Indias Birla and Godrej in global drive

Written by The Financial Times | Updated: Sep 30 2011, 08:51am hrs
By James Fontanella-Khan and James Lamont in Mumbai

Two of the largest family-run groups in India plan to invest billions of dollars worldwide as they seek to boost revenues by expanding in emerging marketsand by acquiring distressed assets of companies based in developed markets.

Aditya Birla Group, Indias aluminium-to-retail and mobile telephony conglomerate, plans investments of $17bn globally, aimed at almost doubling group revenues to $65bn by 2015.

Godrej, one of Indias oldest conglomerates, with interests ranging from consumer goods to palm oil, said it would invest several billion dollars in developing markets to try to increase sales by at least 10 times to $30bn by 2020.

Kumar Mangalam Birla and Adi Godrej, chairmen of the respective groups, 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 Indias 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 Indias fast-growing economy amid a global scramble to tie up mineral resources.

Both conglomerates have a record of big-ticket global expansion. When Mr Birla took the reins in 1995 from his late father, Aditya Vikram Birla, the group was India-centric and generated $2bn in revenues. Today, after 22 acquisitions, it is a multinational worth $35bn, operating in 33 countries and generating more than 60 per cent of its revenues overseas.

Mr Birla, 44, said the majority of the investment - about $10bn - would go to developing greenfield projects at the groups aluminium and cement companies, and to securing resources such as copper and coal needed to meet Indias rising demand for construction materials. The remaining $7bn will be invested in Birlas mobile phone carrier, its pulp business and its viscose staple fibres unit.

Mr Godrej, 68, said his group planned 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.

The Financial Times Limited 2011