COMPANY PROFILE

Aditya Birla Nuvo

Limited
REFERENCE CODE: 2A37AC67-A9B8-4BAA-A611-733F86D8C7A9
PUBLICATION DATE: 30 May 2014
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TABLE OF CONTENTS
Company Overview..............................................................................................3
Key Facts...............................................................................................................3
SWOT Analysis.....................................................................................................4
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TABLE OF CONTENTS
COMPANY OVERVIEW
ADITYA BIRLA NUVO LIMITED (ABN or the company) is a diversified conglomerate within Aditya
Birla Group. The company through its subsidiaries operates a portfolio of manufacturing as well as
service sector businesses ranging from textiles to financial services. The company primarily operates
in 36 countries spanning across six continents. It is headquartered in Gujarat, India and employed
approximately 69,000 people as of March 31, 2013.
The company recorded revenues of INR254,902 million ($4,664.7 million) during the fiscal year
ended March 2013 (FY2013), an increase of 16.7% over FY2012. The operating profit of the company
was INR28,468.7 million ($521 million) during FY2013, an increase of 31.4% over FY2012. The net
profit was INR10,588.9 million ($193.8 million) in FY2013, an increase of 19% over FY2012.
KEY FACTS
Aditya Birla Nuvo Limited Head Office
Indian Rayon Compound
Veraval 362 266
Gujarat
IND
91 2876 245711 Phone
91 2876 243220 Fax
http://www.adityabirlanuvo.com Web Address
254,902.0 Revenue / turnover
(INR Mn)
March Financial Year End
69,000 Employees
500303 Bombay Stock
Exchange Ticker
ABIRLANUVO National of India
Ticker
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Aditya Birla Nuvo Limited
Company Overview
SWOT ANALYSIS
ADITYA BIRLA NUVO LIMITED (ABN or the company) is a diversified conglomerate within Aditya
Birla Group. The company through its subsidiaries operates a portfolio of manufacturing as well as
service sector businesses ranging from textiles to financial services. The strong and consistent
financial performance allows the company to invest in future growth opportunities. Further it also
ensures financial stability. However, the stringent telecom regulatory environment may affect the
companys operations in the coming years.
Weaknesses Strengths
Sluggish performance of insulators business Strong and consistent financial performance
Leadership position in domestic markets
Diverse vertical exposure and balanced
revenue stream
Threats Opportunities
Stringent telecom regulatory environment Accelerating Indian apparel market likely to
drive demand for the company's products Sluggish economic growth in Indian markets
Growth of Indian telecom market
Positive outlook of the Indian life insurance
industry
Strengths
Strong and consistent financial performance
The company has been recording a strong and consistent financial performance. The companys
revenues grew at a compounded annual growth rate (CAGR) of 18% between FY2008 and FY2013.
Further, in FY2013, the company recorded revenues of INR254,902 million ($4,664.7 million) an
increase of 16.7% over FY2012. The companys earnings before interest, taxes, depreciation and
amortization (EBITDA) also increased at a CAGR of 29% and in the FY2013, the operating profit of
the company was INR28,468.7 million ($521 million) an increase of 31.4% over FY2012. The
companys net profit grew at a CAGR of 48% between FY2008 and FY2013. In FY2013, the net
profit was highest ever and it grew by 19% compared to the prior year.
In addition, the company also has a strong balance sheet. The debt/ equity ratio of the company
was 0.33 as of December 2013. Also the net debt/ EBITDA ratio was 2.1 during the same period.
This indicates that the company has favorable debt position. Also in January 2014, ABNL IT & ITeS,
a wholly owned subsidiary of the company, entered into an agreement to divest its IT-ITeS subsidiary,
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SWOT Analysis
Aditya Birla Minacs Worldwide for an enterprise value of $260 million subject to the working capital
adjustments, pursuant to a share purchase agreement with a group of financial investors led by
Capital Square Partners (CSP) and CX Partners (CXP). This divestment is expected to further
strengthen the companys balance sheet.
The companys strong and consistent financial performance and strong balance sheet allows it to
invest in future growth opportunities. Further, it also ensures financial stability.
Leadership position in domestic markets
The company holds a significant position and market share in the Indian markets. The company is
also among the Fortune 500 companies. The companys subsidiary, Aditya Birla Financial Services
is among the top five fund managers in India. Further, Birla Sun Life Insurance (BSLI), a 74:26 joint
venture between the company and Sun Life Financial, Canada is the fifth largest insurance player
among private players and held a market share of 8% in FY2013. Also, Birla Sun Life Asset
Management, a 51:49 joint venture between ABN and Sun Life Financial, Canada, ranked fourth in
the Indian market and had a market share of 9.4% in fourth quarter of FY2013. The companys
telecom subsidiary, Idea cellular is one among the top three wireless telecommunications service
provider in terms of the wireless revenue market share. ABN is also the largest manufacturer of
insulators and second largest manufacturer of Viscose Filament Yarn (VFY) in India. Based on the
revenue size, it ranks among the top six Indian companies in business process outsourcing (BPO)
business. The leadership position based on the revenues and market share provides a strong base
for the company to pursue future growth prospects.
Diverse vertical exposure and balanced revenue stream
ABN has diversified vertical exposure and a balanced revenue stream. The company has significant
presence across all the five key verticals it operates in. ABN operates in the financial services,
manufacturing, telecom, fashion and lifestyle, agriculture and IT-ITeS industry verticals. Furthermore,
the company also reported balanced stream of revenues across verticals. For instance, the financial
services accounted for 24.6% of the total revenues in FY2013, manufacturing (24.3%), telecom
(22.2%), fashion and lifestyle (19.3%) and IT and ITES (9.5%). ABN's exposure to diverse businesses
enhances the addressable market, reduces vulnerability to sector specific risks and enables the
company to leverage the opportunities offered in segments that have scope for strong growth.
Weaknesses
Sluggish performance of insulators business
Aditya Birla Insulators, the insulators segment of the company reported sluggish performance in
FY2013. The insulators segment recorded revenues of INR4,540 million ($83.1 million) in FY2013,
a decrease of 3% compared to FY2012. The revenues declined due to deferment of deliveries by
customers and increase in cheaper imports from China. Lower capacity utilization coupled with rise
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SWOT Analysis
in the production costs strained profitability of the business as well. Also the EBIDTA witnessed a
decrease from INR670 million ($12.2 million) in FY2013 to INR610 million ($11.1 million) in FY2012.
The sales volume declined by approximately 8% in FY2013. Further, in the short term the investments
in the power sector may be affected owing to the liquidity crunch in the power sector which in turn
could have a negative impact on the companys insulators business. Sluggish performance of
insulators business could be a drag on the company's overall operational performance.
Opportunities
Accelerating Indian apparel market likely to drive demand for the company's products
The Indian apparel market has witnessed strong growth. According to industry estimates, the size
of the Indian apparel market is expected to grow approximately four times to $200 billion by the end
of 2025.
Madura fashion and lifestyle (Madura), the branded apparel retail business of ABN, is the largest
premium branded apparel player in India. The companys Madura, Pantaloons and Jaya Shree
Textiles combined together own approximately 1,443 exclusive brand outlets spanning across 3.7
million square feet alongside 4,750 departmental stores and multi-brand outlets. Further, the company
is also opening new outlets to expand its presence throughout the country. For instance, in May
2013, Louis Philippe launched its first store at Aizawl, Mizoram as part of the companys strategy to
expand in non-metro areas. In the same month, Pantaloons opened its first store in Chandigarh.
This will strengthen the companys presence in North India. Subsequently, in November 2013,
Pantaloons announced the opening of its second store in Vadodara and further in the same month,
the company opened its first store in Dehradun. The company through these store openings furthered
its strategy to enter new markets.
ABN's significant presence in the apparel industry and its initiatives in the recent times to further
expand its presence allow it to benefit from the projected growth in the medium and long term.
Growth of Indian telecom market
The Indian telecom industry has undergone a revolutionary change in the last few years. It has
emerged as one of the leading telecom markets in the world. Availability of low priced mobile devices,
robust network coverage, and affordable services are some of the factors that boosted its growth.
The growth is expected to continue at the same pace in the future. The Indian telecom sector grew
by around 11% in terms of revenue in 2012 due to continued robust growth in mobile subscribers.
Moreover, as per the industry estimates, the mobile internet users were approximately 87.1 million
in 2012 and it is expected to reach approximately 130.6 million by 2014 and 164.8 million by the end
of 2015. This led to the growth in adoption of newer mobile internet services including the second
generation (2G) and third generation (3G) services in the recent times.
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SWOT Analysis
ABN's telecom subsidiary, Idea Cellular is poised to benefit from the rapidly growing telecom market
in India. Idea Cellular is one of the leading private telecom players in Indian market with a customer
base of 122 million in FY2013. It offers a diversified range of voice, data, messaging, and other
services. The telecom segment recorded revenues of INR56,623.4 million ($1,036.2 million) in
FY2013, an increase of 14.8% over FY2012. In addition, the company has been investing in the 2G
and 3G services in order to address the data demand. In FY2013, Idea cellular launched about 7,000
2G cell-sites and approximately 4,300 3G cell-sites to scale up its network capacity to over 90,000
2G sites and more than 17,000 3G sites.
The company's strong presence and the positive outlook for the Indian telecom market would provide
ABN's telecom subsidiary an opportunity to increase its customer base and revenues in future.
Positive outlook of the Indian life insurance industry
The Indian life insurance industry is recording positive trends in the recent years. The favorable
demographics and multiple industry and regulatory changes further contribute to the growth. According
to industry estimates, the Indian life insurance sector is estimated to grow at a compounded annual
growth rate (CAGR) of approximately 15% between 2013 and 2018. .
The companys life insurance business, Birla sun Life Insurance (BSLI), a 74:26 joint venture between
ABN and Sun Life Financial, Canada ranked fifth among private players with a market share of 8%
in FY2013. The company witnessed a strong performance and strong profits in FY2013. Also, the
companys persistency ratio was 81% which indicates that the companys volume of business
continues to be strong. The company, through its subsidiary Birla Sun Life Insurance is well positioned
benefit from the positive outlook if the Indian life insurance industry.
Threats
Stringent telecom regulatory environment
The telecom regulations in India have been increasing in recent times. The regulations on
communication in India are handled by the Department of Telecommunication (DoT) and Telecom
Regulatory Authority of India (TRAI). In recent times, there have been significant modifications and
additions to regulations. For instance, in May 2012, the government of India approved the New
Telecom Policy (NTP) 2012, which eliminates roaming charges and allows users to retain the same
number across the country. The government also plans to remove roaming fees that will allow users
to retain their numbers even if they move from one circle or zone to another. In February 2013, TRAI
floated a consultation paper for reviewing tariff for national roaming.
Implementation of this policy will have a significant impact on the whole telecom industry in India.
This will eliminate subscriber trunk dialing (STD) rates across states and carriers and reduce roaming
revenues. The mobile phone industry is going through a difficult phase and any further reduction in
roaming revenue may severely affect the financial condition of the service provider companies.
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SWOT Analysis
According to industry estimates, the NTP is expected to result in a loss of $400 million for telecom
providers and an additional $600 million in roaming charges. The introduction of free roaming will
have a significant negative impact on these revenue streams. These regulatory changes may
negatively impact the company's revenues.
Sluggish economic growth in Indian markets
The global economic growth is sluggish and is expected to grow moderately in the coming years.
The growth prospect of Indian economy is likely to remain weak in 2014. India's GDP growth fell to
5% in FY2013 from 6.2% in FY2012. The fall of GDP growth rate in 2013 was a decade low. Decline
in the nation's GDP is attributable to weak industrial growth and overall deceleration in investments.
Also the current account deficit peaked to 6.7% during the year and has been the main driver of
slowdown in growth. Fiscal deficit reached approximately 5.2% in the FY2013 on account of higher
imports bill, weakening of Indian Rupee and increased subsidy burden. Persistently high inflation
and interest rates affected savings growth, consumption and the investment cycle. Also, RBI projects
the wholesale price index to increase by 5.5%, down from 7.3% in the prior year. Further, according
to IMF, the GDP of India is estimated to grow moderately by 6% in FY2014. Weak growth prospects
of Indian economy are likely to have an adverse impact on the consumer sentiment and in turn the
demand for the company's offerings.
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SWOT Analysis