Businesses must have scale and long-term vision to survive, says KM Birla at HTLS 2024

Aditya Birla Group Chairman Kumar Mangalam Birla on Saturday said scale is crucial for the survival of a business in today’s competitive landscape.

Speaking at the Hindustan Times Leadership Summit 2024, Birla acknowledged that size is not the only factor in success, but it often becomes the deciding factor.

“Without scale, it would be difficult for a business to survive today,” he said, underlining the group’s ambition to be among the top two in every industry in which it operates.

“We built the cement business to 100 million tons in 36 years, and in the next five years we were producing 150 million tons. In another five years, we will be producing 200 million tons,” he said. Birla’s UltraTech Cement currently has a combined gray cement production capacity of 156.06 million tonnes per annum.

He emphasized how longevity and scale have been the defining principles of the Aditya Birla Group.

In the long run, he said, businesses are in many ways the prerogative of the promoters. Birla added that when Hindalco Industries Ltd acquired Novelis for $6 billion in 2007, the company’s stock took a hit and was written off by investors.

“Any professional CEO who would have made that decision would be fired because it seemed like the wrong thing to do at the time… I think as a promoter I have the privilege and the desire to see more than just the quarter, but It’s a few years,” he said. “It’s part of our culture to run a business for the long term,” he added.

Therefore, the stage of a country’s growth curve determines which industry one wants to enter, Birla explains. “When we started providing financial services [in 2007]this is a country that is maturing… ordinary people are becoming more aware of their savings and becoming more financially literate,” he said.

Entry into retail businesses such as paint is also driven by scale. Since they were already in the cement business, they had an advantage in coatings because distribution was common.

“Distribution is a very important success factor for an industry like paints. The group launched paints business Birla Opus in February this year. “The problem is, we have built 40% of the capacity of the industry…to this financial year By the end of the year, we will be the second, third, fourth and fifth players in the market with combined capacity,” Birla said.

“The lessons we have learned in financial services and certain retail formats have given us the confidence to be closer to our customers,” Birla said.

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Building long-term businesses is the family legacy of the Birla Group. However, leadership is always contextual. “My father came to India at a time when India was opening its doors to the world. My grandfather started his business during a time of scarcity. My great-grandfather, India had just gained freedom,” he said. “Everyone has a different background,” he added.

Birla said the company’s values ​​also contributed to its longevity. “A company is not just a repository of shareholder wealth. A company is a repository of people’s trust, especially the trust of shareholders, customers, and suppliers.”

Likewise, the people associated with the group are also very important, he added. “I am the only one in the family who is actively involved in running the business…The fact that we are so large and diverse…obviously means that we are a highly empowered and decentralized organization,” Birla said.

He called the organization a people’s organization, saying “we invest heavily in our people, in their careers, in adding intrinsic value to them,” he added.

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