birla case v3
TRANSCRIPT
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Birla GroupThe Legacy
Founded in 1857 by Seth Shiv Narayan Birla
3rdLargest Indian Conglomerate after Tata and Reliance with USD 40billion revenue (2012 figures)
Deemed Best Employer in India in 2007 Flagship Companies: Grasim, Hindalco, AB Nuvo
KEY PEOPLE
Ghanshyamdas Birla Aditya Vikram Birla Kumar Mangalam Birla
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Business Timeline
1857: Initial business based around cotton trading in Pilani, Rajasthan
Early 1900s: Ventured into manufacturing with 1stJute Mill
1970s: Aditya Birla expanded business in South-East Asia
Expanded Birla Group to be worlds largest refiner of Palm Oil and VSF and Indias only Linen Producer
Early 1990s: Group ranked among top producers of aluminum, cement, rayon grade pulp
1995: KM Birla invested in cement, textiles, aluminum, fertilizers, tea, carbon black, shipping, chemicals
2005: Merging of medium sized firms led to creation of AB Nuvo
Principles of Operation
Rule of ThreeGrowth inDominant
Presence Business
Increased Verticalintegration
AchievingEconomies of
Scale
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Strategic Vision of Aditya BirlaInvestment in fewer business
Focus shifted from market size to profitability and growthStrategic shift from global to consolidating and reforming the entire business
Policy reforms Eg Retirement policy
New talent acquisition
Management style
Defining process and adapting change
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Structure and Systems
Aditya Birla Management Corporation as the central body for decision makingand to give strategic direction to the Birla Group
An internal consulting firm for various divisions of the Birla Group , a staffstrength of 350
The issues addressed were to define the organizational goals, mergers andacquisitions knowledge sharing and implementing best practices across thesubsidiaries
ABMC consisted of 14 Corporate Cells in different functional areas like HR,
Finance, Legal, Economics , Manufacturing etc.
The primary responsibilities of these cells were to identify new areas ofinvestment, research regarding portfolio decisions, set goals, track thecompetitive landscape etc.
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Corporate Cell Structure
Technology Strategyand Services Safety, Health andEnvironment Cell
CommunicationsCell
Strategy and BusinessDevelopment
HR Cell ManufacturingServices
InformationTechnology Cell
World ClassManufacturing Cell
Finance Cell Corporate Affairs andDevelopment Cell
Legal Cell Economics Cell
Management AuditCell
Central Cell
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Corporate Cell ResponsibilitiesStrategy and Business
Development
Create action plansfor new ventures
Formulation andimplementation of
strategies
Identifyopportunities fororganic growth
Central Cell
Long term planning
Capital Budgeting
Evaluation of
businessperformance
Portfolio planning
Technology Strategyand Services Cell
Automatemanufacturingprocesses
Facilitate research
and best practices
Provide expertise onmanpowerutilization andenergy conservation
Information Technology Cell to provide strategies for IT initiatives ,formulate IT policy andKnowledge Management
World Class Manufacturing Cell to look after Quality Standards through TQM, Six Sigma
Finance Cell functioned as an in-house investment bank, advice on mergers and acquisitions
HR Cell responsible for Intellectual Capital which aligned with the organizational strategic goals
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Total assets held by Hindalcoincreased by 137 % in last 4years and by more than 7200% in last 20 years
Hindalcos annual turnoverincreased by 197 % in last 4years and by more than 3600% in last 20 years
PBT increased by 180 % in last4 years and by approx. 9129%
in last 20 years
377
11724.313574.3
16606.8
20933.4
27804
516
6400.97902.3
9877.811802.1
19058.9
311020.2 1485.4
1847 2030.43661.6
0
5000
10000
15000
20000
25000
30000
1989 2003 2004 2005 2006 2007
Hindalco Figures (Cr )
Asset Turnover PBT
-20000
2000400060008000
1000012000
Turnover(Aluminium)
Turnover(Copper)
PBT(Aluminum)
PBT(Copper)
TotalAssets(Alu)
TotalAssets(Cop
per)
Margins(Al)
Margins(Copper)
2003 3267 2610 748 384 5158 3217 22.9 14.7
2004 4502 3584 1092 367 6075 4252 24.3 10.2
2005 5321 4547 1620 174 6310 6140 30.4 3.8
2006 6064 5702 2130 -86 7310 8487 35.1 -1.5
2007 7367 11527 2927 588 8763 8523 39.7 5.1
Hindalco Major Business Analysis
2003 2004 2005 2006 2007
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0
5000
10000
15000
Garments Rayon Carbon Black Insulators Textiles Insurance Software BPO Telecom Fertilizers Financial
Services
Total
Turnover
Aditya Birla Nuvo Businesses
2004 2005 2006 2007 2008
-600
-400
-200
0
200
400
600
800
Garments Rayon Carbon Black Insulators Textiles Insurance Software BPO Telecom Fertilizers FinancialServices
Total
PBT
Segment wise PBT
2004 2005 2006 2007 2008
-20.0
-10.0
0.0
10.0
20.0
30.0
40.0
Garments Rayon Carbon Black Insulators Textiles Insurance Software BPO Telecom Fertilizers FinancialServices
Total
Margins
Segment Wise Margin
2004 2005 2006 2007 2008
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1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Sales 3757 4273 4453 4372 4606 5213 6229 6653 852 10215
PBT 172 245 409 467 713 1077 1361 1202 2189 2964
0
2000
4000
6000
8000
10000
12000
Grasim Industries (Cr)
Grasim industrys Total Salesincreased by 171 % over the last
10 years
Grasim industrys total ProfitBefore Tax (PBT) increased by171 % over the last 10 years
2004 2005 2006 2007 2008 2009 2010
Cement 14.6 13 15.7 35.2 30.9 23.1 15.8
Fibre & Pulp 31.2 58.3 40.9 54.7 57.2 23.3 24.9
Sponge Iron 44.9 71 1.6 9.3 24.8 41.1 51
Chemicals 28.3 41.5 50.8 23.3 35.8 21.6 25.6
Textile -0.2 -0.4 -3.1 -4.2 -1.9 1.3 1.4
-100
1020304050607080
ROCE on all segments in Grasim Industries