Aditya Birla group plans $5-bn capex for Aleris deal, expanding other biz

Aditya Birla group chairman Kumar Mangalam Birla on Thursday said the conglomerate is looking at a capital investment of  $5 billion over the next three years across its businesses both in the home market and abroad.

He said the group has already spent about $3.5 billion in the past two years across various businesses.

"Our capex plans over the next three years is about $5 billion across our businesses both in the country as well as in the US. Aleris, which Novelis is acquiring, is also another aluminium rolled product player, will attract around $3 billion of this projected capex," Birla told The Economist India summit.

The Birlas in July announced that it would snap up the US-based aluminium player Aleris for around $2.58 billion.

The rest of the capex will go into the cement, financial services, chemicals and the fibre businesses both overseas and in the country, he told a panel discussion.

The group is looking at growth across all areas of its businesses but most of it will come from financial services, cement, metals, garment and retail verticals, he said.

When asked the riskiest decision the group has taken so far, Birla said it was the $10 billion acquisition of Novelis by Hindalco in 2008.

"In 2008, we acquired Novelis. Hindalco is into primary aluminium, and so we wanted to go downstream, which is closer to the customer and also it insulates you from cyclicality of a commodity.

"I think this $10-billion acquisition by far was one of the riskiest things that we have done. We put a lot at stake and it was actually larger than Hindalco. But all worked out well for us," he said.

Sounding bullish about the domestic economy he said, "as per our house view, we are looking at a GDP growth of 7.3 -7.5 per cent in FY19."

Though he said the fundamentals of the economy are strong, he listed the continuing rupee fall and the spike in crude oil prices as problem areas.

Calling for free trade, he said any sort of protectionism creates uncertainty and impacts growth and investments.

"We would like to believe that this current round of tariff wars is something that will pass. I am given to understand that it has already impacted global growth by 0.2 per cent, and if it continues for the next couple of months it will impact growth globally by 0.5 per cent," he said.

He also sounded cautious on government imposing import duty on certain items to safeguard domestic market, saying it has to be done on a case by case basis.

"You can't have a one-for-all-kind of a solution. Each commodity has its own issues and you have got to look at whether there is dumping or whether it requires non-fiscal trade barriers. So, it is a very commodity by commodity situation," Birla said.

Birla, who is on board of many prestigious educational institutions, said private sector participation in the sector is still required.

"There is a lot to be done in secondary and higher education space, as well as in the vocational training area. From a business point of view, some of these are very attractive business opportunities as well," he said.