UNLOCKING STAKEHOLDER VALUE THROUGH
RESTRUCTURING
By Mr. M.R. Prasanna
General Counsel
Aditya Birla Group, India
The views expressed herein are that of the author and not that of the organization he represents.
ADITYA BIRLA GROUP – GLOBAL FOOTPRINTS
 The Group operates in 25 countries —
India, UK, Germany, Hungary, Brazil, Italy,
France, Luxembourg, Switzerland, Australia,
USA, Canada, Egypt, China, Thailand, Laos,
Indonesia, Philippines, Dubai, Singapore,
Myanmar, Bangladesh, Vietnam, Malaysia and Korea.
 The first truly multinational Indian Group.
 A US $28 billion corporation, the Aditya Birla Group is in the league of Fortune
500.
“Rock solid in fundamentals, the Aditya Birla Group nurtures a culture where
success does not come in the way of the need to keep learning afresh, to keep
experimenting.”
2
THE ADITYA BIRLA GROUP – GLOBAL FOOTPRINTS
$28bn
$24bn
 Over 50 years of excellence
 Operations across 20 countries and presence in 30 countries
 Anchored by about 100,000 strong workforce employed in 123
locations globally. 32,000 employed outside India, 20 nationalities
Market cap
Revenues
FY’07
 Presence in diverse businesses spanning manufacturing and
services industries
3
RESULTED IN GLOBAL SIZED, GLOBALLY COMPETITIVE
BUSINESSES
Cement
Carbon Black
11h largest in
the world
Largest
manufacturer
with 21% global
share
4th largest in the
world
Insulators
3rd largest in the
world
VSF
Metals
Mining
Among largest
Indian merchant
iron ore mining
Company
Global cost &
regional market
leadership
Aluminum,
Copper, Iron ore
4
ADITYA BIRLA GROUP
International
Operations
100%
100%
Joint
Ventures
Aditya Birla
Retail Ltd.
51%
100%
100%
51%
5
BUILDING BRANDS
6
BUILDING BRANDS
7
ADITYA BIRLA GROUP – BUSINESS SEGMENTS
ALUMINIUM
India’s largest and globally one of the most cost efficient producers. Fully integrated from
mines to metal to downstream products. World’s largest aluminium rolled products
manufacturer
COPPER
Largest custom smelter and refinery in India. Backward integrated into copper
mining in Australia
CEMENT
Leader in India and 11th largest globally
VSF & PULP
TEXTILES
CARBON BLACK
Commands a 21 per cent global market share; is the second largest producer of
viscose filament yarn (VFY) in India with a 30 per cent domestic market share
Global leader in Rayon. Major acrylic fibre producer. Wide range of fabrics
produced in India and Thailand. Leader in branded apparel in India
Amongst the top 4 in the world and one of the most cost efficient producers. Operating in
India ,Thailand, China and Egypt
FERTILIZERS
One of the large and most efficient urea producers in India
INSULATORS
India’s largest and world’s third largest producer
8
ADITYA BIRLA GROUP – BUSINESS SEGMENTS
CHEMICALS
Chemicals: caustic soda, aluminum fluoride, polyphosphates, epoxy resins,
hydrogen peroxide, sulphites, epychlorohydrins etc.
MINING
Essel mining - India’s largest private sector iron and manganese ore mining
company
TRADING
Commodity trading
FINANCE &
INSURANCE
One of the largest private sector mutual Funds. A leading insurance company
and insurance advisory services provider
TELECOM
RETAIL
SOFTWARE
BPO
A leading cellular operator in India
Multi format stores
IT solutions for insurance, banking and finance
A leading offshore call center and transaction processing service provider
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GROUP HISTORY OF M & A AND RESTRUCTURING
Year
Transaction
Key features
1998-99
Grasim acquires cement business
of Indian Rayon (Now Aditya Birla
Nuvo )
 Internal Group restructuring
1998-99
Grasim acquires Shree Digvijay
Cement Company
 Target was a listed Company with significant debts
Rs. 66 Cr.
2000
ABNL acquired Madura Garment
and Retail
 Revolutionized India’s readymade apparel and retail
Rs. 60
 Resulted in consolidation of cement business
market
2001
Acquisition of PSI Data Systems
from Group Bull SA, France
2001
Acquisition of Indal by Hindalco
2002
Divestment of Mangalore Refinery
& Petrochemicals to ONGC
2002
Hindalco acquired copper
business of Indo Gulf
 Created a metals powerhouse (Aluminum + Copper)
Grasim acquires L&T cement
business
 Ultratech – Open offer was made
2003
Approx Value
(in mn)
 Acquired from Alcan, Canada
 Exiting from non- core business activity
$ 225
$14
 New Indo Gulf Fertilizer Ltd formed
$ 700
 Start of consolidation phase in cement industry
 Substantial re-branding exercise undertaken
10
GROUP HISTORY OF M & A AND RESTRUCTURING Contd..
Year
Transaction
Key features
2003
Transworks acquired by ABNL
 Entry by group in BPO business
2004
Hindalco acquired Nifty and
Mount Gordon copper
 First Mines acquisition in Australia (a new territory for the
Approx
Value (in
mn)
$ 110
Group)
 First Indian mines company to be listed in Australian
Stock exchange
2004 – 2006
2005
2006
2007
Various Transaction for Idea
Cellular
 Idea acquires 5 circles of Escotel - 2004
$ 300
 16.5% Idea stake from Cingular - 2005
$ 150
 48% Idea stake from Tata – 2006
$ 980
Consolidation in Aditya Birla
Nuvo Ltd (ABNL)
 Merger of Birla Global Finance Ltd and Indo Gulf Fertilizer
Acquisition of Minacs
(Canada) by Transworks/
ABNL
 Group became 3rd largest India Based BPO and Globally
Hindalco acquires 100% of
Novelis
 Novelis was a Canada Based Listed Company
Ltd with ABNL
Created $
2b ABNL
$ 125
among top 15 players
$ 6,100
 Globally largest aluminum rolling products Company
11
M & A AND RESTRUCTURING in 2008
Year
Transaction
Key features
2008
Idea Cellular Ltd. acquires Spice
Communications Ltd.
 Pan India presence and entry in to high growth markets
Approx Value
(in mn)
Rs. 680
 Offset loss of 1st mover advantage in Punjab and
Karnataka
2008
2008
2008
Aditya Birla Nuvo Ltd, acquires
56% stake in Apollo Sindhoori
Capital Investments Ltd.
 Strengthen the position in retail financial market as
Acquires Trinethra Superretail
Limited from India Value Funds.
 As part of overall portfolio strategy and long-term
Creates Aditya Birla Retail Ltd
 Entry into fast growing Indian retail market with multi
Rs. 2 bn
distributor of value added financial products
growth plans.
Rs. 200
format presence across the board
2008
Divested Vikram Ispat to Welspun
Power and Steel Ltd
 Exiting from non core business like sponge iron
$ 230
 Exiting on a high
2008
Divested Palm oil business to IOI As no scope for horizontally leveraging group's
Corporation Berhad
business synergies
2008
Divested Shree Digvijay Cement
Co. Ltd. to Cimpor, Portugal
 Rationalize the portfolio and optimum utilizations of
$175
$100
plants
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FLAGSHIP COMPANIES
HINDALCO’S COMPANY STRUCTURE
Indian Subsidiaries
Indian
Aluminium
Company, Ltd.
(currently
awaiting court
order to merge
with Hindalco)
Utkal
Alumina
International
Ltd. (100%)
Australian Subsidiaries
Bihar
Caustic &
Chemicals
Ltd.
(54.65%)
Dahej
Harbour &
Infrastructure
Ltd. (100%)
Aditya Birla Minerals Ltd. (51%)
Birla Maroochydore Pty. Ltd. (50%)
Birla (Nifty) Pty. Ltd. (100%)
Hindalco Tubed East Coast
Almex
Coal Bauxite
Aerospace Limited Mining
Limited
(60%) Company
(70%)
Pvt. Ltd
(74%)
Birla Resources Pty. Ltd. (100%)
Birla Mt Gordon Pty. Ltd. (100%)
Canadian Subsidiary
Novelis Inc. (100%)
Joint Venture and Associates
Mahan Coal Limited (50%)
A joint venture with the Essar Power (MP) Limited.
The two JV partners have been jointly allocated a
coal block in Madhya Pradesh and so a JV is formed
to mine the coal for offtake by parent companies
Aditya Birla Science & Technology
Company Limited (49%)
An associate company, primarily a
knowledge resource for the Aditya Birla
Group, where some of the major Group
companies, which are users of technology
have a stake
14
HINDALCO OVERVIEW – A GLOBAL NON - FERROUS METALS
COMPANY
Copper
business
acquisition
and
expansion
to 250,000
tpa
2001
Majority
stake
in Indal
through
largest
all-cash
acquisitio
n in
India
2002
Acquisition
of
Nifty & Mt.
Gordon
Copper
Mines
2003
Aluminium
Expansion
at
Renukoot
to
342,000
tpa,
Hirakud to
65,000 tpa
Increase
stake
in Utkal
from
20% to 55%.
Further
increased to
100% in
2007.
2004
2005
Doubling of
copper
capacity to
500,000 tpa
Expansion
JV
agreement
signed
with
Almex for
aerospace
alloys
2006
Listing of
Aditya Birla
Minerals
Ltd. on ASX
in May 2006
2007
2008
Doubling of
Hirakud
Smelter
capacity to
143,000 tpa
Acquisition
Hirakud
Aluminum
brownfield
expansion
Acquisition
of
Novelis
2009
Alumina
Expansion at
Muri
Others
2010
Utkal
Alumina
greenfield
project
2011
Aditya
Aluminiu
m
greenfiel
d project
Projects
2012
Mahan
Aluminiu
m
greenfiel
d project
Aditya
Alumina
greenfield
project
2013
Jharkhand
Aluminium
greenfield
project
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ADITYA BIRLA NUVO : PREMIUM CONGLOMERATE BY DESIGN
Growth Businesses
Garments
Telecom
(27.02%)
BPO
(88.3%)
Value Businesses
Financial IT Services
Services
(70.4%)
Rayon
Carbon
Black
Insulators Fertilisers Textiles
Life Insurance
Apparel
Retail (100%)
Contract
Exports (100%)
Minacs
(100%)
(74%)*
Asset Management
(50%) *
Represents Subsidiaries
Distribution
(49.99%)
*
Capital Market
Insurance Advisory
Retail broking^
Represents JV’s/Associates
* JV with Sunlife Financial, Canada
^ Acquisition of Apollo Sindhoori
Capital Investments Ltd.
De-risking with optimum blend of value & growth businesses
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SUCCESSFUL HISTORY OF TRANSFORMATION &
REJUVENATION OF BUSINESSES
De merger of
Cement unit /
Surplus cash
returned to
shareholders
through
buyback of
equity shares
1
9
1999
9
9
Life Insurance JV with
Sun Life, Canada
Acquisition of
PSI Data Systems
from Group Bull SA,
France
2
0
0
0
Acquisition of
Madura
Garments
2
0
0
1
Foray into the
BPO sector
through the
acquisition of
Transworks
Increased
stake from
4.3% to
20.74% in
2005; further
to 35.74% in
2006
Carbon Black
Brownfield
expansion by
40K MT to 160K
MT
2
0
0
3
2
0
0
4
2
0
0
5
Merger of Indo
Gulf Fertilisers
and Birla
Global with
Company
Indian Rayon
rechristened as
“Aditya Birla
Nuvo”
Insulators
subsidiary
merged with
Nuvo w.e.f.
April 1, 2007
2
0
0
6
Raised Rs. 7.8
billion
through rights
issue
Acquired
Minacs, a
leading
Canadian BPO
Preferential
allotment of
2.05 Cr.
warrants to
promoters
convertible
within 18
months into
equity shares at
Rs. 2007.45 per
share
Carbon
Black
Brownfield
expansion
by 60K MT
to 230K MT
Entry into new age businesses with high growth-potential
2
0
0
7
2
0
0
8
Acquired 56%
stake in Apollo
Sindhoori, a
retail broking
company, for
Rs. 198.8 Cr.;
Nuvo will make
open offer for
20% stake after
required
approvals
17
BUSINESS
Viscose
Staple
Fibre
Cement
White
Cement
BRANDS
Textiles
Chemicals
AV Cell
Birla Lao Pulp
Birla Jingwei Fibres
CEMENT MAJOR AND GLOBAL LEADER VISCOSE STAPLE FIBRE
18
BACKWARD INTEGRATION
Backward Integration
PULP (RAW
MATERIAL)
Right from plantation stage to the final VSF stage
1998 Acquires Atholville Pulp Mill
Canada
2005 Acquired St. Anne Nackawic Pulp
Mill, Canada
Entire production is exclusively for
the Group's captive consumption,
supplies 1,25,000 tonnes of
dissolving grade chemical pulp to
its VSF units in India, Thailand,
Indonesia and China.
Value Addition and Integrated
Supply Chain
VSF (END
PRODUCT)
19
FORAY IN TO DRAGON LAND
Liaoning Birla Carbon:-
JV between Thai Carbon Black Co. Ltd.,
Thailand, (an ABG CO.), and Dashiqiao Ronghua Co. Ltd.
Product :- Carbon black
Birla Jingwei Fibres Co. Ltd.:- JV between Aditya Birla Group and Hubei
Jingwei Chemical Fibre Co. Ltd.
Product :- Viscose Staple Fiber (VSF)
Aditya Birla Grasun:-
JV between Aditya Birla Chemicals (Thailand) Ltd. and
Fanchenggang Grasun Co.Ltd. , China
Product :- Food Grade Phosphoric Acid
20
WHY DO M & As HAPPEN?
Accelerated
Growth
Enhanced
Profitability
Diversification
To Create
Value
Tax and
Financial
Benefits
Increase in
Market Power
M & As promote not only
growth and Creation of Value
but they also Unlock Value
through JVs, Spin Offs and
total Divestment making them
complementary concepts.
21
FUELLING M & A GROWTH
 DRIVERS:
 Synergies & Scaling up of operations
 Territorial & Capacity Expansion
 Leveraging Competence
 Tangible & Intangible Acquisition
 Competitive Edge
22
KEY CONSIDERATIONS
Business
Environment
Cultural Issues
Business Dynamics
Accounting
treatment
CROSS BORDER
TRANSACTIONS
Legal & regulatory
framework
Tax regimes & treaties
Identifying and
delivering synergies
23
FUELLING M & A GROWTH Contd..
OVERSEAS
CONSOLIDATE POSITION
INCREASE CAPACITIES
TATA - CORUS
BIRLA – NOVELIS
ACCESS TO
INTERNATIONAL MARKETS
DR.REDDY–BETAPHARM
INTEGRATION
SUZLON - REpower
BACKWARD/FORWARD
STERLITE GROUP
ACQUIRE CERTAIN
CAPABILITIES: Technology, People and R & D
BECOME GLOBAL PLAYER
24
M & As IN SERVICE SECTOR
New
Service
given its
profitability
Growth Oriented
SERVICE
SECTOR
FINANCIAL SERVICES
RETAIL
ITeS
Cost Centre
Becoming a
Profit Centre
BPO
LPO
Complement
existing
business
25
CORPORATE RESTRUCTURING Contd…
ACQUISITION
DEMERGER
Strategic
Division
Financial*
Spin Off
JOINT VENTURE
MERGER
Combine
Strategic
Consolidate
Financial*
DIVESTMENT
OF
CORE ASSETS
* With an appropriate Exit Mechanism
26
GUIDELINES FOR STRATEGIC VISION
STRATEGIC VISION
OPERATING
STRATEGY
COMPETITOR
REACTION
“THE CERTAINTY OF
MISERY IS BETTER
THAN THE MISERY
OF UNCERTAINTY.”
PROPER SYSTEM AND
PROCEDURES
- Forbes Magazine
27
INTEGRATION CHALLENGES
MANUFACTURING
REMUNERATION AND BENEFITS
MARKETING
POLICIES
LOGISTICS
PROCESSES (IT)
28
HOW TO MAKE IT WORK
PRE MERGER
C
KEY TO SUCCESS
O
PLAN
M
INVESTIGATE
M
U
NEGOTIATE
•Structure a sustained
communication plan - message,
channels, mode, frequency
•Discuss future business plans
and the synergies expected.
N
IMPLEMENT
I
C
POST MERGER
•Clarify revised roles and
performance expectations
•Continuously communicate on
the integration process progress
A
T
INTEGRATE
E
29
UNDERLYING PRINCIPLE OF M & A TRANSACTION
1 + 1 = 11
ADDITIONAL VALUE OF “SYNERGIES”
30
CORPORATE RESTRUCTURING
The concept of “growing organization” is not about just
growth but is all about its adaptability to global business
dynamics and its ability to quickly change the way it
does business and the tenacity to shed unwanted or
unrelated businesses.
31
THANK YOU
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