The
cover story of Outlook Business (March 14, 2012) on diversification strategy of
Indian Conglomerates influenced me to write this post. The article talks about
failure of Indian conglomerates in their substantially new business. Some of
such conglomerates are Reliance which is
facing a huge loss in their retail and communication business, Birla who
are not doing good in their retail business . Why diversification has been a
painful task for Indian Conglomerates? My thought extended to the Piramal
Healthcare, the company created the empire through diversification. The textile
player extended its footprints to healthcare through acquisition of Nicholas Laboratories from its foreign parent
in 1988 and created a huge empire within a period of 23 years. In May 2010,
Ajay Piramal, Chairman of Piramal Healthcare stunned the business world by
announcing that he has sold part of Piramal Healthcare’s business, constituting
about half the company’s revenues, for a staggering $3.8 billion, or about Rs
17,140 crores, to Abbott Labs of the USA.
Now,
Ajay Piramal is working on a plan to convert the pharma-centric player to a
much more diversified conglomerate. Piramal’s latest foray is into the
unrelated business of mobile telephony, that of investing close to Rs 6,000
crore in Vodafone India. In fact, the Vodafone deal, where Piramal bought a
total of 11 per cent in the Indian arm of the telecom major Vodafone is a very
interesting move.
In
an interview with Business Standard, Piramal explained his twin philosophy:
that of transforming his group from a pharma-centric one to a diversified one.
What
is your opinion about the twin philosophy of Piramal group by entering into
unrelated business? Will they sustain in the new areas? What are the new opportunities for Piramal
Group?
Hi Asif,
ReplyDeleteIf there is one item in their repertoire that they can leverage, it is their brand name "Piramal".
If this be the case, it won't be a surprise if they introduce a "Piramal Pen Stand"!!!!
ya its true.the deep pocket company is searching for new avenue and ready invest in high profitable business.Let us wait and see whether it extends to Piramal Airways!!!
ReplyDeleteHi Asif,
ReplyDeleteMost of the Indian conglomerates fail due to unambitious growth. Like most conglomerates fail when they extend to retail space and it happens vice versa, like The Maharaja of retail(Kishore Biyani) having Rs.7200 cr debt. But there are few Chanakyas like Piramal who are playing safe game and betting on better horses. He takes a lot of time to invest in a business and does a lot of study. so I hope the group will perform well in all spheres.
Hi Asif
ReplyDeleteThe same thing happen to Suzuki is number one in car segment. It has nearly 50% share in car market. Many people are satisfied with Suzuki four wheelers because the technology is good. When it comes to bike section, Suzuki failed. Though Suzuki is respected for its fuel efficiency, quality, knowledge of Indian market, it is unable to replicate its car success in motorcycles. and Mahindra is similar to Suzuki. Mahindra succeeded in jeep and tractor segment but failed in bike segment. Mahindra bikes are not much popular. Many people don’t even know the names of these bikes. Not even one bike got popular.