Bloomberg News

Birla to Invest Overseas As Uncertainty Harms Indian Ops

March 04, 2013

Indian billionaire Kumar Mangalam Birla

Kumar Mangalam Birla, non-executive chairman of Hindalco Industries Ltd. Birla, who has assets valued at $8.7 billion, according to the Bloomberg Billionaires Index, still said the situation for local companies didn’t augur well for investment. Photographer: Kuni Takahashi/Bloomberg

Indian billionaire Kumar Mangalam Birla said he would rather invest in countries including Brazil and Indonesia as frequent policy changes at home discourage spending by companies in Asia’s third-largest economy.

“Country risk for India just now is pretty elevated and chances are that for deployment of capital, you would look to see if there is an asset overseas rather than in India,” Birla said in an interview to Bloomberg TV India. “We are in 36 countries around the world. We haven’t seen such uncertainty and lack of transparency in policy anywhere.”

Birla, who runs companies from the world’s largest rolled aluminum maker to India’s biggest cement producer, said he’s looking for buying opportunities in the U.S., Brazil, Thailand and Indonesia. India slipped three levels in the 2013 World Economic Forum’s Global Competitiveness Index from a year ago to 59 and behind Costa Rica and Khazakhstan. Brazil was ranked 48, while Indonesia was in the 50th position.

“When we put up a fairly large investment in Brazil recently, our team said we will commission the project at 10 a.m. on 29th September,” Birla said. “That is a huge difference. The kind of certainty and comfort it gives, is a completely different feeling.”

The Birla group, which aims to increase revenue to $65 billion by 2016 from $40 billion, spent more than $1.5 billion acquiring assets overseas in the past two years, data compiled by Bloomberg show.

A report on Feb. 28 showed India’s $1.8 trillion economy expanded 4.5 percent in the three months to Dec. 31 from a year earlier, lower than forecast and the weakest pace in almost four years, as a decline in investment and exports, and a curb in government spending sapped growth.

‘Lost Opportunity’

“It would be very unfortunate if we grow by less than 5 percent,” Birla, 45, said in the interview. “That would be a lost opportunity,” he said, adding that the country should be looking to expand as much as 9 percent.

Finance Minister Palaniappan Chidambaram March 1 shelved a plan to tighten rules for overseas investors seeking to benefit from double taxation treaties, a day after it was proposed in the federal budget. Foreigners sold the most shares in about a year on Feb. 28, contributing to the 1.5 percent decline in the benchmark S&P BSE Sensex index.

“First you go through so much rigmarole to set up a business and then when you start earning profit, there is no certainty on tax laws,” U.R. Bhat, managing director of Dalton Capital Advisors India Pvt. in Mumbai. “At 5 percent growth rate, it’s just not worth the trouble.”

‘Extremely Mobile’

Chidambaram in his budget speech announced a 15 percent credit for companies investing 1 billion rupees in plant and machinery. In January, he wooed investors in Singapore, Hong Kong, London and Frankfurt, part of wider policy overhaul since September to revive economy growth.

Birla, who has assets valued at $8.7 billion, according to the Bloomberg Billionaires Index, still said the situation for local companies didn’t augur well for investment.

The government in October granted Mahan Coal Ltd., an equal venture between Essar Power Ltd. and Birla’s Hindalco Industries Ltd. (HNDL), the first stage forest clearance for a coal block, more than a year after referring the allocation of the mine to a panel of ministers.

“Global capital today is extremely mobile,” Birla said.“Why will anyone invest in India? We don’t get support from the government. Why not invest in Brazil or Indonesia?”

To contact the reporters on this story: Bhuma Shrivastava in Mumbai at bshrivastav1@bloomberg.net; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editor responsible for this story: David Merritt at dmerritt1@bloomberg.net


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