Birla to ramp up overseas capacity

Group may exit telecom business.

The Rs 27,000 crore Aditya Birla group plans to acquire more copper mines overseas, ramp up the group's existing overseas carbon black production capacities in Egypt and China, consolidate the group's cement business, acquire business process outsourcing (BPO) companies and exit non-core businesses like telecom in due course.

"A large part of the restructuring exercise is over. It has started paying dividends and the group is poised for growth," AV Birla group Chairman Kumar Mangalam Birla told Business Standard on Saturday.

The group, which was earlier eyeing the state-owned Nalco and National Fertilisers Ltd, will change its strategy if the new central government decides not to privatise them.

"We will wait for the government's decision. If we cannot acquire them (Nalco and National Fertilisers), we will grow organically in the aluminium and fertiliser businesses," Birla said.

The group has a presence in cement (Grasim and UltraTech Cemco), non-ferrous metals (Hindalco and Indal), textiles (Madura Garments and Grasim), fertilisers, information technology (Transworks and PSI Data Systems) and chemicals (Indian Rayon).

Birla declined to comment on telecom venture Idea Cellular, in which the group had a stake along with the Tatas. However, industry sources said that the telecom business was only a financial investment for the group and it might decide to exit the company in due coures if the group was offered "the right value for its stake in Idea". The Birla group owns a 33 per cent stake in Idea, while the other two partners,the Tatas and AT&T, own 33 per cent each.

The group is planning a massive expansion of its carbon black and pulp businesses overseas. "We plan to ramp up the capacity of Alexandra Carbon Black in Egypt to 1,70,000 tonne per annum (from 1,20,000 tpa). This will make it the world's largest single location carbon plant. The capacity of our carbon black plant in China will be raised from 12,000 tpa to 60,000 tpa," Birla said.

The group is also in the midst of scripting an expansion strategy for its aluminium business. "It will take a couple of months to announce our plans for the aluminium business," Birla said, adding all expansions would be funded through internal accruals and debt "" domestic as well overseas.

He also pointed out that the group did not plan on listing Hindalco overseas. "We are not looking at raising equity," he said.

The group has big BPO company acquisition plans. "We are looking at growing our BPO business, Transworks, through acquisitions. It is growing fast. We have a good list of clients," Birla said. Transworks at present has 1,600 seats and its monthly revenue rate is about Rs 8 crore.

Birla, however, admitted that the group's software division, PSI Data Systems, had been "in a bit of trouble". He said, "Perhaps we entered the IT cycle at the wrong time. We are redefining the company. It will bounce into the black this year,".

He is bullish on Madura Garments' future. "The company's turnover this year will cross Rs 500 crore. The brands are growing fast. Once the quota regime expires next year, we will focus on contract exporting in a big way," Birla said.

He said the focus would continue to be on the diversified businesses as the group's core strength is managing a conglomerate.

"We may not add too many businesses to the existing portfolio. Over the next five years, there could be one new business. We are successfully managing our diverse ventures," Birla said.

He also pointed out that the contribution of overseas operations to the group's turnover would go up significantly from the present 30 per cent.

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The blueprint for growth

Cement: Largest player in India with 31 mtpa; consolidation in due course

Copper: Acquisition of copper mines overseas

Aluminium: Large brownfield expansion to be announced in the next couple of months

BPO: Looking for acquisitions

Carbon black: Ramping up capacities in Egypt and China

Textiles: Focus on contract exporting; Madura Garments turnover to cross Rs 500 crore this year

Telecom: May exit at the right value