Anil Agarwal Sterlite Group has a presence in copper, aluminium, zinc, lead and high-tech cables. Agarwal sees it growing into a $4-billion (Rs 19,618 crore) metals group ACQUISITIONS Malco (Rs 25.5 crore), ARM Cables (Rs 20 crore), India Foils, DMT, and Thalanga Copper mines in Australia (Rs 30.24 crore) and First Dynasty gold mines in Canada, Balco (Rs 550 crore), Hindustan Zinc (Rs 788 crore)

Kumaramangalam Birla Rs 27,000-crore business spread over 18 countries and 40 manufacturing units is a diversified conglomerate with interests in cement, VSF, aluminium, carbon black, copper, urea, insulators, branded garments, and telecom and software. ACQUISITIONS Dharani Cement (Rs 32 crore), Shree Digvijay Cement (Rs 34.4 crore), Madura Garments (Rs 236 crore), Indal (Rs 1,008 crore), PSI Data Systems (Rs 71 crore) and L&T (10 per cent stake for Rs 766.5 crore). * In the last five years

Narotam Sekhsaria Gujarat Ambuja Cement, a Rs 1,500-crore company, has grown ten-fold over the last decade. ACQUISITIONS Ambuja Cement Eastern (Rs 191 crore), Ambuja Cement Rajasthan (Rs 350 crore) and strategic stake in ACC (Rs 455 crore)

Cement, copper, aluminium, fertilisers... yawn. Viscose filament yarn, textiles, carbon black... snore. You're entitled to such reactions if we told you this story was about commodity businesses like those listed above. But hang in there a minute and you'll see what we're talking about. True, commodities like cement, copper, fertilisers, et al, are nowhere near telecom, infotech, biotech or even retailing, at least in the hype and high jinks department. After all, what is there to running a commodity business? Build big plants, get assured supplies of raw material, and keep producing. Well, you'll be surprised. This story is about three individuals who've grown their empires, each focused clearly on commodities.

Kumar Mangalam Birla heads a Rs 27,000-crore group, 92 per cent of whose turnover comes from commodity businesses like cement, copper, aluminum, chemicals, fertilisers, and carbon black. First-generation entrepreneur Anil Agarwal built from scratch the Rs 7,200-crore Sterlite group in just 16 years. Proportion of commodity businesses in Sterlite's non-ferrous metals and optical fibres business: 100 per cent. And Narotam Sekhsaria, whose Gujarat Ambuja Cement entered the already mature cement industry as recently as in 1986. Sekhsaria's cement empire (including a tie-up with acc) tots up to a neat Rs 1,500 crore.

These guys put their eggs into one basket. The commodities basket. That's not to say that all of them haven't ever looked at new business opportunities. Birla, for instance, has. He's got interests in non-commodity businesses too, like telecom, software, finance, and even branded premium ready-to-wear men's garments. Yet, those three businesses add up to a piffling 8 per cent of his group's turnover. The rest is, you guessed, commodities.

Besides growing the topline, all three have also been able to earn robust profits, year after year. And keep margins healthy where falling trade barriers and competition have made markets like shifting sands. And though their portfolios are different-Birla, the biggest of them, has a more diversified commodity portfolio than Agarwal, while Sekhsaria is focused on one commodity-their strategies have three common threads.

Size matters: Never mind what E.F. Schumacher might have said back in the 1970s, big, not small, is beautiful. In any commodities business, scale matters. And all three have built large-sized businesses-through both greenfield expansions as well as acquisitions. Sterlite's Agarwal has been on a takeover spree. Birla, of course, has been a past master at the game, consolidating his cement business through takeovers and alliances.

Value addition: The trick in any commodities business is to differentiate your product, through quality attributes and branding. Birla and Gujarat Ambuja's cement is an example. So is Sterlite's cables. And at Birla's Hindalco, the mantra is all about manufacturing value-added aluminium products rather than the basic metal.

Low costs: It's a no-brainer, really. In a commodities business, the lower you can keep your costs, the more profits you can make. And, coupled with size or scale of operation, this is the critical factor that determines whether a business can make it. All three of our commodity czars are low-cost producers but keeping costs low is a constant endeavour. BT profiles the three Indian commodity barons.

Sultan of Cement

Back in 1986, Narotam Sekhsaria, then just 35, tiptoed into the cement industry, which was at that time dominated by acc and Grasim. Today, he is one of the leading players, controlling a capacity of 12.5 million tonnes and revenue in excess of Rs 1,500 crore. Says Sekhsaria: "Commodities are a great business. It is exciting, profitable and growth is fabulous. How many businesses can you think of with a growth of 20 per cent year-on-year for 16 years? We had that."

Sekhsaria's strategy in cement has been two-fold: grow in size and build value through branding. In its first year when Gujarat Ambuja's 7 lakh tonne plant was a pygmy compared to ACC's 10 million tonnes, Sekhsaria splurged Rs 50 lakh on advertising-incidentally, that was also ACC's ad budget then. Today Gujarat Ambuja spends Rs 16 crore annually on brand advertising, much more than its competitors.

Besides branding, Sekhsaria is obsessed with value addition. When Gujarat Ambuja first entered the Mumbai market six years ago, a cement analyst at a foreign brokerage predicted that the company would never be able to cut much ice against giants like acc. The poor fellow has had to eat his words. Ambuja today has nearly 40 per cent of the Mumbai market. Says Sekhsaria: "You can add value by building brands and ensuring quality products and services. In a commodity business, a manufacturer has to add real value to the consumer because that's the only differentiator in an otherwise standard business. I have found it easier to add value to a commodity like cement, because it's simple and basic."

Sekhsaria has worked hard to keep costs on leash. Ambuja Cement costs Rs 701 per tonne, against India Cements' Rs 901 per tonne and Madras Cements' Rs 853 per tonne. Its operating margin at 37 per cent is the highest among the domestic and international players. It is the low cost of production and quality that helps Gujarat Ambuja during a downturn. "A downturn is, in fact, good for us," says Sekhsaria, "We still make money, when others start losing." It also provides an opportunity to acquire scale and geographical spread. From 0.7 million tonnes in 1986 it has grown to 12.5 million tonnes, through expansions and acquisitions of Ambuja Cement Eastern (ACELL), Ambuja Cement Rajasthan (earlier DLF Cement) and a 14 per cent strategic stake in acc. Says Sekhsaria: ''We have to grow at double the market rate.'' That may not be tough, considering India is the second-largest consumer of cement in the world.

Metals Maven

In March 2002, Sterlite's Anil Agarwal, a self-effacing businessman from Patna with a fascination for non-ferrous metals and mining, picked up a 26 per cent stake in the public sector Hindustan Zinc for Rs 445 crore. That was another step towards becoming a major player in the non-ferrous metals and mining industry. A year ago, Agarwal had acquired a 51 per cent stake in another PSU, Balco. Agarwal has set his goals high: from a turnover of $1.5 billion (Rs 7,200 crore), he wants to grow his empire to $4 billion (Rs 19,600 crore) in the next three years. His non-ferrous portfolio comprises aluminium, copper, zinc, lead and gold. Says Agarwal: "We have to create a world-class metals company."

Acquisition will be the key strategic effort in achieving that goal. Spotting opportunities in the depressed market scenario, Agarwal is in the final stages of negotiations for a copper and lead mine in Australia. Two years back, he had acquired two OMT and Thalanga copper mines there and in 1999, he bought Toronto-based First Dynasty gold mine. The Australian mines allow him control over raw materials.

For a scrap trader, Agarwal has come a long way. He has acquired ailing companies cheaply and turned them around with elan. His first move was in 1976, when, in order to set up his own cable company, he acquired Shamsher Sterling in Mumbai. Then, he integrated backward, manufacturing copper for the cables he made. Later he did the same for another raw material-aluminium: he acquired Madras Aluminium (Malco), India Foils, and Balco. Now, the focus is on boosting the scale of operation and exports. Plans are afoot to expand the group's aluminium capacities from 1.5 to 4 lakh tonnes, while copper capacity is being increased from 1.7 to 3 lakh tonnes. The peripatetic Agarwal, who now has a London-based NRI status, sleeps 50 nights airborne, en route to his plants as well as his takeover targets. His ambition: to become a global player like Alcan, JDs and Uniphase. "All these were regional players who went on become global players," he smiles, eyes gleaming.

The Original King

He may have entered new growth areas like branded clothes, telecom and software in the last few years, but Kumar Mangalam Birla is a commodities player at heart. Says the 34-year-old Chairman of the Rs 27,000-crore AV Birla Group: "We may get into two more new areas in the next five years and maybe get out of a few, given our theme of being a dominant market player in any businesses. But we will for the large part remain in the commodities business where we have grown and demonstrated our ability."

Birla's father, the late Aditya Birla had often explained that the core competence that ran through the group's diversified swathe of commodities businesses was that they were all process industries and that the group's core strength was in running such businesses. Today, Birla sees the lines between commodities, brands and services blurring. "In the future, we will become service providers and, more importantly, providers of solutions to customers." That probably explains the current blitz in creating a group identity and a common brand that cuts across the group's businesses-from cement to textile to garments.

Leadership in its sector is the driving strategy for the AV Birla group. It is a dominant player in each of its commodities businesses spread over 18 countries and 40 manufacturing units. It is the third-largest cement producer, the leader in viscose staple fibre, the largest and fully integrated aluminium producer, the market leader in copper and a large player in carbon black. Birla's biggest challenge when he took over in 1995 was the classic commodity business' challenge: of increasing volumes and lowering the cost of production for better margins.

In 1999, he began consolidating the cement business picking up plants across India. Then in 2001 he acquired a strategic 10 per cent stake in L&T. Birla's Grasim taken together with L&T is the largest player in cement with a capacity of 30 million tonnes. True, besides cement, Birla has made acquisitive moves in other areas-like telecom, software, garment brands, etc. But for some time, the group's core business will remain-commodities.