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RESTRUCTURING Will B.K. Birla Get His Groove Back? Shareholder value is the buzzword these days with B.K. Birla, as the 81-year-old patriarch restructures his Rs 6,000-crore empire to cope with today's, and well, tomorrow's challenges. By Debojyoti Chatterjee
When Basant Kumar Birla was pitchforked into Birla Brothers way back in 1936, when he was all of 16-years-old, chances are that concepts like shareholder value and hostile takeovers wouldn't have figured in his lexicon-or in that of his father's, Ghanashyam Das Birla, who founded the trading company along with his brothers. Today, however, the 81-year-old patriarch-who's at the helm of a Rs 6,000-crore empire-is pulling out all the stops to keep apace. Even as he restructures his commodities-based group to defy poor demand and realisations, with more than a little help from his daughter, he's foraying into information technology. ''We are facing tough market conditions and tight money market situations, but that's no excuse for not giving returns to shareholders,'' shrugs BK. That's not proving to be the simplest of tasks, though. The three major companies in his group-Kesoram Industries, Jayshree Tea & Industries, and Century Enka-don't figure on the investment radar of too many investors these days. When one of the stocks did elicit market interest, it wasn't exactly celebration time for Birla-the only reason for the price appreciation in Kesoram Industries was that a Dubai-based raider, Shiva Kumar, had laid siege on the B.K. Birla flagship. In the January-February period, daily volumes on the Kesoram counter spurted to roughly 13 lakh shares, and not before long Shiva Kumar was holding 12 per cent of the stock. That was a distinct worry because the Birla's share in Kesoram was under 20 per cent at that time. Birla was quick to make his move. ''We felt that the best way to go about the issue was to get in touch with the financial institutions,'' points out S.K. Parik, Director, Kesoram, and financial advisor to Birla. ''ICICI had 15 lakh shares to sell, and the promoters bought that out at the market price on the given day.'' By June 30 2001, the promoters' share in Kesoram was up from 19.29 per cent to 24.65 per cent. ''What's more,'' adds Parik, ''the FIS assured us that their 17.83 per cent stake was not for sale, and even if it was, we could get the first option.'' Shiva Kumar's takeover threat might have ended with a whimper, but BK wasn't finished, not yet. He refused to buy the raider's shares, even as the stock price plummeted from Rs 54 to Rs 23.
Gearing Up For The Global Competition By staving off Shiva Kumar, Birla has proved that he's still got what it takes to stay at the helm. Observers point out that the fact that he could get the FIS onto his side speaks volumes for his credibility. But it's going to take more than creditability for BK to restructure his companies and make them competitive in a rapidly-changing economy that has also slowed down. But that's exactly what the chairman is trying to do at Kesoram, Jayshree Tea and Century Enka. And his youngest daughter Manjushree Khaitan is spearheading the group's forays into sunrise areas like infotech. Birla for his part is aware that life today isn't as easy as it was pre-liberalisation during the licence raj. ''We are faced with global competition and newer products. Under these conditions we need to concentrate on costs and corporate restructuring to survive. Since we believe in prudent fiscal management we are not looking at expanding capacities or diversifying. Instead, we are looking at upgrading our facilities for better efficiency,'' says Birla.
The process of restructuring is most evident in Kesoram. During the course of 2000, Kesoram reabsorbed Birla Tyres as one of its divisions, and in the process boosted its turnover from Rs 672 crore to Rs 1,345 crore. The return of revamped Birla Tyres to Kesoram has now given the company two basic product lines to grow with: cement and tyres. The 1.1-million tonne cement division of the company is the clear breadwinner and is among the most efficient plants in the country. The company is making a further Rs 30-crore investment in upgrading the plant to ensure better returns. The three other divisions-rayon, spun pipes, and refractories-do make for a pretty picture. Manjushree Khaitan, who has taken charge at Kesoram, is making a last-ditch effort to revive the fortunes of spun pipes and refractories. ''The task before us is pretty severe but we have put together a fairly competent team to upgrade quality and allow the divisions to at least recover the operational costs,'' says Khaitan. The rayon division is not in too bad a shape, thanks to frenetic cost-cutting measures. ''We are also in the process of adding value in terms of number of colour shades in the viscose filament yarn range,'' says J.D. Palod, President of the rayons division. In another attempt to boost the bottomline, Kesoram has hived off its loss-making textile division into a separate company, Kesoram Textiles. Shareholders of Kesoram were given free stock in the new company in the ratio of 1:1. ''This has eased the load on our bottomline and with the constant process of retiring high cost debt-we have retired around Rs 200 crore in the last three years-the balancesheet is looking much stronger. We are further in the process of merging our subsidiary Bharat General with the mother company. This will bring in around Rs 37 crore into the Kesoram kitty and be the main source of the next round of investments in the company,'' says Parik. Trekking a tough terrain
If Kesoram is showing distinct signs of turnaround, Jayshree Tea is facing a crisis of sorts. With the tea market in the doldrums, the company's operating profit declined from Rs 26.20 crore to Rs 5.36 crore last year. ''The only redeeming feature is that the entire industry is in trouble and we are not alone in tough market conditions. To ensure better profitability we have stopped all recruitment and are trying to aggressively market tea outside the auction route,'' says Jayshree Mohta, B.K. Birla's elder daughter and the person in charge of Jayshree Tea. The efforts are yet to bear fruit. B.K. Birla and infotech may not exactly go hand in hand, but it's his daughter who's taking the initiatives. ''Kakuji is not quite into computers, but I have a feeling that we have to move ahead. So when he suggested we look into infotech we started Manjushree Infotech as a division of Manjushree Plantations. It's just been a year since we have been around, and the numbers are not anything to write home about. But we plan to get to the Rs 100-crore mark in the course of the next three years,'' says Khaitan. Manjushree Infotech's focus is on the healthcare market, where Khaitan sees a huge opportunity once the health insurance segment opens up. ''We can meet the outsourcing needs of many of the large insurance companies,'' she explains. The company is also setting up a call centre in Kolkata, and has made a foray into educational CD-ROMs. ''Our huge experience in running schools prompted us to get into this segment. With children getting increasingly networked we feel that school texts need to be supplemented. Our schools have some of the best teachers and we are keen to share their experience with students through an interactive procedure,'' she says. The post-liberalisation phase hasn't been the best part of BK's long innings, and he admits as much. ''I know in the last four years my prestige has gone down and there is nothing I can do about it. The companies and businesses I am in are not easy to run, especially today, and in that sense I am paying a price. However, I can plan only for two-three years ahead and it is for the next generation, Kumarmangalam and his aunts Manjushree and Jayshree to take the group ahead,'' says the patriarch. Of course, a lot depends whether Kumarmangalam is willing to pick up the gauntlet, or whether he feels that he has a plate that's full to the brim and doesn't need other challenges. Don't forget that BK also controls Century, which was entrusted to him by his father. But today groups like MP and GP-CK want their say in matters, too. ''They are perfectly right and I wish I could work out a solution that would suit everybody. For the moment we are still searching,'' says Birla. He's also searching for answers to how to grow his companies and reward his shareholders. Because that's one of the ways BK would like to be remembered-''As one who tried his level best to serve industry and the shareholder.'' |
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