Exclusive Session with Padma Bhushan Kumar Mangalam Birla

So, you know, let me say that my children are now—my oldest daughter is 30, my son is 28, my younger one, my young girl is 23. So up until a few years ago, they were deciding—maybe seven, eight years ago—they were toying with different options as to what they want to do in terms of career. And the only thing I said is that you can do what you like, but you cannot become a CA because it just takes away the spark from the years of your life when everyone's having a really good time. You know, it indulges your spirit to that extent. Everyone's partying, having a good time. You're studying, or at least you're supposed to be studying. Even if you're not studying, you're thinking about 'I should be studying.' I had some very accommodating friends who would, you know, adjust their programs so that I could be included. But yes, it was very treacherous. Any CA here would vouch for that. But I think I'm really grateful to my father because as things happened, I think my CA qualification, what I learned there, was really invaluable. If it wasn't for that, then I think I would have been in a bigger soup. So, you know, I think that listening to your parents is something that we should all do.

No, I mean, in a sense, it depends. The businesses that we have grown over the years, I think I know fairly well. But I think fluency with numbers is a big advantage for a leader where you don't depend on someone else. You can read numbers and you can see numbers and tell a story. Your dependency on anyone for anything—numbers are, you know, in many ways the lifeline of a business. So I think your confidence is immensely boosted by the fact that you can see the balance sheet, you can see a P&L, and maybe even without knowing the business, you can tell the health of a business. You can more or less say where margins should go up or cash flow can go up. So I think number fluency is something that is a great advantage, and I'm always grateful that I went through that rigor doing my CA.

I think you should let him do whatever he wants to do. And CA, you know, they have revised the syllabus quite a lot. They made it more practical. They have reduced the rigor. When I gave it, the pass rate was 2%. Now I think it's 12-13%. So the chance of getting out once you get in are much better. So I think it depends on each individual child, depends on what they want to pursue, what they like to do. I think it's very important that young people have complete stake in what they want to do in the future, and even if that makes them make mistakes, I think you should let them. For your son, but for anyone, it's important that they take a call on what they want to do in their lives.

So that, as you can imagine, was very tough because a number of things were happening together at the same time for me. My father had passed away. He was someone who people in the organization really looked up to, with a lot of regard, with a lot of affection. He was, you know, like a brother or a son or whatever it is to different people. So there was an emotional connect that people had with him. But at the same time, the external world was changing a lot. We were in the throes of liberalization. You had foreign competition right in your backyard, which wasn't there earlier. Up until then, India was a very insulated market, for those of you—I'm sure a lot of people here remember that. And we had suddenly opened the doors, the government had, to foreign competition. So the competence it required to succeed was very different from what it had required up until then. The investor profile had changed; you had FIIs coming in, their demands, their asks were very different. So I think everything coming together was a huge change. If it was just one factor, it would have been far less complex. But I think that sometimes the formula for success changes, and what worked in the past won't work in the future. And that's the kind of situation that I found myself in. I was also very young. I was involved with only a part of the organization before my father passed away. So a lot of it was very new to me. Most people in the organization, barring a few, didn't know me. I was also of a different mindset. I had studied abroad, done my MBA abroad, and you know, each person is shaped by their own influences, and influences are different for each person. And after a while, I believed that we required different kinds of skill sets to succeed in the future. But success is something that can also become a barrier, and I don't think people were able to understand why we need to change. You know, we've been very successful. We were very successful even then, and I don't think that I had the communication skills that I should have had. Maybe because I was very young, because a lot of these people I had seen when I was growing up. I was also, you know, forming my own thoughts. I don't think I was able to clearly articulate, you know, in retrospect, as clearly as I could have. Even if I had, I don't think there was a mindset of people saying that, okay, if you're in a crisis, it's much easier to change because then there's maybe an existential crisis. But if you're doing well and you have done well, then to ask people to change becomes a huge challenge. I also brought in a lot of change. And I think whilst it was all for the right reasons from my perspective, I think that people couldn't understand. They missed my father. You know, he had a very personal connect with people. So the first day that I went to work, my father, in the very first meeting, he was very angry with someone. I can't remember. And he was shouting at him, and I've never seen a grown-up man's knees actually knock. His knees were knocking. He had files in his hand, just fell off his hand. So I went back to my room and I called up my friend and I said, you know, I'm on an elephant now and I can't get off it. So he said, you know, why don't you just hang in there, see how it goes. It's your first day at work. But I saw something about him that I'd never seen before. But it was very strange because by the evening when I was about to leave and go home, I was passing by his room and I saw that he and the person who he was firing in the morning were sitting together and they were having tea and, you know, talking to each other as if, you know, as if one would think that they're very long-lost friends. So, you know, he had that kind of personal connect that I didn't have, partly because I didn't know these people. They didn't know me. I was much younger. He also was very charismatic, and charisma is something that you can't define. You see someone and you feel that they're charismatic. Like, let's say I know a man who is charismatic and I know that I can't be like that because I have maybe other strengths. So there were lots of that that, you know, they missed. It was like an organization in mourning. I was very young, obviously, but they were very supportive to the extent that they could be, but they genuinely had some issues about change. So for example, I asked a foreign faculty member to come and have a session with us on strategy because Indian business didn't need to strategize earlier. You got a license, you put up a plant, the focus was on running the plant, you know, milk the asset and make the money. And at the end of that three, four-hour session, I remember one of the senior-most people getting up and saying, 'So I think the best strategy is not to have a strategy.' And I was like, but you know, he genuinely believed that. So there was a major mindset shift that was required. I wanted a different kind of people coming into the organization. I didn't like the fact that if you are a relative of someone in the company, you just come in by default. That didn't work for me. I was not of that mindset. The wrong kind of people, you know, landed up coming in. I remember that we got this policy—I brought in this policy of if you're a near relation, there has to be a process by which, you know, you come into the organization. Otherwise, if you're a son, grandson, job was guaranteed. So we said, you know, because it was a very big issue. It sounds very strange now, but it was a very big issue for me back then because what we were trying to create, or I was trying to create, was a very meritocratic organization. So we did that, and I remember one senior person coming and being very angry with me. And this happened a few times. He said, you know, 'My younger son, you've ruined his future.' I literally said that. So I said, 'What did I do?' So he said, you know, 'My plan was to get him into the company, and now you have this new policy, and, you know, he can't join.' So I started talking to him. I realized that he has two sons. This is why it sounds a little funny, but it's not. So he had one son who was like a star, an IIT graduate, and there was this son, a graduate, just about, and he wanted to get him into our organization. So I said to him, you know, 'Your son who's an IIT, I'm very happy to take him in, but this only graduation thing won't work because he won't be able to cope.' Now inside our organization, so many conversations like this. It was, I think, very difficult for people. It was very difficult for me. But, you know, about a year, two years, things started to settle down. So that's a process of churn that we would have had to go through.

So I'll just give you a background. My older daughter, her name is Ananya. Ten years back when we were talking, Ana wanted to become a singer. My son, Armaan, wanted to become a cricketer. So I mean, obviously my wife is more liberal. I was also liberal, but I was quite taken aback because this was something that I had not expected. I had thought that they will go to an undergrad, you know, BBA kind of an education, and then perhaps do an MBA and join work. But they had very different passions. So I thought about it very long and hard, and I thought that if those passions helped them to develop their own identities and get an identity of their own. When I joined the business, even when my father was there, I was the promoter, as the owner's son, I was a pygmy over there, and it was very difficult even when he was there to make my presence felt. So I thought that, you know, if these kids do a good job, or if they don't, then they learn from their own failures, but why deprive them of following their passion? And, you know, with God's grace, they had also the leeway where they could do it. Also, I said to them that, you know, if you're a singer, if you're performing on stage, or if you're a cricketer, you're playing on the pitch, there's no way that Mom and I can help you. And I think that's what really kind of they wanted to do. They wanted to prove their own identity. Both did very well. My son played for—when he left cricket, he was captaining Ranji for, I think, Madhya Pradesh. He started off by serving drinks to the players in the dressing room, and every day was a new day because the day you played well, you got to play the next day; otherwise, you were back, you know, on the wings. My daughter, she has become quite known as a singer. She has a fan base of her own. She was in Oxford. She was on the dean's list, doing very well. But a year after that, after being in Oxford, she told me that, 'Dad, I'm not having a good time. You have to study by yourself. There's a lot of self-study. And, you know, I'm not motivated. I'm spending a lot of my time playing the guitar and singing in the local gyms. And I'm very sure I want to start a microfinance business.' I didn't know what microfinance was then, 12 years ago. So I said, 'Where did this thought come from?' I still don't know how she got that thought. But she said, 'I'm very clear that that's what I want to do, and this is really a waste of time for me.' So we said, 'That's fine.' She started her own microfinance business called Svatantra at 18, and in 12 years, it's become the second largest in the country. She's going to list this year. So they both have had their own journeys. My son, after playing cricket, came and worked for me for four years. He came back last year after doing a two-year full-time MBA at Harvard. I find that both these alternate careers have really shaped their personality. For example, in my son, I see a lot of discipline. I could be sitting in a meeting and looking at the mobile at times. He'll never do that. Be bang on time for a meeting. My daughter, since she's been an entrepreneur of her own, has, you know, the advantages of having been successful, about how to deal with people, situations. So my son, of course, worked for me for four years. Even before he went, he now is completely immersed. I've been able to convince my daughter, and she's happy to do that now, that besides running her own business, you should also be a part of the group. I think she's at a point where she thinks she's achieved what she wanted to, or she's far down that road with microfinance, and this is a good time for her to also contribute and be a part of the group. She's also launching her own new businesses in cosmetics. She's launched Birla Studios, that's going to be in making movies. My son, by himself, is also in the F&B business. Recently tied up with Joe and the Juice to come to India. So they have their own set of businesses because I think those are what they're passionate about, and I wanted them to do things that they are also passionate about. They don't have to just come and start doing businesses that the group has been in. I think that, you know, I had made a lot of change when I came in. Five years after I came in, everything had changed practically except for the basic value system, which I think we hold true even today. So I was wondering what these kids will do because, you know, it's time to be on the other side. But I think that our organization, because the external world hasn't changed as much as it had when I was coming in, we are a contemporary organization, meritocratic. So I don't think that they are finding the need to change. They want their own teams, which they are recruiting. Whatever tweaks they want to do in processes, systems are not very earth-shattering like I did. And for the businesses that they're involved with, they have a free hand to do that. They have their own way of equating with their teams, of building teams, because both their personalities are different, their styles are different, and I think it's very good to see that as long as they're working hard, they have a great work ethic. That's what matters most.

So, I don't think that we've had any kind of friction, with God's grace. I have my younger daughter who's going to join in July, and she's a different kettle of fish. So I have to see. But they keep telling me that, 'Papa, to induct two of us in business must be very hard for you.' But actually it's not, because I think they're very aligned. They understand and align with the business. They have a point of view which we discuss and change the vision if it needs be. And they are really playing the role of very active members of a team. So yes, I'm very relieved and happy.

So when I had come to work, I think for people of my vintage, we'll probably remember that at that time investors had this obsession with what they call core competence, as in that if you're in textiles, stay only in textiles; if you're in, whatever, let's say cement, stay only in cement. I didn't agree with that point of view because India was growing and was going to grow and throw up many opportunities. And if you just stuck to the knitting—they used to say core competence, stick to the knitting—otherwise we don't want to invest in your company, which is fine. But investors are very fickle; they are in one day and out after two days, whilst we are growing our businesses for maybe the next few generations. So I had taken a call even then, which was a contrarian call, that we want to be a conglomerate at a group level. But what I did do is that if we had metals in two businesses, Hindalco and one more, two companies, then I rearranged so that every legal entity, every company, had the same set of businesses and it didn't duplicate. But we had taken a call even then that we will want to grow in different businesses. Personally, I found that more exciting. Also, I think it would capture the growth story of India as opposed to us getting isolated. So having said that, since that's the underlying logic of going into several businesses over the years, and like you said, our underpinning assumption has been that we want to be number one, number two, or number three in a new business in the foreseeable future. So we either have the competence to do that or we have a way to acquire the competence to do that, and we've had a very good success rate. In a couple of smaller businesses, we haven't been able to achieve that, and I've actually exited those businesses. But I think that the crux of the matter is about attracting talent and delegating, decentralizing. So I think that today what we have is a distributed, what I call a distributed model of leadership, where it's just not me, but we have leaders across the organization. They are, you know, we're aligned in terms of vision, we are aligned in terms of our values. We have a set of values which we have as our basic anchor, whichever business you might be in. But cultures are different because you can't have someone in the financial business have the same culture as someone in the paints business. The demography is different. The kind of skills required are different. So if you're that ambitious, like I was and have been and am, and want to grow in different businesses, the only way you can—and at that time I was the only one in the family in any case—the only way you can do that is to build teams and to induct people, you know, with the right talent and who have the right kind of commitment and the capability to actually roll up their sleeves and be in the trenches and work. So I think that's the part that we've been able to do well.

Absolutely. I think trusteeship is a basic, it's an underlying philosophy. So, you know, capital allocation, absolutely. I must have said no 20 times to different business proposals or new business proposals or proposals which I just didn't think fit in with our value system. If I had done those, maybe it would have grown a couple of percentage faster, even more than that, but we didn't want to take a haircut on the values that we stand for. So I think trusteeship is basically an ethos or a sentiment that you hold a company, an asset, in a spirit of being a trustee for people, not just for the promoters, as opposed to brute capitalism, as they call it, where it's only for yourself and your family. So that's an underlying philosophy that holds true in any business context. Whether the business is doing well, not doing well, you know, whether your market cap has gone up, gone down, that's something that is universal in that sense.

So Novelis was a very unusual case, and we can talk about it sometime. But I think today, my response to your question of international M&A is very different from what it would be even two or three years back. So I think that given whatever is happening just now. So if you look at it, look at the kind of volatility that we have seen in the last couple of months. Gold has peaked in terms of prices. Duties have first gone up to 50%, now they've come down to 18%. $3 trillion of the value of software companies have been sold in the last one week across the world. At one time, American markets spoke about only software, only technology; now they're talking about anything but technology, basically, because of the fear of what AI can do. So I think with the kind of volatility that exists today in the world, and it's more ferocious than it's ever been in the past, it's been—I would say that even the pace of change has changed because it's from all directions. It can come from a direction that you didn't anticipate at all and wasn't possible sometimes to anticipate. I think that this is the time to double down on India. I think just given the India growth story, all of us know it, 8 to 10%, 7 to 10% of annual growth for two decades in the future is a huge thing. We can talk about how, but in a way, we have our stars aligned as a country. For example, we have political continuity, political stability. We have regulators in place, like say SEBI. Without regulators, an economy can't grow for very long. So we have institutions in place, we have markets in place. About 80% of our GDP growth of 8% comes from internal consumption, internal manufacturing. So there's a great sense of, you know, self-sufficiency. You have one billion young people in the workforce today, as opposed to European and maybe Japanese, Chinese economies where aging has become a problem. So you really have a country where it's like many countries, many markets rolled into one. So I would think that the opportunity now is in India. I think you should go global only if, say, for example, your customers require you to go global. We are investing in Alabama in North America, $5 billion in one location, which we've never done before, even in India. But that is because what we make there—aluminum foil for auto and for beverage cans—is something that we are already doing there, and our customers want more of that. It's a business we've, through Novelis, been in now for 25 years. And you have a customer, you have demand that is known, there is no other substitute that can dislocate that demand. Therefore, we're growing where our customer wants us to grow. In carbon black, for example, we are in the process of setting up three plants—India, Thailand, Hungary—but that again is because we think global, but we need to be local because in that business we've stayed close to where our customers are because of so many good things—inventory, you know, responsiveness, time to respond. But if you're not global, then I think this is a wrong time to become global. I think you can be in India and run a business that is globally benchmarked in terms of market share, efficiencies, customer connect, all of that. So I think that this is really India's time and India's age, and I think that that's something that's recognized by people across the world. So unless there's a compelling reason to go global, like for example you have a technology that you have an IP on which no one can replicate...

Cost arbitrage is no longer a comparative advantage, or you're in a business where your customers need you to also have a presence, let's say, somewhere in Europe. I don't think that one should go and invest overseas in a hurry, just given the amount of flux that we're seeing around us.

I'm glad you didn't ask about work-life balance because that is completely quite messed up and I think it'll remain like that. I don't think there's anything like work-life balance. I think you're asking me about how I manage my time at work. So I think that the large businesses take up time and that allocation to time for them is how it should be. New businesses, you're getting into a new business because you believe you can create immense value. So they take time. Businesses that are in trouble, they take time. And that keeps shifting over a period of time. Earlier I used to, for example, if we were looking at financial services businesses, we would spend one whole day reviewing a business. Now I focus much more on deeper dive, more on depth than breadth. So for example, we could have a two-hour, one-hour meeting on, for example, in our mutual fund, we want to have more of passives. We don't have a passive fund that's doing as well as the others. So we would probably have a one-hour, one-and-a-half-hour meeting on how to tackle that and make that into a growth area as opposed to doing a sweeping review of the whole business. Or let's say in cement, we talk about what else we can do to dislodge the market leader, which is, we've got 8% share from them in one year and we plan to get much more. So specific strategies towards that. I'm not getting into manufacturing and all of that because that's doing fine. So I think that now from my point of view, it's more about deeper dives into specific issues where I believe or we believe value can get created. The businesses are actually quite independently run on a day-to-day, month-to-month basis with people who are very qualified. They're obviously also very experienced, very committed. They have also grown in the roles. So many of us have now grown together. I always feel very proud of the fact that I have about 2,000 colleagues who've now been with me for 20 years and they I think provide some kind of a stability. So they kind of provide, I think I don't have empirical proof but I think they also provide stability to the organization as a whole. We move people around businesses. So if you ask anyone, they would say that they've been in at least three businesses of the group. So then that also creates a bond across the group. So I'm not only sitting and doing paints. I've also by the way been in, let's say, cement. And by the way, I've also been in fiber in different roles and that has helped me grow as a leader. So when you have leaders with that kind of an experience, to delegate and decentralize with a view to create headroom for yourself in terms of time becomes much easier. So I think investment in people and talent is something that helps me to create time for myself. Capital depends on, we have our criteria we want to meet, it's financial. Basically, we also want to be dominant. So we got into paint because, reason to be, we are in cement distribution to an extent is common. So we can start to distribute across the country pretty quickly. That's our reason to be. We want to be number two in three years. We are number two, we are number three today after a year. So it bases some very specific criteria. I hope that answers your question.

The culture is not the same actually. And I don't even aim to have the same culture because let's say in financial services, it's a much younger demographic as opposed to say any other business, say chemicals, where it's more manufacturing focused. You have a part that's consumer focused, customer focused, but it's a different culture. The people who manufacture, engineers, who live in a colony, who are on the shop floor, their mindset is very different. So it's not, people who are in the jewelry business and they're rolling out 10 stores a quarter, I mean a month, they'll roll out 22 stores in March. It's not possible for them to have the same culture as someone in cement or in financial services. So everyone's culture, every business has its own culture. We have a set of values which we articulate. If you're new in the group, you will have an orientation about values. If you make a merger, new employees will have an orientation around values. We have seven values. That gives like an anchor. So you know, I say commitment is a value. Commitment means very different things in our context versus say a Southeast Asian context versus a European context versus an American context. So I think that we contextualize what we call our values and that is the common running thread in terms of basics. Culture is also, you can't have the same culture in North America as you have in India or in Egypt. So it's not even something that I've tried to achieve.

Consistency of values, the same values. Yeah, consistency of values is something that everyone understands, everyone knows, they relate with it. If you don't relate with it, then you know, more or less without exception, someone who's not in sync with values will exit the organization. Either the organization will identify him as someone who doesn't fit in. In a rare case, they might decide to exit because they don't relate with you. So I think that commonality of values is something that all 280,000 people will know and practice.

So every business is run by its own team. I'm the only common factor. Now my children, as and when they become more and more active, otherwise each team is completely independent. They don't have to worry about, fashion retail doesn't worry about what cement is doing. But we have a lot of common platforms where they come together. For example, we have a management and development center in New Bombay and about 7,000 people will go through that in the course of a year. So there is common learning, there's a common platform. And we teach real stuff. So if someone is going to become what we call in our parlance a finance head, going to become a P&L head. So I don't know what that would mean. Let's say in your business, technical head, he wants to become, he's becoming profit and loss head of let's say one region or one unit, one plant. Then they go through a certain training. It's designed by me with lots of inputs. It's called Chairman's Cutting Edge. Anyone who's going through that transition will go through that. So that there's a certain common level of understanding. So an engineer must, at a senior level, he must be able to read a balance sheet and profit and loss and cash flow and make sense of it. Not just be the best builder or fitter or whatever, be the best in managing an aluminum rod mill. That kind of completeness, that kind of wholeness as a senior person we would expect. So every business has its own team, their own culture. Like I was saying, I was reviewing the fashion retail business. I was giving them a very hard time. And then in a smaller group, my CEO said, you know, you told us this. You didn't tell us we've grown 21% in EBITDA. I don't think my CEO of cement would do that. Different generation, different profile. So every culture is different and profile is different. And you know, people who are in customer-focused businesses, if you're selling on the shop floor, then there's a different kind of aggression, different kind of attitude you have towards things where you have to sell so much in a particular day, you have to sell a certain thing of garments volume or whatever cross of garments. So the business also shapes.

Guru school. So that's a great idea. I think you know, we are able to mentor the leaders according to our need and that ownership and all. I think otherwise creating so many people, identifying so many new resources, new places, new people, new mentality is very difficult. It's a cool idea. Thank you so much.

So like I was telling you, everyone knows this, we're the fastest large economy in the world in terms of our growth. 7-8% for 20 years is huge. In terms of, we have a huge internal market. 80% of our GDP is constituted of internally generated consumption or manufacturing. We have a stable government with strong regulators. We have a workforce, a billion people in the workforce in the next few years. That's huge. And these are people who, I mean, the bulk of them I'd say are very bright. I think that the intellectual capability of an average Indian student is far brighter than that of kids overseas. I wouldn't say that in my group, this thing, but I think that that is true because of the rigor that they go through. I think all of these factors combined, we've got great political leadership. All these factors combined make us a force to reckon with not just globally but also as a place to do business in. So why would you then, as an Indian business house or an Indian businessman, not take advantage of that?

I don't know about what other people are facing, but I think our biggest challenge is that our goal has been that for any position that comes up at a senior level, we should have three people who are competing for it internally. So you're growing that much of talent. But we have grown much faster than what we had anticipated. So for one important role or one senior role, maybe we have not enough talent and therefore we're having to look outside to get in senior people. It's called lateral recruiting. But I'm finding it very difficult to get people to run businesses or a part of the business of our scale and complexity who I can get from outside and transport. So someone would have done at least, should have done at least, you know, 60% of a role that's as complex and large. If you don't find that, then that's a problem because then you're having to take a bet on people who are far less experienced. So I think growing talent fast enough to fill roles that come up within the company is as of today our biggest challenge.

Absolutely. I was saying earlier that, you know, it's not a rules-based order anymore, now it's a deals-based order internationally. So your traditional trade blocks don't exist anymore. Your energy partners might be very different from your technology partners. These are one-on-one relationships. It's not like it used to be in the past where there were set blocks of countries that normally come together or partner together. So in this kind of deals-based order, the uncertainty of doing business obviously becomes much more. Like I was saying, if in the last three months gold has seen its highest peak, the favorite of the market in India, look at our Indian IT companies, they've lopped off their market cap by 30%, 40%. I don't understand why because I don't know the sector, but I think the impact of AI will take a little longer and I think that this kind of reaction is perhaps extreme. But to have 40% of your market cap gone in three months, it's a huge thing. I don't think it would have happened earlier and that's happened with software companies globally. So I think yes, unless you have a compelling reason to grow internationally and one of that has to be returns much higher than in the past, I think that it's a good time to focus on India.

I think it's important to follow your passion and to be consistent. So not let, you know, hurdles sidetrack you and to stay in there and do consistently what you set out to do. As simple as that.

So 18 times is at work only, by the way. I excluded outside of work. No, I actually, when you are working with people who are very committed, very smart, then you don't need to lose your, to me losing your temper is a little being out of control which I don't like. No, it may have happened once or twice more. I don't remember. But it's not my way of working.

My two or three of my favorite watches. I'm very fond of watches.

Cement war. It's not a passion. Both have to be done and done really hard. Both teams are committed to it. They're like, you know, dragon after fire every day. So, it's nothing to do with my passion.