Mr. Birla, thank you very much for accepting the award.
No, it's my privilege entirely.
Thank you so much for accepting again. So the context of this discussion is we have a vision series where we interact with stellar business leaders like yourselves, and the message to entrepreneurs is from your journey and how you build successful businesses not only in India but outside India also. So many of my questions will be based on that interaction as such.
Indian entrepreneurs are backed by private equity and venture capital as such. Now fundamentally that's a new phenomenon in India, in some sense it's about 20 years old as such, and you had built your business I presume without capital which is risk capital overall. So as we move forward in the Indian market space, what was your experience on building not only Indian businesses but global businesses without risk capital, and what can entrepreneurs learn from that?
Well, I think to have risk capital invested in you requires a slightly different kind of method of working, style of working, culture, because timelines typically wouldn't be aligned with our timelines as very long-term investors. We've used in terms of financing largely our focus has been on internal accruals. Cash for us is a very important metric of performance, and strong cash accruals is something that we're very focused on. And therefore, logically speaking, internal accruals has been a big source of funding for us, as has been debt. But having said that, I'll share with you that our debt to EBITDA for the whole group today is less than one. So it's not that we are prolific about taking debt. Debt is a last resort. Equity of course is even further away. That actually is the last resort. Debt comes before that. All our investments are with the very long-term in mind. You would see that in all of our companies. Most of them are listed. And I think the entrepreneurial mindset exists if you look at our businesses, if you look at the way people operate, that's where the entrepreneurship shines. I think that we are a very highly delegated organization. Our CEOs are highly empowered. We have a good alignment with each of our business leaders about what we want to do with the business, where we want to go, where we don't want to go equally. And I think that the entrepreneurial spirit of ABG is one of our biggest strengths.
So I watched one of your interviews where you mentioned that in the paint business you started five paint factories in 9 months, and that's the speed at which entrepreneurs wish to move all the time. How do you bring speed, agility in such a large business, because many entrepreneurs obviously are doing it or want to do it as such.
You're right. In fact, we commissioned our sixth plant in Bengaluru six days from now. So paints has been a very interesting journey. I mean we kind of introspected about it, studied the sector from basic stuff like how much capacity should we start with, one plant, two plants, should we build, acquire, if six plants or four plants or five plants, where just the choice of location was a big one. We were very clear that when we come into the paints business we have a right to win. So we are a large player in white cement and in grey cement we are the largest in the country by far, and there is an overlap in distribution of both these businesses with paints. So the distribution channel of paints is somewhat similar to or overlaps to an extent with that of grey cement and white cement. That's a right to win which is sort of very important in a business that's been around for 50-60 years. We obviously wanted to signal and we are long-term investors. We're here to stay. When we looked at the industry landscape, there's a huge difference between the number two and the rest, number one and the rest of the players. So we said we must come in with a bang. So six plants in about one and a half years, 40% of the industry's capacity. Like I said, it's an industry that's been around for a very very long time. So 40% of that capacity is actually pretty large and it speaks of our intent to be a large player, to be a dominant player, as also to be there for the long run. I think that I'd completely credit the leadership and the team. Our role, my role has been in being a very active participant in the discussion, in the deliberations to the run-up of the business. I think it was my role to articulate what I thought of the paints industry, why I thought this was an opportunity for us, the fit in terms of our strengths, what we brought to the table, gaps in skill sets. But I think that in this case the devil has been in the detail, and the detail especially on the front of execution, acquiring land, technology, recruiting people, the whole configuration of the six plants from the point of view of the logistical distance from different markets, cost of logistics. So I think direction setting, alignment with the team so that we are all aligned and we're marching the same direction, very clear about what the goal is, and I think the quality of execution has been truly outstanding.
And that's leading to speed.
Absolutely. I think alignment is very important. When there's alignment from me right up to an engineer on the shop floor almost, that helps a lot.
Now the ABG group has also expanded worldwide, and many of them through acquisitions. In one of your talks you mentioned something like making presentations beyond the balance sheet. Could you expand on that?
I think this referred to an acquisition we were making in Canada, one of the pulp mills. Yeah. And it was, I remember it was in New Brunswick. It's an industrial, it's a mill city in the sense that the entire livelihood of people there depended on this pulp mill that we were set to acquire. We weren't really known then and there was no social media, so this was about, whilst we were and are a household name in India, it was ironic that people didn't know us there, and therefore we had to sell our credentials. We had to tell them who we are, our history, our kind of vision and the country track record. And in doing that we were also selling the story of India. And therefore we started off with presenting to all the different interest groups from the workers to the local authorities and many more such interest groups, talking about India, about our background, what we would do with the mill, we were a strategic player there for the long run, not a transition investor, what we would do about jobs and all of that. So that was a very different kind of an experience.
And you also mentioned in the same talk which you were giving that people mattered a lot. And many of the Indian conglomerates are not actually acquiring much outside the country, but definitely entrepreneurs are now growing to a level. In our own portfolio we have two companies who are almost $1 billion revenue each, Lenskart and FirstCry. Now the question is when they go outside the country, some of them are open to acquisitions right now and not just organic growth. And you also mentioned that we like to keep the people, and in fact in the same company perhaps the CFO got promoted to a CEO as such. So what is your view on how entrepreneurs who are wanting to go global, how should they address acquisitions from not just a geography expansion or a product expansion but also from a people point of view, because that's a very different culture outside the country.
So I think the acceptance by the people of the company that you're set to acquire is extremely important. It's about tapping into their minds and their hearts. And when we acquired Novelis for $6 billion in I think it was 2007 or 2008, all the different, we had different teams going out to do the due diligence and meeting people, and the one question that was primary in my mind was how would they react to an Indian company acquiring them. You know, India didn't have the stature it has today in the global world of business. And that to me was the primary concern, because if there was any kind of negativity about an Indian company acquiring them, I would have backed off. You know, then all the financials, all the business logic would have fallen by the wayside, you would back off. So I think the fact that they saw us as long-term investors, willing to put in long-term capital, invest for the long term, and of course learn about our history, by then we had a track record of making acquisitions, making them work. They also knew that we intended not to change the leadership of the company, and that they had had opportunities to also grow with the Birla group, not just in their present company but also in different businesses of the group. So I think they saw authenticity, and that to me was a clinching moment, a criteria for finally deciding to make that acquisition. So I think when you're acquiring a company, acquiring not just a business but the company, there are people who come in, it's very important for them to understand your culture, your values. In fact one of the first things we do when we acquire a company is to have a workshop for our new employees talking about for example our value system, our articulated values, what they mean. For example commitment can mean different things in different cultures, so what we mean by commitment, what non-compliance can lead to, what compliance looks like. I think it's very important to integrate them at least in terms of the values of the group, if not cultures, because cultures can be different in different parts of the world and different kinds of businesses. So our anchor from that point of view is our value system. So people in an acquisition I think is the most important thing that one needs to address.
In a similar talk you also mentioned we are deeply global and unmistakably local. Could you elaborate on what you meant by that?
So I think it's about the need for global companies to become global, which is be global but still remain local. Say for example with the same company Novelis, we're putting up a $4.7 billion aluminium rolling mill in Alabama in the US. And with that we are also enabling the setting up or the growth of an entire ecosystem. It's very important to impact local communities, to create jobs, lots of social impact initiatives, so that they feel one with you, they feel that this is a company, global or Indian in terms of its birth, but very much local in terms of their understanding of our situation, of our problems, of what value we can provide to them. So I think more so in the last few years, the importance of being local, which is global but still local, has been highlighted and heightened in so many ways.
Interesting. Now as entrepreneurial companies grow, the founder CEO obviously gets somewhat removed from the trenches, and then there are multiple businesses, either geographies running either inside the country or outside the country. This seems to be in some cases by design, in some cases by accident, a corporate headquarters as such. Again in one of your talks you mentioned the role of a dynamic corporate center, and it's not just an administrative center which coordinates things but is also an engine for growth. That would be something very interesting for entrepreneurs who are growing very large today. Love to have your elaboration.
