Die’versifi ed?!? Naah!
Gone are the days ‘diversified’ meant ‘troubled’. Robust performances by companies operating in the diversified sector points towards a new era of growth coupled with value!

While India Inc. registered yet another year of outstanding growth and profitability, indicating the start of a new chapter of upswing in the economy, the companies operating in diversified sectors too continued to display their robust performances. The year was loaded with mixed trends for different sectors that comprise this so called ‘diversified’ sector. But critically, earlier the choice of empire builders, diversification creates shareholders’ value without compromising on the conceptual focus on growth.

Dominated by the two traditional Indian business conglomerates – the Tatas and the Birlas – the sector displayed a lot of vibrancy during the past fiscal. Be it Grasim and A.B. Nuvo from the stable of Aditya Birla or Tata Chemicals and Voltas from Tata’s kitty, these well diversified companies continued to move up the growth trajectory. On a leading front, Kesoram Industries – a B.K. Birla flagship – posted a phenomenal surge of around 481% in its net profit. Concentrating more on cement and tyres, Kesoram Industries increased its focus on rayon & chemical businesses.

According to R.K. Gupta, MD, Taurus Mutual Fund, “These (diversify ed) companies have product portfolios that never move in tandem. This allows them to strike a balance among products in an effective manner.” And the recent examples being firms like Kesoram Industries and Grasim, which, despite being cut dry by the cement sector (just after the Budget), were rescued due to their exposure to other segments, the main being Viscose Staple Fibre (VSF) and Rayon Grade Pulp that did pretty well last year.

Grasim, which focused on augmenting its capacity in the last fiscal, continued the endeavour this year as well. It further plans a capex of Rs.45 billion over the next two years across various segments. Cement and VSF, accounting for about 90% of both revenues and operating profits, continued to be the growth enablers for Grasim. Aditya Birla Nuvo too carried on with its image of business builder that it amply showcased by recently listing Idea Cellular on stock exchanges. While acquisition of Minacs by TransWorks (a Nuvo BPO subsidiary), a company four times its size, says the rest. Not only this, with a planned investment of around Rs.2.9 billion in Madura Garments, Nuvo is all set to increase its retail presence also. In the same league, Tata Chemicals increased its profitability by 26% over the last fiscal along with its foray into the ‘fresh produce business’ by entering into a JV with an Irish firm. Voltas also did well particularly in the domestic AC business and with more and more malls coming up, the company is poised for a good time ahead with its industrial ACs & cold storage devices.

The sector showcased huge vibrancy, though a lot is still to come. Diversified is surely not the ‘die’versified of yesteryears, eh!

Birds of a feather...

Whoever said that the era of family run businesses in India is an era bygone, just spoke too soon, and is still eating his words! Four family run companies made it to the top ten of the B&E power 100 list, and many more made their way to the top 100. And it’s not just their spectacular financial performance that sets them apart. They are hungry for growth today & no longer are they willing to rest on their past laurels...

Aspiring for ‘More’
AV Birla Group now plans to diversify into retail

What is required to build a spectacular, unfatomable global footprint? The $24 billion Aditya Birla Group should know. The group has 50% of its revenues pouring from its operations across the world. The combined turnover of the group was $9 billion in FY ’07, as compared to $6 billion in FY ’06. Profits were at $1.25 billion in FY ’07, as against $0.73 billion in FY ’06.

The K. M. Birla-led group made reverberations with the entry in the telecom segment by way of Idea Cellular acquisition in 2006. The $6 billion acquisition of Novelis, an aluminum rolling and recycling company, in 2007 showcases a gargantuan appetite for expansion, which is also being seen in the cement & VSF, where the company is making massive expansion plans.

And now, albeit a trifle late in the day, the group wants to enter retail with the brand name ‘More’. Birla reveals, “Our mission is to change the way people shop. We will give them more.” Surely, the investors would not mind ‘more’ either!

The all pervasive Tata!
Just count the zeros, $30 billion in the next 3-5 years.

Blink once & you might risk missing out some expansion or acquisition plan by the Tata group. With a stupendous Rs.1.6 trillion expansion plan announced in 2006, the Tatas seem to have decided that they have to move far ahead of the rest. Six Tata group companies featured in the B&E Power list, with combined profits worth $2.83 billion.

In early 2007, Tata Steel took the world by the storm when it decided to acquire Anglo-Dutch steel maker Corus for a highly profligate sum of $12 billion. Tata Tea made a $677 million acquisition of Glaceau (which it sold off to Coca Cola recently for $1.2 billion). The Taj Group initiated the Ginger group of hotels venture during the period. The Tatas also initiated the Infiniti chain of retail stores in late 2006.

The group has caused it’s fair share of controversy too, in particular with the Rs. 1 lakh car plant in Singur, West Bengal. Besides, the group does faces great risk due to a higher debt-equity ratio. No risk, no gain, as they say!

Ambitious Ambanis!
Read on to know the latest about India’s famed fable…

If it’s true that Dhirubhai Ambani infused life into India’s moribund stock market, than it won’t be an exaggeration, if one were to conclude that both Anil & Mukesh have kept that life, that vigour & vitality very much intact.

It’s the investors that have always stood by Reliance and that’s because of tremendous wealth created by both the brothers even after the de-merger of the business. The m-cap of Reliance Industries stood at Rs.1,153 billion, as on June 8, 2007 compared to Rs.683 billion a year ago, a smart 69% increase, what else could an investor ask for?

For 2006-07, net profits of Mukesh Ambani controlled – Reliance Industries crossed Rs.10 billion mark. The turnover was up by 24% and touched $25.51 billion mark, while exports crossed the $15.02 billion mark accounting for 12% of aggregate exports from India. The net profits of Anil Ambani controlled – Reliance Communications reached $209 million and revenues at $851 million in a short span of time.

While Mukesh continues his romance with black gold, Anil has forayed intonext-gen business like Financial services & Telecom and plans to supersede some of the established players. Two different set of business lines, but in the line with investors’ expectations!

The Bajaj supernova!
Will Bajaj emerge as a winner from demerger?

It has become almost a ‘business objective’ among two wheeler manufacturers to focus on specific segments. Hero Honda did it with the entry segment and now Bajaj is demonstrating this by focusing on the premium segment.

Bajaj as a company is India’s second largest two-wheeler manufacturer and maintains a market share of 34% (+3 points). Apart from the pulsating performance in the domestic market, the company is also going great guns in the international markets like South East Asia. For 2006-07, Bajaj Auto had revenues of $2.38 billion and profits worth $309 million.

It seems that Bajaj is well ensconced in its chosen track and the recent demerger, forming Bajaj Holdings and Investment Limited (BHIL) and Bajaj Finserv Limited (BFL), is just a pointer towards bigger plans for the future. The de-merger might unlock value and leave more room for appreciation for investors.

The of late entrepreneur!
The Bharti group is barging into retail and finance...

We all are aware of the impeccable brand image that Airtel has created in the minds of Indian consumers. Bharti Group now plans to replicate the same success of Airtel with it’s new ventures, too. Bharti Group, which enjoys leadership in the telecom segment for as many years as the existence of wireless telecom segment itself, is now trying a connect with consumers through financial services (insurance). And helping Bharti in this mission is the French insurance giant AXA. The JV for the life insurance segment will invest Rs.5 billion in the next 2-3 years and will have a country wide presence through multi-channel distribution. Besides, Bharti is also strategizing for mutual funds.

Of late, the Bharti Group has entered into the retail segment too. Bharti along with Fortune 500 company – Walmart will study and evaluate the retail market in India and identify business opportunities together within the existing guidelines.

Bharti plans to shell out $2-2.5 billion by 2015 to develop 10 million square feet across all cities. With organised retailing being the next big thing, Bharti too will ring loud in this segment.