Two of India’s largest family-run groups plan to invest billion of dollars around the globe as they seek to boost revenues by expanding in fast-growing emerging markets and by acquiring distressed assets of companies based in developed markets.
Aditya Birla Group, India’s aluminium-to-retail and mobile telephony conglomerate, plans investments of $17 billion across its 33 companies aimed at almost doubling the group’s revenues to $65 billion by 2015. Godrej, one of India’s oldest conglomerates, said it would invest several billion dollars in developing markets in an effort to boost the company’s sales by at least 10 times to $30 billion by 2020.
Kumar Mangalam Birla, chairman of the family owned group, and Adi Godrej, the 68-year-old chairman of eponymous Indian consumer goods-to-palm oil group Godrej, told the Financial Times that the bulk of the investments would be rolled out over the next two to five years.
The substantial capital inputs are in stark contrast to India’s investment environment, which has been damped by record high inflation, rising commodity prices and ballooning lending rates. The aggressive moves come as the groups seek to meet the demands of India’s fast-growing economy amid a global scramble to tie up mineral resources.
Both conglomerates have a record of big-ticket global expansions, reflecting the changing face of corporate India. Companies have for decades been content to stay at home but now are cash rich and increasingly looking for opportunities overseas, where inflation and interest rates are lower and valuations are attractive following the 2008 financial crisis.
When Mr Birla took the reins in 1995 from his late father Aditya Vikram Birla, the group was India-centric and generated $2 billion in revenues. Today, following 22 acquisitions, the group is a multinational worth $35 billion, operating in 33 countries and generating more than 60 per cent of its revenues overseas.
The 44-year-old Mr Birla said the majority of the investment – about $10 billion – would go to developing greenfield projects at its aluminium and cements companies, and to securing resources such as copper and coal needed to meet the nation’s rising demand for construction materials for nascent infrastructure projects. The remaining $7 billion will be invested in Birla’s mobile phone carrier, its pulp business, and its viscose staple fibres unit.
“Buying resource assets is something that we are very keen on,” Mr Birla said. “We bought copper mines, we’ve been buying fibre and pulp assets, coal assets for our power … Control over key resources and raw materials is a big theme for us going forward in terms of our investment focus.”
Mr Godrej said the group plans to expand heavily in Africa, Asia and Latin America through a series of acquisitions.
“We have a capital-light model so in the past we used to throw a lot of cash to our shareholders,” Mr Godrej said. “Now we think that we can give better returns to our stakeholders if we use the money for inorganic growth.”