As Acquisitive As Ever

The Aditya Birla Group has used an inorganic growth strategy over the years. Hindalco’s latest purchase of U.S. aluminium firm Aleris will help it diversify its product basket and counter risks.

- Aveek Datta

IN 2007, A DAY AFTER Hindalco Industries announced its intention to acquire U.S.  aluminium maker Novelis for $6 billion, the Aditya Birla Group company’s stock price fell close to 5% on the BSE. Cut to 2018, and something similar happened when Hindalco’s share price declined 1.07% a day after it announced it had agreed to acquire another U.S.-based aluminium products manufacturer, Aleris, for $2.58 billion. A knee-jerk reaction from the market to acquisitions announced by the $44 billion Aditya Birla Group, with interests ranging from metals and mining to retail and telecom, isn’t unexpected. Something similar happened when another group firm, UltraTech Cement, announced the acquisition of Jaypee Cement’s assets in Gujarat in 2013. Each time, Aditya Birla Group chairman Kumar Mangalam Birla appeared to know something the market didn’t immediately grasp, for most of the inorganic growth decisions taken by the 51-year-old industrialist have created value for the group.

Take Novelis, for instance. The U.S.-based company, which makes downstream products like rolled aluminium for beverage cans and aluminium sheets for automotive use, now accounts for a lion’s share of Hindalco’s consolidated revenues and profitability. It accounted for 62% of Hindalco’s consolidated revenues for FY18 (₹1,15,818 crore) and close to 56% of operating profits (₹14,189 crore).