History of Aditya Birla Group

Aditya Birla Group is one of India's largest conglomerates and also claims to

be the most international of the country's major corporations. The company

acts as a holding company for more than 72 manufacturing and services

subsidiaries throughout India, and in Thailand, Indonesia, the Philippines,

Malaysia, Australia, China, Egypt, and Canada. Aditya Birla's major

subsidiaries include Grasim, the world's leading producer of viscose staple

fiber, and a manufacturer of rayon grade pulp, cement, sponge iron,

textiles, and chemicals; Hindalco, a leading producer of aluminum and

copper; UltraTech Cement, which produces portland cement and related

products; Aditya Birla Nuvo, which manufactures clothing, textiles, and

carbon black and is India's second largest producer of viscose filament yarn;

Indo Gulf, a fertilizer producer; Birla NGK Insulators (a joint venture with

NGK of Japan), which is the world's leading producer of insulators; and Idea

Cellular Ltd., a mobile service provider jointly owned with fellow Indian

conglomerate Tata Industries. The company also produces software and

provides IT services, and operates a number of financial products

subsidiaries. The company's Birla Sun Life Insurance Co. is the second

largest private sector insurance company in India, and its Birla Sun Life

Asset Management Co. is the country's fourth largest assets manager. In

other areas, the company claims to be the world's eighth largest producer

of cement and the world's fourth largest producer of carbon black. These

operations combine to generate revenues of nearly $7.6 billion per year.

The company is led by Kumar Mangalam Birla, son of Aditya Birla.

Indian Financial Dynasty in the 19th Century

The Aditya Birla Group was founded in the 1960s by Aditya Birla, who

started building his business empire at the age of 24. By then, however, the

Birla family had been one of India's most prominent industrial and financial

families for nearly a century. The origins of the Birla family fortunes lay in

the second half of the 19th century, when in 1870 Seth Shiv Narayan Birla

launched a cotton- and jute-trading business in the town of Pilani, in

Rajasthan, India. Despite the British occupation, and the attempt to

establish monopolies by the British trading companies, Birla succeeded in

building the family's first fortune.

The next phase of the family's success came at the beginning of the 20th

century, when Birla's grandson Ghanshyamdas took over as head of the

family fortune. The younger Birla led the family into the industrial sector,

setting up a jute mill in 1919. The Birla family also became important

supporters of the independence movement led by Mahatma Ghandi.

Ghanshyamdas Birla not only provided the financial backing for Ghandi, he

also participated in the talks with the British that ultimately led to the

country's independence. The company's wealth, and its intimate connection

with the new Indian government, enabled it to emerge as one of a small

number of Indian families that dominated India's quasi-socialist economy

through the end of the century.

With independence, Birla began developing his industrial empire in earnest.

The family quickly branched out into a number of sectors. Just days after

the country's declaration of independence, for example, Birla founded

Grasim Industrial Ltd., opening a small weaving plant in Gwalior. By 1950,

Grasim had begun importing the recently developed rayon fiber, and it

began producing rayon-based fabrics. In 1954, Grasim launched its own

rayon production, opening a factory in Nagda. By the mid-1960s, Grasim

also had launched production of the rayon pulp itself.

The family's interest in textiles and rayon in particular led it to acquire

another branch, Indian Rayon Corporation, in 1966. That company had been

founded just a decade earlier, and in 1963 had expanded with the

construction of its own viscose filament yarn factory in Veraval. As part of

the Birla family holdings, Indian Rayon, which later evolved into the Birla

group's largest subconglomerate, Aditya Birla Nuvo, developed diversified

operations, including the production of garments, textiles, carbon black,

and insulators. The company also entered cement production, launching its

own factory in 1985.

In the meantime, Birla's industrial interests had led it into a new area, the

production of metals, and specifically aluminum. The family established a

new company, Hindalco, in 1958 and began construction of their first

smelter. That complex, in Renukoot, launched production in 1962. By 1967,

the company had set up its own power plant, in Renusagar, described by the

company as "a significant strategic move." The company later branched out

into copper production as well.

The development of the family's business interests had been turned over to

Ghanshyamdas Birla's sons, K. K. Birla, C. K. Birla, and B. K. Birla. While B.

K. Birla took over the family's raw materials and related industrial

operations, his brothers took charge of other Birla family holdings,

including Hindustan Motors, part of India's big three automakers, and

the Hindustan Times, one of the country's major newspapers.

International Pioneer: 1970-80

In the mid-1960s, Aditya Vikram Birla joined his father, B. K. Birla, in that

branch of the family business, which by then consisted of Grasim, Hindalco,

and Indian Rayon. By the end of the decade, Aditya Birla, then 24 years old,

was placed in charge of these companies, which formed the basis of the

Aditya Birla Group.

The younger Birla soon proved himself a visionary, leading the company's

development from an India-focused industrial group to India's first and

largest internationally operating conglomerate. The company enjoyed the

advantages of India's "License Raj," a license-permit-quota system devised

by the country's first prime minister, Jawarharal Nehru, that made it

difficult for new domestic competitors to emerge. Although this system

protected and reinforced the Birla family's interests, it also subjected the

Birla group to strict capital controls. At the end of the 1960s, however,

Aditya Birla recognized a means of skirting these controls, through the

development of foreign interests.

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In 1969, Birla launched its first subsidiary, Indo Thai Synthetics, to produce

and export synthetic yarns in Thailand. Into the 1970s, the company

continued to invest in Thailand, launching two new subsidiaries in 1974.

The first of these, Thai Rayon, launched production of viscose rayon staple

fiber, which it marketed on a global basis as Birla Cellulose. That company

quickly grew into a major exporter, while also supplying the Thai textile

industry. The company set up in 1974 was Century Textiles Co., which

operated a weaving and dyeing plant, producing Centex-branded fabrics,

including polyester, rayon, linen, and later lycra and others. By the end of

the 1970s, the company's Thai holdings included Thai Carbon Black (TCB),

founded in 1978. Carbon black, also known as soot and lampblack, was used

as a black pigment for inks, food colorings, and especially for the

production of rubber tires. TCB grew strongly, building the world's largest

carbon black facility on a single location, and counting among its customers

the global big three tire manufacturers. The company was particularly

successful in Japan, where it captured more than half of the total carbon

black market.

Birla's success in Thailand encouraged the group to extend its operations

elsewhere in the region. In 1975, the company launched a joint venture in

the Philippines, to produce spun yarn. The operation became the basis of

the group's other Filipino holdings, grouped under the Indo Phil name.

Malaysia became the company's next foreign market, with the opening of an

edible oil production subsidiary in 1978. That business, Pan Century Edible

Oils, became the world's largest single-location palm oil refinery.

Steady Growth Through the End of the 20th Century

The Birla group's expansion continued through the 1980s. The company

moved into Indonesia in 1982, setting up PT Indo Bharat Rayon. In

Thailand, in 1984, the company expanded into the production of sodium

phosphates for the detergents industry, establishing Thai Polyphosphates

and Chemicals. The company added yet another Thai unit in 1987,

deepening its interests in that country's textile sector with the founding of

Thai Acrylic Fibre. The company also expanded into the chemicals market in

Thailand, founding a joint venture, Thai Peroxide Co., with the United

States' FMC Corporation in 1989.

In the meantime, Birla's Indian holdings continued to expand and diversify

as well. Grasim, for example, added cement production in 1985, launching

the Vikram Cement plant at Jawad, in Madhya Pradesh. By the beginning of

the 1990s, that operation had tripled its production capacity. Through the

1990s, Grasim added other diversified businesses, including merchant

exporter Birla International Marketing Corporation in 1992, and Vikram

Ispat, a gas-based sponge iron factory, in 1993. Grasim also expanded its

cement holdings, opening two new cement plants, Grasim Cement in Raipur

and Aditya Cement in Shambhupura, in 1995. The growth of Grasim's

cement operations led Birla to transfer its other cement production

operations from Indian Rayon into Grasim.

This restructuring was launched under the leadership of Aditya Birla's son,

Kumar Mangalam Birla, who took over the company after his father's death

in 1995. Until then, the Birla group of companies had been described

by Institutional Investor International Edition as a "murky empire." The

younger Birla, who had been educated at the London Business School, now

became determined to transform the company into a modern corporation.

Birla now led a restructuring of the company's holdings, grouping all of its

businesses under the single umbrella holding, Aditya Birla Group. Birla also

continued to streamline operations, regrouping various industrial

operations into a more coherent structure.

Leading Diversified Conglomerate in the New Century

Aditya Birla nonetheless remained committed to its structure as a highly

diversified conglomerate. The company also took advantage of the

liberalization of India's economy, launched during the country's economic

crisis in 1991, to enter a number of new areas. In 1988, for example, the

company launched a petroleum refining joint venture with Hindustan

Petroleum Corporation. The company then entered the telecommunications

market, forming a joint venture with AT&T of the United States, Birla AT&T,

in 1995. That company merged with Tata Communications in 2000,

becoming one of the country's leading telecom groups.

Through Hindalco, the company launched fertilizer production, under

subsidiary Indo Gulf in the late 1980s; in 1998, Indo Gulf added the

production of copper as well. In 2002, Hindalco was restructured, with its

fertilizer production spun off into a separate company, Indo Gulf Fertilisers.

Indo Gulf's copper business was placed directly under Hindalco. By then,

Hindalco had acquired major rival Indal, an aluminum producer founded

near Kolkata in 1938. That acquisition was completed in 2000; two years

later, Indal boosted its aluminum foil production through the purchase of

control of Anapurna Foils. Indal was merged into Hindalco in 2004.

Other new markets for Birla included software development and IT services,

which were regrouped into Birla Technologies Ltd. in 2001. The company

entered the power generation market through a joint venture with

Powergen PLC. In 1999, Birla added financial services to its range, forming

a joint venture with Canada's Sun Life Assurance.

Into the mid-2000s, Birla also continued to expand its international network.

The company made its first entry into the North American market, acquiring

the Atholville Pulp Mill in New Brunswick, Canada. The purchase,

completed in 1998, established Birla as the world-leading producer of

viscose staple fiber and also marked its first major foreign acquisition. In

2003, the company turned to Australia, buying up the Nifty Copper mines in

Western Australia. The purchase enabled Birla to develop into an integrated

copper group, supplying its factories in India with raw material. Later that

year, the company bought up a second Australia copper mine, at Mt.

Gordon. In that year, as well, Birla extended its reach into the mainland

Chinese market, where it established a carbon black production unit,

Liaoning Birla Carbon. Back at home, the company launched a project to

build a new aluminum production complex in Orissa, beginning construction

in 2005.

Birla's international expansion continued to drive the company's growth into

the mid-2000s. In 2005, for example, the company reached an agreement to

acquire the St. Anne Nackawic Pulp Mill in Canada. The company also

sought out new markets; in March 2006, the company announced its plans

to build a $350 million viscose staple fiber plant in Laos. Aditya Birla had

grown into one of India's leading conglomerates, and a major player on the

world market.

Principal Subsidiaries

Aditya Birla Chemicals (Thailand) Ltd.; Aditya Birla Nuvo Ltd.; Alexandria

Carbon Black Company S.A.E. (Egypt); Alexandria Fiber Company S.A.E.

(Egypt); AV Cell Inc. (Canada); AV Nackawic Inc. (Canada); Birla Mineral

Resources Pty. Ltd. (Australia); Birla Mt. Gordon Pty. Ltd. (Australia);

Century Textiles; Grasim Industries Limited; Hindalco Industries Limited;

Indo Gulf Fertilisers Limited; Indo Phil Textile Mills (Philippines); Indo Thai

Synthetics; Liaoning Birla Carbon Co. Ltd. (China); Pan Century Edible Oils

(Malaysia); PSI Data Systems Limited; PT Elegant Textile Industry

(Indonesia); PT Indo Bharat Rayon (Indonesia); PT Sunrise Bumi

(Indonesia); Thai Acrylic Fibre; Thai Carbon Black; Thai Peroxide; Thai

Rayon; TransWorks Information Services Ltd.

Principal Competitors

RPG Enterprises; Tata Sons Ltd.; Murugappa Group; Jaypee Group;

Amalgamations Ltd.; Dabur India Ltd.; Balmer Lawrie and Company Ltd.;

Escorts Ltd.; HMT Ltd.; Greaves Cotton Ltd.; Bombay Burmah Trading

Corporation.

Chronology

Key Dates

1870 Seth Shiv Narayan Birla launches a cotton- and jute-trading

business in the town of Pilani, in Rajasthan, India.

1919 Grandson Ghanshyamdas Birla sets up a jute mill, establishing

the family's industrial holdings.

1947 The Birla family sets up the Grasim weaving plant, later adding

production of rayon.

1958 The company establishes Hindalco for production of aluminum.

1966 Indian Rayon Corporation is acquired.

1969 Under Aditya Birla, the company launches international

expansion, founding Indo Thai Synthetics in Thailand.

1978 Carbon black production is launched in Thailand.

1988 Indo Gulf is formed under Hindalco for the production of

fertilizer.

1995 Aditya Birla dies and is succeeded by son Kumar Mangalam

Birla, who later leads a restructuring and streamlining of the group; a

joint venture, Birla AT&T, is formed.

1998 Info Gulf begins copper production; Birla enters Canada with

the purchase of Atholville Pulp Mill in New Brunswick.

1999 Birla adds financial services through an insurance joint venture

with Canada's Sun Life.

2000 Birla AT&T merges with Tata Communications; Hindalco

acquires Indal.

2002 Hindalco restructures and spins off Indo Gulf Fertilizers;

Anapurna Foils is acquired.

2003 Birla acquires Nifty Copper and Mt. Gordon Copper mines in

Australia; the company enters China with the creation of the carbon

black joint venture, Liaoning Birla.

2004 Indal merges into Hindalco.

2005 Construction of a new aluminum facility begins in Orissa, India;

the St. Anne Nackawic Pulp Mill in Canada is acquired.

2006 The company announces plans to build a new viscose staple

fiber plant in Laos.

Additional Details

Public Company

Incorporated: 1870

Employees: 72,000

Sales: $7.59 billion (2005)

Stock Exchanges: India

Ticker Symbol: BIR

NAIC: 331491 Nonferrous Metal (Except Copper and Aluminum)

Rolling, Drawing, and Extruding; 551112 Offices of Other Holding

Companies; 423990 Other Miscellaneous Durable Goods Merchant

Wholesalers; 331111 Iron and Steel Mills; 313210 Broadwoven Fabric

Mills; 325120 Industrial Gas Manufacturing; 325131 Inorganic Dye

and Pigment Manufacturing; 325221 Cellulosic Manmade Fiber

Manufacturing; 327124 Clay Refractory Manufacturing; 313210

Broadwoven Fabric Mills; 322110 Pulp Mills; 322121 Paper (Except

Newsprint) Mills; 325181 Alkalies and Chlorine Manufacturing;

327310 Cement Manufacturing

Further Reference

"AV Birla Group Charts 3-Pronged Growth Plan," India Business

Insight, March 16, 2004.

"Birla Makes Changes," Nonwovens Industry, November 2004, p. 20.

"Birla Plans Expansion," Mining Journal, April 27, 2001, p. 315.

"Birla Renames Thai Unit," Chemical Week, January 25, 2006, p. 14.

Chandler, Clay, "Dealing with Dynasties," Fortune

International, October 31, 2005, p. 56.

Clarke, Jo, "India's Birla in Deal to Buy Second Australia Copper Mine

for $14.3M," American Metal Market, September 25, 2003, p. 4.

"India: High Profile Family-Owned Businesses," International Market

Insight Reports, May 16, 2000.

Lachner, David, "Birla Breaks Ranks," Institution Investor

International Edition, August 2000, p. 16.

Viscusi, Gregory, "India (the World's Billionaires)," Forbes, July 20,

1992, p. 186.

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