-“Taking India to the World”

 By: Adhiraj Dhawan A-003

Aishwarya Raj Bagla A-006

Shashank Bansal A-042

Shlok Puthanpure A-046

Shreevar Khemka A-057

 INTRODUCTION
 Started as Cotton traders in 1857

 Seth Shiv Narayan Birla-Founder

 Today a Multinational conglomerate

 36 countries

 Main industries-Viscose staple fibre, Carbon Black,

Cement, Telecom, Metals
 Vision

“To be a premium global conglomerate, with a

clear focus on each of the businesses”.
 Vision Analysis
 Going Global

 Global Expansions

 Acquisitions

 Striving to be number one in all the businesses

 Third largest conglomerate in India($40 Billion)

 Eg.Novelis acquisition, Domsjo, Columbian Chemicals

“Our vision is to be a premium metals major,
global in size and reach. The acquisition
of Novelis is a step in this direction”
-Kumar Mangalam Birla
 Global Scenario
 Hindalco-Largest Aluminium rolling company

 No.1 in Viscose Staple Fiber(VSF)

 No.1 in Carbon Black

 Fourth largest producer of insulators

 Fourth largest producer of Acrylic Fiber

 Among top 10 cement producers

 Largest Indian MNC with manufacturing operations in USA

 Indian Scenario
 Largest Fashion and lifestyle player-pantaloons

 Largest exporter of viscose filament yarn-Nuvo

 Largest producer in chlor-alkali sector-Aditya Birla Chemicals

 Among top 3 telecom companies-Idea

 Leading in asset management and insurance-Birla Sunlife

 Among top 2 supermarket chains in India-MORE

 Among top 6 BPO companies-Minacs

 Largest producer of Linen

 Mission

“ To deliver superior value to our customers,

shareholders, employees and society at large”.
 Mission Analysis
Superior products, Reasonable price
Idea cellular – CSR through media campaigns
Big time customers-Government of India, GVK, GMR
Helping farmers via MORE stores.
Wealth creating for shareholders
Education, women empowerment.(BITS Pilani, Goa)
50% revenue from outside India
Topped Nielsen’s corporate image monitor(2012-13)
Low Cost
Increase in Net profit
Best employer by Hewitt Associates-2007
STRATEGY NUMBER- 1
 Hindalco - Novelis

 Internationalization (Acquisition)

 Inorganic growth strategy

 Novelis - a subsidiary of Hindalco.

 Hindalco
 Products-Aluminum & Copper

 Aluminum -
 Largest integrated producer in India
 Invested heavily in Inorganic growth
 Stake in NALCO (2004) 10.4%
 Joint Venture with ALMEX USA, Inc.(2006)
 Novelis

 World leader in aluminum rolling products.

 Spin-off from parent company Alcan Inc in 2003.

 Inherited a debt of $2.9 billion

 Leader in downstream production.

 Long-term contracts with Coca-Cola, G.M.

 Deal Structure
 On 11 Feb. 2007

 Deal was agreed at $6 Billion

 All cash deal

 Share price of $44.93

 Debt raised $ 2.4 Billion

 Consortium of banks lead by

AMRO & Bank of America

 Rationale behind Novelis

 Entry into high-end downstream market

 Increasing scale of operation- 5 Largest

 Enhancing global presence.

 New Technology

 Steady cash flows, and no LME price risk.

 Recycling

 In organic growth
 Challenges
 Adversely affected by changes in financial condition.

 The debt component of Novelis stood at US $2.4 billion and

additional US $2.8 billion, putting pressure on profitability
due to high interest burden .
 Greenfield projects costing of Hindalco worth Rs. 25,000
crore will take a hit.
 Exposure of Hindalco to weaker balance sheet increase the
debt and erode its profitability
 Company will move from high margin metal business to low
—margin downstream products business.
 Post acquisition performance
Novelis financial Net Profit/Loss($)
performance. Millions
FY 07 (-265)
FY 08 (-69)
FY 09 486
FY 10 754
FY 11 1072
FY 12 1053
FY 13 961

Cut its overseas operations and restructured its capital expenditure in an effort to
stabilize operations. Eg. Closing Rogerstone in the UK

Cut jobs due to weak demand in construction and automotives in Europe and
America and rationalize production

Aluminum prices have gone up.

Mr.Debnarayan Bhattacharya (M.D) was the man behind the turnaround, he was
keen on downstream expansion.
 Are Corus, Novelis Pulling
Their Weight Yet?
 TISCO $12-Bn takeover of Corus

 No profits till date FY13 £1.2bn loss

 The margins are shirking ever year

 Adverse impact on financial health of TISCO

 European slump and capex. adding on complication

STRATEGY NUMBER-2
 L&T – Grasim Industries
 Vertical Integration

 Grasim ventured into the cement industry three decades ago

 Operations in India, UAE, Bahrain, Sri Lanka and Bangladesh

 Accolades – “Superbrand” and “Powerbrand”

 From one cement plant in Madhya Pradesh to largest cement manufacturer in

India
 One of the major milestone in achieving this position
 Acquisition of LTD. by GRASIM INDUSTRIES one of a major flagship
companies of ADITYA BIRLA GROUP in 2004. LARSEN & TOUBRO
 Acquisition of Jaypee Cement Corporation’s Gujarat unit in 2013.
 Pre-Acquisition Phase
GRASIM INDUSTRIES LTD

 A major flagship company of ADITYA BIRLA GROUP

 Revenue- Rs.5233.33Cr (2003-2004)

 Started operations in 1948 as textile manufacturer.

 Diversified Into
 Viscose Staple Fibre,
 CEMENT,
 Sponge Iron and
 Chemicals.
 LARSEN & TOUBRO LTD.
The country’s largest engineering and
construction conglomerate.
Cement Business:
Covered most of South & Middle-east
India, handful of plants in North.
Sold 13.32 million tons & exported
2.76 million tons (FY 20002-03).
Demand & supply mismatch – low
price realization but better logistic
management kept L&T competitive
Competitive advantage- Quality,
International presence, Customer focus
and Brand.
 Takeover Battle
 Battle between Grasim and L&T has its roots in early 90’s.

 In late 90’s
 Reliance acquired 10.05% stake in L&T.
 Was focusing on acquiring L&T as whole not just the cement
factory.
 Reliance could not get any support from public, the Govt.
and financial institutes . Hence failed in acquisition of L&T.
 In 2000’s
 Grasim industries purchased Reliance’s entire stake of 10.05%
 Public announcement for acquisition of another 20% and forwarded
letter to SEBI.
 Rejection by SEBI.
 Grasim appealed to the Securities Appellate Tribunal (SAT)
 L&T tried to outsmart Grasim by proposal to carve out its cement
business into a subsidiary.
 Wherein L&T would have retained around 75 % stake and 25 % with
the shareholders.
 Would have brought down Grasim’s direct stake to about 3.75% in
L&T.
 Grasim managed to get a stay order by court on the proposed de-
merger.
 Grasim made a counter proposal of vertical de-merger of cement
business to the L&T board
 SEBI came to the conclusion that Grasim had not violated the takeover
code resulting in Grasim withdrawing its appeal before the SAT.
 Finally Grasim made an open offer for L&T’s 20 % stake which failed
miserably. Grasim could only get 0.38% stake in the open offer.
 However, subsidiary purchased another 0.83% stake from the open
market Thereby taking its total holding to 15.73 % of L&T’s equity
capital.
 Grasim got board seats on L&T’s board.

 On July 6,2004 Larsen & Toubro and Grasim Industries announced the
completion of the scheme of demerger L&T’s cement division with
Grasim having acquired a majority stake in it.
 8 months after the acquisition, L&T sold its stake in L&T Cement and
the company of name was changed to ULTRATECH CEMENT LTD.
Press Release by Birla’s on event.
 L&T’s SURRENDER - A
STRATEGIC MOVE?
 L&T’s core strength – Engineering not cement.

 Couldn’t afford more investments as ROI was lower than

Cost of capital.
 Survival – Financial Institutes were willing to sell their
stake in L&T to Birla’s provided the price was ‘right’.
 L&T management had no choice but to agree to give away
the cement business. 
 Objective of Acquisition
 L&T had the largest capacity of 18mn tonnes, followed by ACC at 15mn
tonnes

 Birla had a simple motive of ‘growth through acquisition’.

 After acquisition, the combined capacity of Grasim and L&T would make
Grasim the largest producer in India and the eighth largest in the world.

 L&T was a premium brand and was used to fetch higher prices.

 Grasim was strong in the Southern markets, L&T was strong in the rest of
India.

 L&T’s strong distribution network – reduction in maintenance cost.

 Cement industry profitable growth.

 Result of Acquisition
Strength Pitfall
 They were able to achieve growth.  L&T managed to retain the ready-
India's biggest cement company and mix cement business and other
India’s largest exporter of cement key cement assets to support their
clinker  construction business which was a
 Achieved an annual capacity of 52 blow to Grasim’s major chunk of
million tonnes. revenue.
 UltraTech cement holds the Superbrand  L&T managed to get a good price
status as compared to what was initially
 With acquisition of L&T, Grasim offered by Birla. (Rs.313 per
Industry was able to enter in the northern share initial offered but they
market as well as the eastern market in a managed to get Rs.346.60 per
short period of time. share. Also they made Birla’s sell
 Grasim was able to achieve goodwill in approximately 14.95% of its stake
the market. at Rs.120 per share to the
Employee Welfare Trust.
 Grasim also managed to go global with
the acquisition of L&T cement sector.
 Mar-13 Mar-12 Mar-11 Mar-10 Mar-09 Mar-08 Mar-07 Mar-06 Mar-05 Mar-04
Particulars (Rs.Cr)  (Rs.Cr)  (Rs.Cr)  (Rs.Cr)  (Rs.Cr)  (Rs.Cr)  (Rs.Cr)  (Rs.Cr)  (Rs.Cr)  (Rs.Cr) 

Gross Sales  21,156.12 19,077.46 13,687.40 7,175.13 6,563.64 5,623.38 4,968.39 3,383.95 2,700.99 2,291.99

Other 304 371 154 58 48 39 59 32 23 44

Income 

Total Income  21,623 19,603 13,952 7,296 6,666 5,724 5,028 3,416 2,724 2,336

Total
Expenditure   16,480 15,039 11,102 5,190 4,847 3,887 3,537 2,809 2,422 1,969

PBIDT  5,143 4,565 2,850 2,107 1,819 1,837 1,491 607 301 367

Interest  252 256 292 118 126 82 87 90 109 118

PBDT  4,891 4,308 2,558 1,989 1,694 1,755 1,404 517 192 249

Annual report of Grasim cement post and pre acquisition.

Competitor Analysis - Jaypee
Cements
 Jaypee group is the 3rd largest cement producer in the
country. The group’s cement facilities are located in the Satna
cluster (M.P.), which has one of the highest cement
production growth rates in India.
 The Group is committed towards the safety and health of
employees and the public. Its motto goes by:-

“Work For Safe, Healthy, Clean & Green Environment “.

 Objective Of Acquisition
 Gave UltraTech entry into Gujarat

 Increased producing capacity by 4.8 million tonnes- achieving total

capacity of 59 million tonnes.
 Expected cost savings (Rs 40cr in a year) in the medium to long term from
this plant.
 Depleting Competition - The acquisition deal would decrease the Jaypee’s
Cement group manufacturing capacity to 33 million tonnes (estimation).
 The deal gave UltraTech Cement a significant presence in the key western
Indian markets as well as access to a jetty that would enable it to ship
cement to new markets.
 Competitors
Grasim (UltraTech) and L&T lost in terms of market share to ACC-
Ambuja alliance.
 ACC-Ambuja followed
 Low price with increase in volume
 High capacity utilization
 Grasim And L&T followed
 Sacrifice volume to charge higher price
ACC-Ambuja also enjoy low price benefits due to lower tax in
Maharashtra.
 ACC Ltd. ET 500 Rank – 79

Annual Turnover 9339.64

Profit After Tax (2010-11) 1013.47

MCRP CR 21303.84

Assets 6993.31

Ambuja Cements Ltd. ET 500 Rank – 93

Annual Turnover 7998.55

Profit After Tax (2010-11) 1165.19

MCRP CR 23110.16

Assets 7395.28

UltraTech Cement Ltd. ET 500 Rank – 52

Annual Turnover 13980.75

Profit After Tax (2010-11) 1367.35

MCRP CR 30638.93

Assets 16253.12

As per market share in India

SWOT ANALYSIS
 STRENGTHS
 Global brand image
 Sound financial position
 Effective Leadership(Kumar Mangalam Birla), Focus
on each business
 Efficiency in terms of technology, Sophisticated R&D
 Growing Internationally
 Recycling ( eg. coal ash used as raw material for
cement manufacturing)
•
 WEAKNESS
 Long operating cycles
 Complex operations
 High manufacturing costs.
 OPPORTUNITY
 E-commerce
 Urbanization
 Industrial Growth and Growth of core sector
industries
 Rapid integration with global economy
(Globalization)
 THREAT
 Competition (Other global conglomerates)
 Foreign Market fluctuation
 Foreign currency fluctuation
 Lack of infrastructure in rural areas.
 Interest rate fluctuation
 Increasing cost of raw material
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