The start of a succession plan at the Aditya Birla group

Kumar Mangalam Birla, Chairman of Aditya Birla Group. (File image)

Slowly but surely, the Aditya Birla group is putting in place a succession plan. Current chairman Kumar Mangalam Birla is only 55, no age to start planning for retirement, but old enough to start thinking about the future. To that end, over the last few months, Ananya and Aryaman, the older of his three children, have been inducted on the boards of the powerful Aditya Birla Management Corporation, the apex body that provides strategic direction to all of its businesses, as well as as Aditya Birla Fashion and Retail Ltd. (ABFRL) and now Grasim Ltd.

If the ABFRL appointment was meant to tap their understanding of the youth market, this week’s move to bring them on the board of Grasim is the clearest sign yet that in the future too, the reins of the storied group which traces its antecedents back to 1857, will stay in the hands of a Birla scion.

Grasim, set up in 1947 – along with its subsidiaries, UltraTech Cement, which is India's largest cement producer, and financial services firm Aditya Birla Capital – is the flagship of the conglomerate, contributing over 20 per cent of its revenues. It has also in the past been the stepping stone to the top job.

Kumar Birla’s Tightrope Walk

In 1977 Aditya Vikram Birla became the company’s chairman and in 1995 following his sudden and tragic death, Kumar Mangalam Birla, then just 28, replaced him as the chairman. Tutored perhaps by the tragic death of his father when he was just 51, Kumar Birla clearly wants his own children to be put through the paces in preparation of future roles.

The Birla group has always been cautious and even conservative. It is one of the few business families in India which has had a mutually acceptable split. In 2013, Basant Kumar Birla and his grandson Kumar Mangalam Birla reached an agreement whereby they bought the combined 27 per cent stake of cousins Ganga Prasad-Chandra Kant Birla and Sudarshan Kumar Birla in Pilani Investments and Industries, the holding company of the group.

After GD Birla, the visionary who built the group’s initial ascendancy, passed away in 1983, Aditya Birla took over the running of major companies Gwalior Rayon (now Grasim) and Hindalco. Following his untimely death, his young son did have to wage some internecine battles, but support of grandfather BK Birla ensured that he didn’t have to face any messy and debilitating court battles that have marked family successions in India

Hits And Misses

That’s what Kumar Birla would want to ensure for his three children (the youngest, Advaitesha, is still only 19) as well. Traditionally, women in the group haven’t got directly involved with the family business. But that was in the past. Ananya has already proved her metier as an entrepreneur and, as the eldest, may well be put in charge of a business once she has had sufficient exposure.

The group that the two inheritors are coming into is a far cry from the one that confronted their father back in 1995. Back then, Kumar Birla’s first task had been to consolidate the many different businesses under a single unifying entity. Subsequently, he seized the opportunities provided by a newly liberalised economy to grow both vertically through scale and horizontally into new areas like financial services, telecom, IT and retail.

In its core commodity business, the group took an aggressive, acquisitions-driven  path to growth, marked by the audacious 2007 purchase of Novelis Inc, the world's largest aluminum rolling company, for a steep $6 billion.

The strategy has worked but only in parts. Today the group trails the top two Indian conglomerates, Tata and Reliance, by a fair margin in terms of revenues and profits. What’s more, its failure in sectors like telecom and IT has meant an overreliance on businesses like textiles, cement and aluminum, which in turn has kept its market cap much lower than its peers.

Betting On Gen-next

What it needs now from the two inheritors is the energy and dynamism of youth, along with a more native understanding of the changing marketplace. Kumar Birla said as much when he spoke about the insights into new-age businesses and consumer behavior that he expects his two children to bring to the business.

Ananya and Aryaman are 28 and 24 respectively, just the age when many of India’s successful heirs started their journeys in the family business. Both Rajiv and Sanjiv Bajaj, for instance, started working on the shopfloor of Bajaj Auto when they were in their mid-20s. Rishad Premji was 30 when he joined Wipro as a business manager.

That though is the big difference. To make a real difference and earn the right to head the business, Ananya and Aryaman will have to be prepared to get their hands dirty. Joining the board isn’t quite enough training for future leaders.

Sundeep Khanna is a senior journalist. Views are personal and do not represent the stand of this publication.