Passing the baton

why have the birlas stayed relevant and a force to reckon with in india inc. while their peers are fading away? sutanu guru traces the evolution of the family and the inheritor through triumph & tragedy

Singhvi had no idea that the company (MRPL) that he was so aggressively promoting would go out of the fold of the Birla family (It is now controlled by public sector ONGC). B. K. Birla and Kumarmangalam Birla wouldn’t have even in their worst nightmares imagined that they will lose a son and a father very soon. Cancer felled Aditya Birla in 1995, when he was just 52 years old. The succession plans of B. K. Birla went out of the window and a 28 year old Kumarmangalam had to suddenly take charge of a sprawling, diversified and often incoherent Empire that was struggling to come to grip with the storm of liberalisation that Manmohan Singh had unleashed in 1991. “I still marvel at the vision of Aditya, his ability to look far ahead and his willingness to think big and take big risks,” reminisces B. K. Birla who has now finally come to terms with the tragedy.

Even prescient analysts had no inkling of the fundamental changes that were to sweep across India Inc. in those days; sweeping change that jolted many corporate reputations and made mincemeat of many legacies. Back then, some of the Birla companies that were part of the coveted Sensex were Century Textiles, Indian Rayon, Hindustan Motors, Grasim and Hindalco. Century Textiles (managed by B. K. Birla after the sudden death of his son) and Indian Rayon (now part of Aditya Birla Nuvo) and Hindustan Motors (manufacturer of the Ambassador car and controlled by another Birla branch) no longer feature in the Sensex. Is it a coincidence that Grasim and Hindalco (controlled and managed directly by Kumarmangalam Birla) are still very much integral to the 30 scrip Sensex? And guess how many other business families and their companies have been cast off the Sensex over the years? Bombay Dyeing run by the Wadias is gone, the venerable Bajaj Auto is gone, Kirloskar Cummins run by the Kirloskars is gone, Premier Automobiles run once by the Walchandnagars is gone, Mukund Iron run by an arm of the Bajaj family is gone, Ceat Tyres run by the R. P. Goenka group is gone, Ballarpur run by the Thapar family is gone, Arvind Mills run by the Lalbhai family is gone and Great eastern Shipping run by the Seth family is gone. Gone too was Mahindra & Mahindra, only to storm back into the Sensex in 2007. Of the old, traditional business families that once dominated the landscape of India Inc., only three remain in the Sensex. There are the Mahindras (M&M), the Aditya Birla group (Grasim and Hindalco) and the Tatas (TCS, Tata Steel, Tata Motors and Tata Power). During the course of an exclusive interview given to Business & Economy in early September, 2009, B. K. Birla had kept harping on the fact that, “it is only the Tatas and the Birlas who matter in Indian business”.

Read more.....

Source : IIPM Editorial, 2012.
An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

2012 : DNA National B-School Survey 2012
Ranked 1st in International Exposure (ahead of all the IIMs)
Ranked 6th Overall
Zee Business Best B-School Survey 2012
Prof. Arindam Chaudhuri’s Session at IMA Indore
IIPM IN FINANCIAL TIMES, UK. FEATURE OF THE WEEK
IIPM strong hold on Placement : 10000 Students Placed in last 5 year
IIPM’s Management Consulting Arm-Planman Consulting
Professor Arindam Chaudhuri – A Man For The Society….
IIPM: Indian Institute of Planning and Management
IIPM makes business education truly global
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM B-School Facebook Page
IIPM Global Exposure
IIPM Best B School India
IIPM B-School Detail
IIPM Links
IIPM : The B-School with a Human Face
IIPM – FLP (Flexi Learning Program)

A saga of ‘lost & not found’ sensitivity

A number of companies that dropped out of the Sensex in 1991 are still showing shaky fundamentals. But then again, there are those who have at least mastered the art of survival

When any listed company talks about its risk factors in its annual report, one feels that every attempt is made to be as comprehensive as possible. It only goes to show how even the best of organizations can feel overwhelmed by a multitude of factors, right from customer mix/perceptions to sectoral disruptions and volatility, political uncertainty, employee retention challenges, environmental challenges, activism related challenges & unfriendly regulation.

In particular, a sudden change in the environment can lead to a dramatic reorganization in the pecking order and leave us with a list of winners and losers. Only 61 companies from the original Fortune 500 list in 1955 are still there. From 1999 to 2009 itself, 262 companies exited the list. And in line with Nicholas Taleb’s Black Swan Theory, experts can only put things into perspective once the entire change process is behind us.

Twenty one constituents have moved out of the Sensex since liberalisation. And an analysis of a few important cases reveals that a number of them are still shaky in their financial fundamentals. The liberalization at large was a watershed moment that sounded the death knell for many Indian firms and a fall from grace for some others. The family angle made a valuable contribution to the fall of some of these businesses, or at least exposed chinks in their armour. For instance, Century Textiles, Indian Rayon, Hindustan Motors & Grasim were all part of the extended Birla empire that split up acrimoniously among family members after the 1980s and barring Hindalco & Grasim, none of the other companies could truly keep up with the pace of the liberalisation era. The Thapar group that owned BILT industries saw a lot of bad blood between the family members for around 38 years before the group eventually split in 2000.

When we look at those who dropped out in terms of sectors, textiles is one area that appears prominently. Century Textiles, Bombay Dyeing & Indian Rayon Industries were all part of the Sensex in 1991. While the lifting of quotas did provide a lot of opportunities to the textile industry, liberalization also brought more FDI ($80 million between 1991 and 2005 as per CCI) and much more competition. Century from the B.K. Birla Group couldn’t stay with the Sensex, but managed to survive thanks to its diversification into cement, shipping, pulp & paper, et al. In fact cement accounted for 59% of its revenues in FY 2009-10. Revenue is growing at a CAGR of 10.96% over the past 4 years to reach Rs.47.65 billion in FY 2010-11. Bombay Dyeing just couldn’t cope with a fleet footed entrepreneurial economy that emerged post 1991 and saw a drastic fall in fortunes. That was in tune with the story of the Wadia group in fact, which missed important opportunities to then competitor Reliance. To its credit, its revenues in FY 2010-11 were Rs.19.5 billion, and it is growing at an impressive CAGR of 40.6% yoy, but profitability at Rs.213 million is still a concern, down by 40.46% from its value in FY 2006-07. This compares unfavourably to a peer like Sutlej Textiles that posted sales of Rs.16.02 billion in the financial year 2010-11 but profits were at Rs.1.14 billion.

Read more......

Source : IIPM Editorial, 2012.

An Initiative of IIPM, Malay Chaudhuri
and Arindam Chaudhuri (Renowned Management Guru and Economist).

For More IIPM Info, Visit below mentioned IIPM articles.

IIPM Best B School India
Management Guru Arindam Chaudhuri
Rajita Chaudhuri-The New Age Woman
IIPM's Management Consulting Arm-Planman Consulting
IIPM Prof. Arindam Chaudhuri on Internet Hooliganism
Arindam Chaudhuri: We need Hazare's leadership
Professor Arindam Chaudhuri - A Man For The Society....
IIPM: Indian Institute of Planning and Management