinion that K.M.Birla would unable to manage the group successfully When k.M.Birla handover business from his father in 1995,his critics dismissed him as a soft and shy person, who lacked the business expertise and assertiveness of his father A.V.Birla. An unapproachable management style and misplaced priorities the result was the investors started selling off their shares .In 1996 the market value of groups four largest

companies grasim ,indian rayon ,hindalco& indo gulf fertilizer suddenly decreased by $1billion or 37%. So K.M.Birla took several initiatives to prove his critics wrong.

1.Retirement policyy

He introduced a retirement policy in 1995,on the basis of which around 325 senior emplayees,who were there early 60s,had quit the organization in the next five years .subsequently about 400 young employees replaced them. Meanwhile ,answering the critics he said, "people in the group about twice my age when I took over as chairman. I had great respect for them personally, but I also feel the need for change.

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2.Corporate logoy

In 1996,he launched for the first time a corporate identity that would serve a corporate logo. The group selected the rising sun as the logo, which signified optimism and served as a unification symbol for the group. K.M.Birla said, The new corporate logo helped in bringing various companies of the group together. This helped the organization to reenergize and get started to the path of change.

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3.Recruitment processy

K.M.Birla also changed the groups policy in house recruitment. In 1996,he also made changes in groups HR system. He hired professionals from other companies into his management team

4.Change in decision makingy

The partha system of daily financial reporting which focused mainly on production was replaced with an Economic value added model. This model focuses on the aspects of profitability, asset productivity and growth. K.M.Birla also established adityabirlamanagement corporation limited, the strategic decision making for ensuring the best practices across the group companies. K.M.Birla decided to reduce the groups dependence on fiber based business where its market share was low. Instead he decided to concentrate on non-ferrous metals as there was less competition and hindalco already had a big presence in the aluminum sector

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5.360 degree appraisaly

K.M.Birla introduced a 360 degree feedback program in 1999 that permitted managers to raise questions over his leadership style, managerial ability and also personal traits but he could not define what he expected from his employees. After the feedback, he issued each senior manager a six page letter mentioning the areas of improvement and his expectations.

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6.Scholarships to students and Awards to employees

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In 1999 K.M.Birla launched the adityabirla scholarship to promote excellence among students community to cultivate the leaders of tomorrow. He said, "cultivating a new generation of managers and cultivating a participative culture are keys to the increasingly energetic, people centered, and performance focused culture we aspire for. He also launched Aditya Birla awards in 1999 where team achievements recognized every year .

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7.Happiness at worky

Birla had also implemented the organizational health survey by the late 1990s, which measured the Happiness at work index. This was carried out to track the employees satisfaction.

8.Hierarchy based on performance of employeesy

K.M.Birla also brought in some managerial changes in the group. Before K.M.Birla took the chairmanship, the hierarchy in the group was determined by seniority instead of merit. He instituted a performance appraisal system. He decided to implement performance management systems,reviwed compensations and accentuated on training to bring meritocracy. He personally led the recruitment program from business schools.

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9.Changes in reportingy

He also brought about changes in reporting system being followed at the group. The top 20 executives of the group, who had greater responsibilities in the group, could report

directly to K.M.Birla, thereby giving them complete freedom to run their businesses and same holding the more accountable for their performance. SUCCESSES: (ACQUISITIONS) } 2007-NOVELIS - became largest rolled aluminum producer. 2000- Majority stake in Indal in Alcan of Canada. } 2003- Mines in Australia. } 2006- Purchasing equity of NGK, subsidiary of Birla group. } 2006- Minacs Worldwide, a BPO company. } TATA`s stake in IDEA cellular } Trinetra, chain of retail stores. } Empire kept expending and new markets continuously being sought out. Other new markets for Birla included software development and IT services, which were regrouped into Birla Technologies Ltd. in 2001. The company entered the power generation market through a joint venture with Powergen PLC. In 1999, Birla added financial services to its range, forming a joint venture with Canada's Sun Life Assurance. Into the mid-2000s, Birla also continued to expand its international network. The company made its first entry into the North American market, acquiring the Atholville Pulp Mill in New Brunswick, Canada. The purchase, completed in 1998, established Birla as the world-leading producer of viscose staple

fiber and also marked its first major foreign acquisition. In 2003, the company turned to Australia, buying up the Nifty Copper mines in Western Australia. The purchase enabled Birla to develop into an integrated copper group, supplying its factories in India with raw material. Later that year, the company bought up a second Australia copper mine, at Mt. Gordon. In that year, as well, Birla extended its reach into the mainland Chinese market, where it established a carbon black production unit, Liaoning Birla Carbon. Back at home, the company launched a project to build a new aluminum production complex in Orissa, beginning construction in 2005. Birla's international expansion continued to drive the company's growth into the mid-2000s. In 2005, for example, the company reached an agreement to acquire the St. Anne Nackawic Pulp Mill in Canada. The company also sought out new markets; in March 2006, the company announced its plans to build a $350 million viscose staple fiber plant in Laos. Aditya Birla had grown into one of India's leading conglomerates, and a major player on the world market.

Principal Subsidiaries Aditya Birla Chemicals (Thailand) Ltd.; Aditya Birla Nuvo Ltd.; Alexandria Carbon Black Company S.A.E. (Egypt); Alexandria Fiber Company S.A.E. (Egypt); AV Cell Inc. (Canada); AV Nackawic Inc. (Canada); Birla Mineral Resources Pty. Ltd. (Australia);

Birla Mt. Gordon Pty. Ltd. (Australia); Century Textiles; Grasim Industries Limited; Hindalco Industries Limited; Indo Gulf Fertilisers Limited; Indo Phil Textile Mills (Philippines); Indo Thai Synthetics; Liaoning Birla Carbon Co. Ltd. (China); Pan Century Edible Oils (Malaysia); PSI Data Systems Limited; PT Elegant Textile Industry (Indonesia); PT Indo Bharat Rayon (Indonesia); PT Sunrise Bumi (Indonesia); Thai Acrylic Fibre; Thai Carbon Black; Thai Peroxide; Thai Rayon; TransWorks Information Services Ltd. Principal Competitors RPG Enterprises;

Tata Sons Ltd.; Murugappa Group; Jaypee Group; Amalgamations Ltd.; Dabur India Ltd.; BalmerLawrie and Company Ltd.; Escorts Ltd.; HMT Ltd.; Greaves Cotton Ltd.; Bombay Burmah Trading Corporation.

Group companies :: Grasim Industries Ltd. :: Hindalco Industries Ltd. :: Aditya Birla Nuvo Ltd. :: UltraTech Cement Ltd. Indian companies :: Aditya Birla Minacs Worldwide Limited :: Essel Mining & Industries Ltd ::

Idea Cellular Ltd. :: Aditya Birla Insulators :: Aditya Birla Retail Limited :: Aditya Birla Chemicals (India) Limited International companies Thailand :: Thai Rayon :: Indo Thai Synthetics :: Thai Acrylic Fibre :: Thai Carbon Black :: Aditya Birla Chemicals (Thailand) Ltd. :: Thai Peroxide Philippines :: Indo Phil Group of companies :: Pan Century Surfactants Inc. Indonesia ::

PT Indo Bharat Rayon :: PT Elegant Textile Industry :: PT Sunrise Bumi Textiles :: PT Indo Liberty Textiles :: PT Indo Raya Kimia

Egypt :: Alexandria Carbon Black Company S.A.E :: Alexandria Fiber Company S.A.E

China :: Liaoning Birla Carbon :: Birla JingweiFibres Company Limited :: Aditya Birla Grasun Chemicals (Fangchenggang) Ltd.

Canada :: A.V. Group Australia :: Aditya Birla Minerals Ltd. Laos :: Birla Laos Pulp & Plantations Company Limited

North and South America, Europe and Asia :: Novelis Inc. Singapore :: Swiss Singapore Overseas Enterprises Pte Ltd. (SSOE)

Joint ventures :: Birla Sun Life Insurance Company ::

Birla Sun Life Asset Management Company :: Aditya Birla Money Mart Limited :: Tanfac Industries Limited

CONTRIBUTIONS OF SECTORS TO GROUP:

Salescopper aluminum cement telecom VSF carbon black insurance spinning mines acrylic fibre chemicals garments fertiliser

Corporate Social Responsibility: Transcending business for over 50 years now, the Group has been and continues to be involved in meaningful welfare-driven initiatives that distinctly impact the quality of life of the weaker sections of society in India, South-East Asia and Egypt. In India, the Group's social projects span 2,500 villages. It reaches out to seven million people annually through the Aditya Birla Centre for Community Initiatives and Rural Development, spearheaded by Mrs. Rajashree Birla. Its focus is healthcare, education, sustainable livelihood, infrastructure and espousing social causes.

The Group runs 42 schools, which provide quality education to over 45,000 children in India's interiors. Of these, over 18,000 children receive free education. An additional 8,000 students receive merit scholarships. Likewise at its 18 hospitals in India, more than a million patients are given extremely subsidised medical care. To embed corporate social responsibility as a way of life in organisations, the Group has set up the FICCI Aditya Birla CSR Centre for Excellence, in Delhi. The Group transcends the conventional barriers of business and reaches out to the marginalised because of its conviction of bringing in a more equitable society.

CREDITS: PRATEEK SINGH AVIRAL PANWAR ANKIT SINGH SUBMITTED TO: PROF. DEEPAK DAVE