306-0 43-1

Aditya Birla Group underKumar Mangalam Birla:

Can he Manage the Mandate?,At 38, f,wpr Mavatan Bfula has ateady done rnon than what mosl otiers gel lo do in a ffiefrnr.. He'stransfonpd a h;/iebou7t' anghnenb inb a npdem onnpdities giant thafs g6ally anpetitive. Ihwdid tE & iI? By rprl efiry hE age.4,tt nny appet as ll the whee! has orne full cirde. But tturnr Birla would puhaps teel that in a nNUgtobalisury envfuonmed, his ioumey has only iud begun-z

Kgmar Mangalam Birla (KM Birla), Chairman of Aditya Birla Group, India's tttird largest conglomerate, became theyoungestleaderof treOroupin 1995,affertredeatr of h'sfutrerand fonnerchairmanAdityaVikam Bjrla.AttrattimgheROity" ain" Croup recorded rarenues worh INR 15,000 crqes.3 Since then, KM Birla has canied out major managerialand financial reslucturing in he Grouo, which has resulted in the Group recording revenues of INR 33,000 crores in2005.a KM Birfa revolulionized ihe Grciup by disconlinuing tre ageold tadilions such as Babucultres ,Wornbl*btr'bNW , Paha s4elf and poliry of in{rouse recruitnent He implernented varbus naiv prognms lke '}Ve-lti7l-W and',Hqpi:ness

AWoilindex-dgttrebasicchatlengeforKM Birh fiesin mainbinlng fre leadenhip psilions in treGroup'smre'business andbregain ib pmilion as oneoftrebptrrcconglomerabs in hecounty. KM Birla's nextbigfoo.ts's benbrinto tre listof Fortune 500 companies. KM Birh said,lVly call'rng is b build an organisalion thatcan createvalue;anyhingebeb asubsetof tratThereban elementof legaryhere,butldontseemyselfasacatalystof changeassuch, onlychangeas a subsetof organbalion building.{

The Birla LegacyThe lineage of ttre Aditya Birla Group dates back b 1857, when Seth shiv Narayan Birla sbrted cotton-tsading

operations in -tre

small toun of Pilani in Rajastran, lndia. ln the early 20t century the founding bther of the Group,dhyanshyamdas Birla (GD Birla), entered into the manufaclrdng sector by sefting up the first jute mill in Calcuth, lndia

ltSiS; toitoweA byvarious otherfactories for manuhcfuring cotton, sugar and chemicals. ln 19?2.,he set up Kesoramdott*.tg"6rtta GD Birla acquired lfnotrsfan Imes in 1927 andesbblished treUppaGanges Sugafactory in 1931-ln 1945, he builtSaunastrtra Chemicals at Saurashba, GujaraL ln 1947, Grasim Industries (Gnsim)was sdt up andincorporated as Gunlior Rayon Silk Manufacfuring Co., which commenced with nyon weaving operalions in Gwalior,

r Suendar T. .l(|m'r llig Bcb'. *whlinsruldndadlr Scdsr$6 2F 2004t Dde Kau** 1s hc aif nntUc mf. w*.hrimqbdatmn Sqtaba l?i ?05t lbirtI Bah, Crlbn nal wiet fu O#"n! o.dq- IlE! E IUG c m ddcar66 d t/t'on!'' llir pdkt mz{ hc afoyca acf dltd sd h. dldra d h. s|phts m grrilcd : Fb'r prtr.sldmErnad'rystmfr'rrden*irgirFrco{arndhdartcacrpft*co4ecdtobdgdldDFt3' T* orgrizdimMa'. !9.41

306-043.1Aditya Bida Group under Kumar Mangalarh Birla: Can he Manage'rhe Mandate?

MadhyaPm&sh. Hindalco, Group's aluminum di,,ision, was incorporated in 1958,which shrted production in 1962at-baluminum complex atRenukmt Uthr Pradesh (UP).

The Grandson of GD Birla, Aditya Vikram Birla (AV Birla) entered into the business in i964. Hesbrted he EasternSpinnhgMibard Industies in 1965 in Calcutta. AVBiila acquired a smallspinningmill,lndian RayonCorpn$on Ltd-ir1966 with an aim to expand the Group's business. However, many of his prcjecb were eiher rejecbd or blocked by fiegwemmentundervarbus prarbions of he'lbense Rf . During he perbd of Lirnse Rry'ln he 1960s and 1 970s, herewae priceresbictions in majorindusties includingfertilizen, sugar, steelandcoal.Alsomany golemment clearancesrelatedbfoe'gn technology collaboration andimportofcapitalgoods and rawmabdalswererequiredtosbrt any project-Having reahd tratitwould be diffiorltbexpand ib business within frecannby due bredhpism andbureaucncy,AVBirlasbrbdlookhg atothercounbiesforgrowtr opportunites. He tumed h'rs atbniion bwards Souh-EastAsian counbies lkeThailand,Indonesia l/alaysia, and hePhilipplnes.Thefrstglobalexpansion bytreGroupwasin 1969,whenAV Birlasetup Indo-Thd Synthetics Company Limited. The Group furtrer expanded ib intemational presence by establishing P-T.ElegantTex$e in Indonesia (1973) and Pan Century Edible Oils in Malaysia (1977).

Duringfie1980s, he Groupfurherdversiled I adding cementandcafton blackb ib prfolio.ln 1980, Birla Coppa,$e copperdvision of Hindalco, was esbblished at Dahej in he Bharuch distictof Gujan[ which b the largest coppersmelling plaf ln lndiaro In he same year, the Group set up a carbon bladi plant h Thaihnd. AV Birla also eshblished P.T.IndoBharatRayoninl9S2bbecomefrefrstvbcoseshplefiber(VSF)it poducerinlndonesia.Thrceyearslater,lndia'sfirstgs$asedferlilizaplantin pimtesecbr; lndoGulf Ferdlisers Limited (lndoGulf)uns eshblshedatJagdishpur, UP.In1984, Grasimentered hecementbusinessforhelirstlime bysefiing up a plantatJawad,liladhyaPradestr.Afierthe Indbngovanmentfibenlized the petroleum indusfy in 1988, heAditya Birla Group enbred into a jointvenhrre witr H'ndusbnPetoleum Company Limited 12 (HPCL) to set up Mangalore Refineries and Pebociemicah Ltd. (MRPL) at Mangalore,Framabka. In 1988, fte Group esbblished a carbon black plant in Uthr Pndesh followed by anothercarbon black phnt inAlexandria (Egypt) in 1990.

TheGnup conlinuedib oveseas o

306-043-1

Aditya Birla Group under Kumar Mangalam Birla: Can he Manage he Mandate?

Group's fourlargestcompanies-Grasim,lndian Rayon, Hindalco and lndo Gulf Ferlilizer, plunged by$1 billion of37%'r!KM Birla took setrenl initialives to prove his oitics wrong.

KM Birla discontinued various ancient pnclices and porryer cenbrs witrin tre Gro:p. He hhoduced a relirernent pollry

in 1995, on tre basis of l.rhich around325 senioremployees,whowerein the{rearly60s, had to quitthe uganizalion in t}renext five yean. Subsequently about 400 young executives replaced them. With this, Bida reduced $e average o{ theemployees in tre Group from 54 years in 1996 to less than 40 years in 2000. Meanwhile, answering tre crilics he said,

'Peoplein the Groupwere aboutfuvice myagewhen lbokoveraschairman.lhad greatrespectforhem personally, butI also felt he need for change"rT

In 1996, helaunchedfortrefntlime acorporate identityttratrmrldserveas acorprablogo. TheGroupselectedthe'Rrsingsur/ as the logo, v*rich signifiedoplimism andswedas aunifralion symbolfortreGroup. KM Birh said,"Duringtrat psio4 wlren tre organisaton r,rns gc.,ing trrur gh trnnoil due b he deah of AV Birla, tre new cuporate logo helped inbringing trevariouscompanies of theGroupbgeher.This helpedtreorganisalion toreanergizeandgetshrted bthe pahofchange."lr

KM Birla also changed ttre Group's poficy of in*rouse recruitnent- In 1996, he also made changes in tre Group'sHuman Resource ftlR)systenr. He hired professionalsfiomobercornpanies intohis managementteam [Erhibit 1]. Thisremoved he earlier nolion trat people, who dd not find jobs elsaartrere, joined he B:irla companies. KM Birla said, lne ofthe trings I got to know early ttrat helped me know myself betteruas rny ovtn stengths and weaknesses. lt was veryimporhntfor me to get people who are much brighter tlran me, ndjust peopie who have more experience. Thafs whatkeeps me challenged.'re He canied outvarbus bdrer changes as well-

The Parfia System of daily fnancial reporling which foctsed mainly on production was replaced 'sith an EconombVdueAddedmodep. In September 1998, while implementing fre'WeWillMn'grogramfaemployees, KM Birla sai4 "l

. do believe trat our sustainable advanbge will come from consbnfr r+invenling he Group and putting more and morepeople on the board who can think outof-h+box.'21 KM Birla also established Aditya Birla Management CorporafonLimitdd (ABIrc1) modeled after GE Capibl, tre sfategic decisionmaking bodyfor ensuring the best praclices acrms theGro.rp companies.

In 1998, hecanied outa numberof restuctudng likeconsolidatim of its cement manufachrring dMsion of Ind'tian RayonandGrasiminba single division cf Gnsim.This mergerwasftebiggstrestucturing caniedoutby any corpoi-ateentityin Inda.a ln 1998, he Grorp also made ib enty into Canada by setting up a 5050 pulp milljoini venture company withTernbec lnc.a of Canada. This was underhken in order to supply pulp for he Group's VSF opentons. lt also decided totie up with Sunlife Financ'Blof Canada, a financial services compatry, wih a vie,rr to expand ib financial seruices businessin 1999. Another landmark restructudng by KM Birla vras tlre decision to consolidate IndoGulfs copper business witltHindalco. This was underbken with an objeclfue of unifiing the Group's non-fenous mebls businesses, and bansformingHindalcointoa ghballymrnpelilive non-fens;s mebb porerho:saHedecided bfocuson tre aspecb of marketleadershipand size. With an aim to remain among ttre top three playens in ib business, KM Bida decided to reduce the Goup'sdependence on fiber-based business where ib market share::esbw. lnstead he decided to concenbate on non-fenousmetals as hererrras less compelition and Hi'rdalm already had atrig presence in the aluminumsecbr.

KM Birfa also brotght in oher key chaoges. In order to do away with the customary'babu+ulfurd, he inhoduced a360-degree feedback program in 1999 trat permitted managers to raise questions over his leadership style, managedalability and also personal baib. According to tris feedback, the verdbt of he managas v,as trat he delegated tre uork welland also had a vision. But he could notcleafy de{ine what he expected fom his employees. He, soon afier the feedback,issued each senior manager a sixjage letta mentioning the areas of imprwementand his expecbtions.?a In 1999, KM

tan he son fll p?a's *rocs at 8|ida 7, w,iv.asiabuinssveek conrbi48ih' r|m lbngdm'Tradorndic w dchai* lom edrry pqy'c" whcsztrEgs'trt DeEmbB 200+'bdrtt 20051r fftrg': Gambt'. tt r Esqi Tw. wa$dirb.cq, lrat 27r 2005Tlitnodd bq!6m-t alt}t !?cd. of FenabilV..sdtddnlt ad goilfr'Ata n lrcia'titg {zt t: bcm r ddr b hc hg'. s*cmridnahdafncroq Sdctt&slF 2|)03rilr,.dt bih.mTcnrbcciirla*r9i{car&dffi prodEbw?ry d6trtEdhlbhAncdn.d Frncah2004r'th sle olepminaclf 9lblinrd3m ll,000oCstcc{lQrrdEdm 50 mld pu$, prpc nd mod pdwf rnftduitrgd3frmg.|rst hl$t Iltr End of lhr$loTort?', fttattrircsdoernaC' Odobc f 20O

{ffi

' Aditya Birla Group under Kumar Mangaiam Birla: Can ,.

""r*:;:;lr:rJBirla launched 0pAdityaBirlaScholanhips to promote s

306-043-1

Aditya Birla Group un jerKumar Mangalam Birla. Can he Manage fre Mandate?

The top 20 executives of the Group, who had greater responsibilities in the Group, could report direciiy to KM Bida,trerebygMng tremcompletefreedom b run trelrbusinesses, andatthesame time holding them more accounbbleforheirierformance. KM Birla said, 'Delegation for me is given. lf the person feels that he can't hke responsibility hen I am hewrongpersonbworkfor." BasantKumarBirh,fatherofAVBirl4said,KumarMangalam'swo*ingrnrdelismmpletetydifierentfrom his fatrer's. Kumar Mangalam believes in delegalicn of ponrer. His style is more.Group oriented.sr SantuptMisra, oneof the mostimportantHR execulives of theGrorp, sairf"Mr. Birlashrtsftom a position oftustandconlinuesiodoSo unless prwen othen*ise, butitis in noway abdicalion. Hehas his ovm antennae and picks rare moments to assesspeople.lfyorpassmusterattrosepoinb,trenyorhareh'shuslbrever.4 SaneralanalystsalsopnisedKMBirla'sstyleoffunclioning.

Analysbwereof freviewtlrathemreof KM Birla's managenentstylewere trequalifes of endunnceandpersuasion.The negoliaiion forhe Group's acquisilion of Larsen & Toubro's (L&T) cement division was a suihble example of iL Thenegotialions lasted orertwoyears and KM Birla keptpursuing itpersistentV tillhe clinched tre deal.A.M. Naik, Chairmanand Managlng Director, L&L said, tlis style, very slmply pu( b to win over tre person across the hble witr a lotoi patience.He justwon'tgiveup. Heis verychanning andfriendty wen in trethickof negoliations. He geb o

306-043-1Aditya Bida Group under Kumar Mangalam Birla: Can he Manage the Mandate?

Though fteGroup hasforayed into Telecom and InfoTech consulting in 1995 and 2000 respecfvely, itis stilla smafiplayer ln tre ma*et Aditya Birla Grrup has excelled in he commodi6es business and is one of tre larest cost produceaof nmtoffremnunodiEes itmanuhcfures. Butibfu[rre bstlies in afraining leadership posilion ln cusbnBrodenteJ Uusl.'ess-Thechallengaalsolies in consolidating ibold businessesandathesamelimeexpanding fre newemnonry businesses-

In the days ofAV Birla, ttre Group had to dealwih the exiernalenvironment like obhining ficenses, permib andcleanances from tre govanment But ln present day scenario KM Birla's main challenge lies in combdng tre very compbxnafureof hemarketlike hriffbaniens which has gone do,rn considerably.The shndardsforqualityandcos[ competencehatealso become a crucialfactorforsurvival. Commenling on KM Birla, R. Gopalakrishnan, o

306-0 43-1Aditya Birla Group underKumar Mangalam Birta: Can he Manage tre Mandate?

Exhibit IKumar Mangalam's Management Team

Santrupt Misra: Joined in 1996. Creditedwitr helplngprofessionalizetheGroup.Sanjiv Aga: Joined tre Group in 1998 and presently b the managing dir-ector of Indian RayonS.K. Mitra: DirectorofGroup's FinancialSewbesShailendra Jain: WorkingwittheGrroupsincel965andistreheadofpulpandsbplefbrebusiness.Debu Bhattacharya JoinedtheGroupinl99SandisheManagingDirec{orofHindalcolndustries.Bharat Singh: Heads Group wide mrporate stsategr and developmeni.Saurabh Misra: GroupDirecbrofhecementbusins.HejoinedtlreGror:pin2000Deepak Mittal: Group Directo-Acrylic Fibre and Tedles, BangkokS*r*t St

Exhibit 2

Contribution of g*ctors in fndia to Group tsrnover

?to of tatal turnovar

others

; insubtsrsvFvminingcerbon blrchgatuEirtsinlgtencpfertilirers

306-0 43-1

Aditya Birla Group under Kumar Mangalarn Ejirla: Can he Manage tl-te Mandate?

Exhibit 3Aditya Birla Group Fac$ile

' The Group is tre world leader in Viscose Staple Fiber.. OneotheAsia'slargestproducers'ofAluminurn. The Group is also the fastesigrowing copper company in Asia. lfs tre Bh largest producer of cernent in the world.. Worfds fourth largest produca of carbon bfack. The Group also has the world's largest singlelocation palm oil refinery.. Third largest producer of insulatcrs glcbally.. India s secondJargest producer of viscose filamentyam.. The numbertwo private sector insurance company in India.. Fourh-largestassetmanagementcornpanyinlndia

Compiled byEFA| Business SchoolCase Development0enhefom -wtru.adityabirla.corn andunmrllogspotmm

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306-0 43-1

Aditya Birla Group under Kurnar Mangalam Birla: Can he Manage tre Mandate?

Annexure 1Various Awards Won by Kurnar Mangalam Birla

Chosen as heYoung GiobalLeaden bytheWorld Economic Forum (Davos)in 2004.The EconomicTimesAwards named him as TheBusinessLeaderof heYea/forCorporate Excellence20022003.

. &rsiness /nda selected him m he "Business Man of tr\eYear-2003 .

. In 2003, he also won The Natonal Inslitrte of lndustrial Engineering's (NlTlE)'s The Lakshya - BusinessVisionaryAward

. He was also ranked among tre top fweAsian business baders forfie ?sian Business LeaderA'anrd 2002sponsored by CNBCfl nsead.

. Hewon the prestigious Inslitubof D'recbns Golden Pemc* NationalAvrrard forBusiness Leadership'in 2001.

. Won The Gianb lntemationalAraard for tsusiness Exceilence and his Contibulion to he Industf in 2001.

. Won The ffindtr/ran 77meC'tsusinessman of heYea/ award in 2001

. Was honoured as The ManagementMan of heYear 1999-200f by he Bombay ManagementAssocialion.

. ln 1998, he became trefirstand onlyindustiaiistbhave been appeinbd as a public nomineeon tre govemingboard of tre Securities and Exchange Board of India (SEBI) by tre Finance Ministy.

Compiled by ICFAI Business SchoolCase DevelopmentCentefrom -wvwv.adityabirlacom

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