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SUCCESSION Thanks, But No Thanks B.K. Birla carves up a part of his empire, but he's still not been able to convince Kumar Mangalam to accept his share of the legacy. By Rakhi Mazumdar
But it isn't as if the patriarch-fondly called 'babu' by those around him-can put his feet up now. For, Birla has been grappling for some time now with the carve-up of his commodities-based empire amongst his daughters and his only grandchild Kumar Mangalam Birla, 32, Chairman of the Rs 20,000-crore A.V. Birla group. " I am 80 years old. I am trying to involve both my daughters as well as Kumar Mangalam in these companies,'' he told BT. Indeed, Birla is now clear that his group-which has diversified interests, from cement to chemicals, paper to rayon, and fertilisers to tea-will be split between his two daughters Jayashree and Manjushree, and Kumar Mangalam. Eldest daughter Jayashree is expected to take charge at Jayashree Tea & Industries (named after her), and younger daughter Manjusree Khaitan will be at the helm of the highly-diversified Kesoram Industries. Both Jayashree and Manjusree are on the boards of these companies already. The big question, of course, is what will Kumar Mangalam get. Or, rather, is he at all interested in any of the B.K. Birla inheritance? Other than Kesoram and Jayashree Tea, the other major companies in the group include Mangalam Timber, Mangalam Cement, ECE, Century Enka, Century Chemicals and-the flagship, if you could still call it that -Century Textiles. Kumar Mangalam is expected to get control of Century Enka and Centak Chemicals.
But even as you wonder what Kumar Mangalam Birla will do with these companies, Birla Senior has yet to figure out his plans for the Rs 2,100-crore Century Textiles, which is held via a web of crossholdings between the various Birla families (SK, CK, and BK). ''All the branches of the family have to come together to find a solution that is acceptable,'' says BK. But it's one of today's worst-kept secrets that BK would like Kumar Mangalam to manage Century. The other contender, Chandra Kant (the son of BK's brother, Ganga Prasad, who controls Hindustan Motors and Orient Paper), point out industry analysts, appears to have little interest in getting into the fray. But what's frustrating BK's efforts is Kumar Mangalam's apparent disinterest. ''In fact, whenever I try to speak to Kumar, he insists that I am capable of running these companies for another 4-5 years. Moreover, he adds that he has hardly any time to take up additional responsibility,'' shrugs BK. You can't blame Kumar Mangalam for being too busy. He's attempting to bring some focus into the huge group he inherited four years ago. On the one hand, he's divesting businesses that he feels the A.V. Birla empire should not be in, and on the other he's growing those in which he feels the group has the potential to be amongst the top two. With the Boston Consulting Group in tow, he's identified those businesses: cement, aluminium, fertilisers, copper, viscose staple fibre, viscose filament yarn, ready-made textiles, insulators, carbon black, and financial services. So what does he do with the businesses-most of them unrelated to his group's focus areas-that his grandfather is seeking to thrust upon him? Consider Century Enka, for instance. The company is a producer of nylon filament yarn (NFY), polyester filament yarn, and polyester textiles. Whilst some strained synergies can be found between these products, and the viscose staple fibre (VSF) made by Grasim and viscose filament yarn (VFY) produced by Indian Rayon, the A.V. Birla Group has made it clear that it will focus only on mainstay commodities where it enjoys leadership status. ''It doesn't make sense for him to take on these businesses, in which Reliance has a major presence,'' says an analyst. Reliance, for the record, has a capacity of 3.5 lakh tonnes of PFY against Century Enka's meagre 75,000 tonnes. And there's absolutely no connection between the speciality chemicals turned out by Centak Chemicals and the A.V. Birla Group. If there is something that could interest Kumar Mangalam in the B.K. Birla empire, it's Century Textiles-not for anything else, but its cement capacities. At a time when all the cement majors are eyeing acquisitions, Century's 4.7 million capacity would fit nicely into Grasim's 11 million tonnes. And Century's rayon capacities (VFY) too could be consolidated into Indian Rayon. The Downside That's the upside. The downside? If Kumar Mangalam does accept Century, along with cement, he will inherit a whole lot of other businesses he doesn't want -paper and pulp, rayon, tyre cord, chemicals, shipping, and even floriculture! Even more worrying is the huge debt. Century Textiles is saddled with (Rs 1,500 crore as of last year). And it's servicing this high debt that has been the principal reason for Century slipping into the red. Perhaps that's why Kumar Mangalam has decided to take the acquisition route to expand in cement and rayon. Culturally, too, the integration of the two
companies would prove a disaster. Kumar Mangalam is pulling out all the
stops to inject new blood into his companies. But the B.K. Birla Group is
still stuck in the past. Ironically, if there's anybody who can shake the
empire out of its sloth, it's Kumar. Only, right now, the man has plenty
of his own baggage to worry about. |
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For Basant
Kumar Birla, a typical day starts at 4 am. In a couple of hours he's on
board a company aircraft, which takes him to one of the many manufacturing
units that make up his Rs 4,500-crore empire. If he isn't touring the
plants, Birla is presiding over some board or company meeting in Mumbai or
Calcutta. By six in the evening, however, Birla prefers to be back home.