mrprasanna

8/3/2019 MRPrasanna

http://slidepdf.com/reader/full/mrprasanna 1/32

By Mr. M.R. Prasannay Mr. M.R. Prasanna

General Counseleneral Counsel

Aditya Birla Group, Indiaditya Birla Group, India

UNLOCKING STAKEHOLDER VALUE THROUGHUNLOCKING STAKEHOLDER VALUE THROUGHRESTRUCTURINGRESTRUCTURING

The views expressed herein are that of the author and not that of the organization he represents.

8/3/2019 MRPrasanna


2

ADITYA BIRLA GROUP – GLOBAL FOOTPRINTSADITYA 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 Fortune500.

“Rock solid in fundamentals, the Aditya Birla Group nurtures a culture wheresuccess does not come in the way of the need to keep learning afresh, to keep

experimenting.”

http://images.google.co.in/imgres?imgurl=http://216.46.11.131/file_uploads/cms_miho/images/world_map_IHO.jpg&imgrefurl=http://216.46.11.131/cms/index.cfm&h=440&w=610&sz=79&hl=en&start=52&usg=__CsZFUAjtUmu_coH9rSOSaarlN88=&tbnid=HXtpq1QZ9TjU8M:&tbnh=98&tbnw=136&prev=/images%3Fq%3Dworld%2Bmap%26start%3D36%26gbv%3D2%26ndsp%3D18%26hl%3Den%26sa%3DN

8/3/2019 MRPrasanna


3

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

Presence in diverse businesses spanning manufacturing and

services industries

$24bn$28bn

Market cap RevenuesFY’07

THE ADITYA BIRLA GROUP – GLOBAL FOOTPRINTSTHE ADITYA BIRLA GROUP – GLOBAL FOOTPRINTS

8/3/2019 MRPrasanna


4

11h largest in the

world

Cement

Largest manufacturer

with 21% global

share

VSF

Global cost &

regional market

leadership

Aluminum,

Copper, Iron ore

Metals

4th largest in the

world

Carbon Black

3rd largest in theworld

Insulators

RESULTED IN GLOBAL SIZED, GLOBALLY COMPETITIVERESULTED IN GLOBAL SIZED, GLOBALLY COMPETITIVE

BUSINESSESBUSINESSES

Among largestIndian merchantiron ore mining

Company

Mining

8/3/2019 MRPrasanna


5

100%

100%

51%

InternationalOperations

JointVentures

51%

100%

100%

ADITYA BIRLA GROUP ADITYA BIRLA GROUP

Aditya BirlaRetail Ltd.

http://www.morestore.com./index.html







8/3/2019 MRPrasanna


6

BUILDING BRANDSBUILDING BRANDS

8/3/2019 MRPrasanna


BUILDING BRANDSBUILDING BRANDS

8/3/2019 MRPrasanna


India’s largest and globally one of the most cost efficient producers. Fully integrated frommines to metal to downstream products. World’s largest aluminium rolled productsmanufacturer

Largest custom smelter and refinery in India. Backward integrated into coppermining in Australia

Leader in India and 11th largest globally

Global leader in Rayon. Major acrylic fibre producer. Wide range of fabricsproduced 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 inIndia ,Thailand, China and Egypt

One of the large and most efficient urea producers in India

India’s largest and world’s third largest producer

ALUMINIUM

COPPER

CEMENT

TEXTILES

CARBON BLACK

FERTILIZERS

INSULATORS

ADITYA BIRLA GROUP – BUSINESS SEGMENTS ADITYA BIRLA GROUP – BUSINESS SEGMENTS

VSF & PULPCommands 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

8/3/2019 MRPrasanna


ADITYA BIRLA GROUP – BUSINESS SEGMENTSADITYA BIRLA GROUP – BUSINESS SEGMENTS

MINING Essel mining - India’s largest private sector iron and manganese ore miningcompany

TRADING Commodity trading

FINANCE &INSURANCE

One of the largest private sector mutual Funds. A leading insurance company andinsurance advisory services provider

TELECOM A leading cellular operator in India

RETAIL Multi format stores

SOFTWARE

BPO

IT solutions for insurance, banking and finance

A leading offshore call center and transaction processing service provider

CHEMICALS Chemicals: caustic soda, aluminum fluoride, polyphosphates, epoxy resins,hydrogen peroxide, sulphites, epychlorohydrins etc.

8/3/2019 MRPrasanna


GROUP HISTORY OF M & A AND RESTRUCTURING

Year Transaction Key features Approx Value(in mn)

1998-99 Grasim acquires cement business of Indian Rayon (Now Aditya Birla Nuvo

)

Internal Group restructuring

Resulted in consolidation of cement business

1998-99 Grasim acquires Shree DigvijayCement Company

Target was a listed Company with significant debts Rs. 66 Cr.

2000

2001

2001

ABNL acquired Madura Garment andRetail

Acquisition of PSI Data Systemsfrom Group Bull SA, France

Acquisition of Indal by Hindalco

Revolutionized India’s readymade apparel and retail market

Acquired from Alcan, Canada

Rs. 60

$ 225

2002 Divestment of Mangalore Refinery &

Petrochemicals to ONGC

Exiting from non- core business activity $14

2002 Hindalco acquired copper businessof Indo Gulf

Created a metals powerhouse (Aluminum + Copper)

New Indo Gulf Fertilizer Ltd formed

2003 Grasim acquires L&T cementbusiness

Ultratech – Open offer was made

Start of consolidation phase in cement industry

Substantial re-branding exercise undertaken

$ 700

8/3/2019 MRPrasanna


GROUP HISTORY OF M & A AND RESTRUCTURING Contd..

Year Transaction Key features ApproxValue (in mn)

2003 Transworks acquired by ABNL Entry by group in BPO business

2004 Hindalco acquired Nifty andMount Gordon copper

First Mines acquisition in Australia (a new territory for theGroup)

First Indian mines company to be listed in Australian Stockexchange

$ 110

2004 – 2006 Various Transaction for IdeaCellular

Idea acquires 5 circles of Escotel - 2004

16.5% Idea stake from Cingular - 2005

48% Idea stake from Tata – 2006

$ 300

$ 150

$ 980

2005 Consolidation in Aditya BirlaNuvo Ltd (ABNL)

Merger of Birla Global Finance Ltd and Indo Gulf Fertilizer Ltd with ABNL

Created $ 2bABNL

2006 Acquisition of Minacs (Canada)by Transworks/ ABNL

Group became 3rd largest India Based BPO and Globallyamong top 15 players

$ 125

2007 Hindalco acquires 100% of Novelis

Novelis was a Canada Based Listed Company

Globally largest aluminum rolling products Company

$ 6,100

8/3/2019 MRPrasanna


M & A AND RESTRUCTURING in 2008

Year Transaction Key features Approx Value(in mn)

2008 Idea Cellular Ltd. acquires SpiceCommunications Ltd.

Pan India presence and entry in to high growth markets

Offset loss of 1st mover advantage in Punjab andKarnataka

Rs. 680

2008 Aditya Birla Nuvo Ltd, acquires56% stake in Apollo SindhooriCapital Investments Ltd.

Strengthen the position in retail financial market asdistributor of value added financial products

Rs. 2 bn

2008 Acquires Trinethra Superretail

Limited from India Value Funds.

As part of overall portfolio strategy and long-term growth

plans.

2008 Creates Aditya Birla Retail Ltd Entry into fast growing Indian retail market with multiformat presence across the board

Rs. 200

2008 Divested Vikram Ispat to Welspun

Power and Steel Ltd

Exiting from non core business like sponge iron

Exiting on a high

$ 230

2008 Divested Palm oil business to IOICorporation Berhad

As no scope for horizontally leveraging group's businesssynergies

$175

2008 Divested Shree Digvijay Cement

Co. Ltd. to Cimpor, Portugal

Rationalize the portfolio and optimum utilizations of plants $100

8/3/2019 MRPrasanna


FLAGSHIP COMPANIES

8/3/2019 MRPrasanna


Indian Subsidiaries

IndianAluminium

Company, Ltd.(currently

awaiting courtorder to

merge withHindalco)

UtkalAlumina

International Ltd.(100%)

BiharCaustic &Chemical

s Ltd.(54.65%)

DahejHarbour &Infrastruct

ure Ltd.(100%)

Australian Subsidiaries

Birla Maroochydore Pty. Ltd.(50%)

Aditya Birla Minerals Ltd.(51%)

Birla Resources Pty. Ltd.(100%)

Birla (Nifty) Pty. Ltd.(100%)

Birla Mt Gordon Pty. Ltd.(100%)

HindalcoAlmexAerospace

Limited(70%)

Canadian Subsidiary

TubedCoal

Limited

(60%)

East CoastBauxiteMining

CompanyPvt. Ltd(74%)

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 formedto mine the coal for offtake by parent companies

An associate company, primarily aknowledge resource for the Aditya Birla

Group, where some of the major Groupcompanies, which are users of technologyhave a stake

Aditya Birla Science &Technology Company Limited

(49%)

Joint Venture and Associates

HINDALCO’S COMPANY STRUCTUREHINDALCO’S COMPANY STRUCTURE

Novelis Inc. (100%)

http://www.novelis.com/Internet/en-US/

8/3/2019 MRPrasanna


Increasestakein Utkal

from20% to 55%.

Furtherincreased to

100% in2007.

Acquisitionof Nifty & Mt.

GordonCopper Mines

Copperbusinessacquisition

andexpansionto 250,000

tpa

Acquisitionof

Novelis

JVagreementsigned withAlmex foraerospace

alloys

HirakudAluminumbrownfieldexpansion

UtkalAluminagreenfield

project

AdityaAluminagreenfield

project

20062001 2003 2004 2005 20072002 2008

Majoritystake

in Indalthroughlargestall-cash

acquisition inIndia

AluminiumExpansionat

Renukootto

342,000tpa,

Hirakud to65,000 tpa

Doubling of copper

capacity to500,000 tpa

Doubling of HirakudSmelter

capacity to143,000 tpa

Listing of Aditya Birla

Minerals Ltd.on ASX inMay 2006

AluminaExpansion at

Muri

AcquisitionExpansion Others Projects

20112009 2010 2012 2013

Aditya

Aluminium

greenfieldproject

Mahan

Aluminium

greenfieldproject

JharkhandAluminiumgreenfield

project

HINDALCO OVERVIEW – A GLOBAL NON - FERROUS METALSHINDALCO OVERVIEW – A GLOBAL NON - FERROUS METALS

COMPANYCOMPANY

8/3/2019 MRPrasanna


Value BusinessesGrowth Businesses

TextilesRayon FertilisersCarbonBlack

BPO(88.3%)

GarmentsFinancialServices

Telecom(27.02%)

Asset Management

(50%) *

Life Insurance

(74%)*

Distribution

(49.99%) *

Capital MarketInsurance Advisory

Retail broking^

Represents JV’s/AssociatesContractExports (100%)

IT Services(70.4%)

Minacs(100%)

Represents Subsidiaries

ApparelRetail (100%)

De-risking with optimum blend of value & growth businesses

Insulators

ADITYA BIRLA NUVO : PREMIUM CONGLOMERATE BY DESIGNADITYA BIRLA NUVO : PREMIUM CONGLOMERATE BY DESIGN

* JV with Sunlife Financial, Canada

^ Acquisition of Apollo Sindhoori

Capital Investments Ltd.

8/3/2019 MRPrasanna


17

Life Insurance JV withSun Life, Canada

Acquisition of Madura

Garments

Entry into new age businesses with high growth-potential

2000 2001 2003 2004 2005 2006 1999 2007 1999

Raised Rs. 7.8billion through

rights issue

CarbonBlack

Brownfieldexpansion

by 60K MT to230K MT

De merger of

Cement unit /Surplus cashreturned to

shareholdersthrough

buyback of equity shares

SUCCESSFUL HISTORY OF TRANSFORMATION &SUCCESSFUL HISTORY OF TRANSFORMATION &REJUVENATION OF BUSINESSESREJUVENATION OF BUSINESSES

2008

Acquisition of PSI Data Systems

from Group Bull SA,France

Acquired 56%stake in Apollo

Sindhoori, aretail brokingcompany, for Rs. 198.8 Cr.;

Nuvo will makeopen offer for

20% stake after required

approvals

Foray into theBPO sector through the

acquisition of Transworks

Carbon BlackBrownfield

expansion by40K MT to 160K

MT

Merger of IndoGulf Fertilisers

and Birla Globalwith Company

Indian Rayonrechristened as

“Aditya BirlaNuvo”

Increasedstake from

4.3% to 20.74%in 2005; further

to 35.74% in2006

AcquiredMinacs, aleading

Canadian BPO

Insulatorssubsidiary

merged withNuvo w.e.f.April 1, 2007

Preferentialallotment of

2.05 Cr.

warrants topromotersconvertiblewithin 18

months intoequity shares atRs. 2007.45 per

share

8/3/2019 MRPrasanna


18

Cemen

t

White

Cement

Textile

s

Chemical

s

Viscos

eStapleFibre

BUSINESS BRANDS

CEMENT MAJOR AND GLOBAL LEADER VISCOSE STAPLE FIBRE

AV Cell

Birla Lao Pulp

Birla Jingwei Fibres

8/3/2019 MRPrasanna


19

BACKWARD INTEGRATIONBACKWARD INTEGRATION

Backward Integration

Right from plantation stage to the final VSF stage

1998 Acquires Atholville Pulp MillCanada

2005 Acquired St. Anne Nackawic Pulp

Mill, Canada

PULP (RAWMATERIAL)

VSF (END

PRODUCT)

Entire production is exclusively for

the Group's captive consumption,supplies 1,25,000 tonnes of dissolving grade chemical pulp to itsVSF units in India, Thailand,Indonesia and China.

Value Addition and IntegratedSupply Chain

8/3/2019 MRPrasanna


20

FORAY IN TO DRAGON LANDFORAY 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 HubeiJingwei Chemical Fibre Co. Ltd.Product :- Viscose Staple Fiber (VSF)

Aditya Birla Grasun:- JV between Aditya Birla Chemicals (Thailand) Ltd. andFanchenggang Grasun Co.Ltd. , ChinaProduct :- Food Grade Phosphoric Acid

http://images.google.co.in/imgres?imgurl=http://www.destination360.com/asia/china/images/s/china-great-wall-of-china.jpg&imgrefurl=http://fusions.wordpress.com/2007/06/26/the-new-7-wonders-of-the-world/&h=332&w=415&sz=51&hl=en&start=50&um=1&usg=__uZ1TkSq6_2juL51xrONlqC1V7Eg=&tbnid=ifkFtQHP84J_AM:&tbnh=100&tbnw=125&prev=/images%3Fq%3Dchina%2Bwall%2Bred%26start%3D42%26um%3D1%26hl%3Den%26sa%3DN

8/3/2019 MRPrasanna


21

WHY DO M & As HAPPEN?

Diversification

Tax andFinancialBenefits

Increase inMarket Power

Enhanced

Profitability

AcceleratedGrowth

To CreateTo Create

ValueValueM & As promote not onlyM & As promote not only

growth andgrowth and Creation of ValueCreation of Value but they alsobut they also Unlock ValueUnlock Value

through JVs, Spin Offs andthrough JVs, Spin Offs and

total Divestment making themtotal Divestment making them

complementary conceptscomplementary concepts..

8/3/2019 MRPrasanna


22

FUELLING M & A GROWTH

DRIVERS:

Synergies & Scaling up of operations

Territorial & Capacity Expansion

Leveraging Competence

Tangible & Intangible Acquisition

Competitive Edge

8/3/2019 MRPrasanna


23

KEY CONSIDERATIONS

CROSS BORDERCROSS BORDER

TRANSACTIONSTRANSACTIONS

Legal & regulatory

framework

Identifying and

delivering synergies

Tax regimes & treaties

Business Dynamics

Business

EnvironmentCultural Issues

Accounting

treatment

8/3/2019 MRPrasanna


24

FUELLING M & A GROWTH Contd..

OVERSEASOVERSEAS

CONSOLIDATE POSITIONINCREASE CAPACITIES

ACCESS TOINTERNATIONAL MARKETS

INTEGRATION

BACKWARD/FORWARD

ACQUIRE CERTAINCAPABILITIES: Technology, People and R & D

BECOME GLOBAL PLAYER

TATA - CORUSTATA - CORUS

BIRLA – NOVELISBIRLA – NOVELIS

DR.REDDY–BETAPHARMDR.REDDY–BETAPHARM

SUZLON - REpower SUZLON - REpower

STERLITE GROUPSTERLITE GROUP

8/3/2019 MRPrasanna


25

M & As IN SERVICE SECTOR

Growth Oriented

Complementexistingbusiness

Cost CentreBecoming aProfit Centre

New

Servicegiven its

profitability

SERVICESECTOR

BPOLPO

FINANCIAL SERVICESRETAIL

ITeS

8/3/2019 MRPrasanna


26

CORPORATE RESTRUCTURING Contd…

ACQUISITION

Strategic

Financial*

MERGER

Combine

Consolidate

DIVESTMENT

OF

CORE ASSETS

JOINT VENTURE

Strategic

Financial*

DEMERGER

Division

Spin Off

* With an appropriate Exit Mechanism

8/3/2019 MRPrasanna


27

GUIDELINES FOR STRATEGIC VISION

STRATEGIC VISION

OPERATINGSTRATEGY

COMPETITORREACTION

PROPER SYSTEM ANDPROCEDURES

““THE CERTAINTY OFTHE CERTAINTY OF

MISERY IS BETTERMISERY IS BETTER

THAN THE MISERYTHAN THE MISERY

OF UNCERTAINTY.”OF UNCERTAINTY.”

- Forbes Magazine- Forbes Magazine

8/3/2019 MRPrasanna


28

INTEGRATION CHALLENGES

MANUFACTURING

MARKETING

LOGISTICS

PROCESSES (IT)

POLICIES

REMUNERATION AND BENEFITS

8/3/2019 MRPrasanna


29

HOW TO MAKE IT WORK

PRE MERGERPRE MERGER

•Structure a sustainedcommunication plan - message,

channels, mode, frequency

•Discuss future business plansand the synergies expected.

•Clarify revised roles andperformance expectations

•Continuously communicate onthe integration process progress

CC

OO

MM

MM

UU

NN

II

CC

AA

TT

EE

KEY TO SUCCESS KEY TO SUCCESS

PLAN

INVESTIGATE

NEGOTIATE

INTEGRATE

POST MERGERPOST MERGER

IMPLEMENT

8/3/2019 MRPrasanna


30

UNDERLYING PRINCIPLE OF M & A TRANSACTIONUNDERLYING PRINCIPLE OF M & A TRANSACTION

1 + 11 + 1 = 11= 11

ADDITIONAL VALUE OF “SYNERGIES”ADDITIONAL VALUE OF “SYNERGIES”

8/3/2019 MRPrasanna


31

CORPORATE RESTRUCTURINGCORPORATE RESTRUCTURING

The concept of “growing organization” is not about justgrowth but is all about its adaptability to global businessdynamics and its ability to quickly change the way it doesbusiness and the tenacity to shed unwanted or unrelated

businesses.

8/3/2019 MRPrasanna


mrprasanna

Documents