Jindal Aluminium: Growing Beyond Boundaries

Be it peer pressure OR THE new normal at India Inc. — the young generation of family entrepreneurs has always been impatient to achieve in just a few years, beyond what the first generation had achieved across many decades. Four-decade-old Jindal Aluminium too has now set itself a goal to double its turnover over the coming five years — and a young leadership is apparently confident of coping with the challenge.

Pragun Jindal Khaitan, scion of the Bangalore-based Jindal-Khaitan family, who is perhaps, among the youngest managing directors in the country, seems to be taking a comparatively cautious step. This Wharton School of Business graduate is an acolyte of his maternal grandfather and the founder and chairman of Jindal Aluminium, S. R. Jindal. Khaitan is committed to the task, but does not want to go overboard with it. A wider, but more synergetic diversification without deviating from the company’s core strength, was the growth model he wants to experiment with.

Critics though, find the Rs 5,000-crore target too ambitious for such a short period. “In a commoditised industry (aluminium), which is always subjected to price and demand fluctuation, especially with competition coming from hundreds of unorganised local players (in the downstream segment) and cheaper imports, this target seems difficult,” said a senior executive in a large industry competitor, present in both the upstream and downstream business, adding that maintaining profitability was always a challenge in a low-margin business.

Wide Diversification
Jindal Aluminium is the country’s largest aluminium extrusion company, with about 35 per cent share in the domestic market. It posted a turnover of Rs 2,500 crore in the 2016 fiscal. The aggressive business diversification plan of the new leadership will involve unlocking the value of the vast land assets and other skill-sets and resources the company has built up over the last four decades or more.

The aluminium extrusion major has shown a marked jump in revenue, with at least 25 per cent average annual growth since the young Jindal took charge in 2013. It has thus, lined up a similar investment and operational outlay for the newly taken up businesses, including renewable energy, real estate and healthcare.

Although these new sectors seem to be unrelated to Jindal Aluminium’s core business, industry experts and those familiar with the company’s culture, see these diversifications as complementary and synergetic. “Nothing can be as synergetic as these for Jindal, as they will not only help unlock the value of its inherent wealth but also make much better sense in terms of compatibility between the existing and the new businesses that it is into,” said an industry analyst with a foreign brokerage. He felt that it was the right time for Jindal to unlock the value of the land parcel that it had accumulated over time, using its surplus funds.

“Similarly, renewable energy is already part of its commitment to non-polluting power for captive consumption, and it has already started contributing to its overall revenue by supplying the rest to the state grid. And, healthcare is in the genes of Jindal Aluminium as its charity — Jindal Naturecure Institution, is already a big brand in the Indian healthcare sector,” he added. “Even though these are high-margin businesses, they would require heavy investments and will take a longer time to pay back,” he cautioned.

The time the company has chosen to enter these new areas is also ideal. All the new industry segments that Jindal Aluminium has chosen to venture into, are currently gaining momentum, supported by increasing consumer demand and awareness and a new set of policies and regulations to develop the market.

Real Estate
Jindal Aluminium has over the years, invested its surplus funds and excess cash flow in land. The company currently owns about 300 acres of land in and around Bangalore and plans to venture into developing real estate in both housing and commercial projects, as part of its efforts to unlock the value of land. But it is very categorical that it does not wish to get into construction, which is not its area of expertise. According to Pragun Jindal, the company will have reputed builder partners in each of its projects. The real estate business will be a separate unit within the parent company. It will first test the market with a single residential project, using about 30 acres of land near Bangalore.

“We want to test the market with this one residential project that we are developing near Bangalore, in which our investment is just the land,” Jindal said.

Renewable Energy
Jindal Aluminium is among the latest to join India’s new renewable energy caravan. The new generation leadership at companies like the Serum Institute of India and Sun Pharma, has already entered this futuristic business. Renewable Energy is a strategic business unit of the parent company, which is likely to get transformed into a separate power generation company. Jindal Aluminium has recently increased its generation capacity to 80 MW and has more investments lined up in this sector. It puts 30 per cent of the capacity of its wind and solar power units to captive use and sells the rest to the state.

According to industry estimates, the output of India’s renewable power projects rose by 26 per cent in the 2016-17 financial year, making it the fastest growing in the world. India is expected to be the third largest solar market from 2018 onwards after China and the United States. The Prime Minister’s ‘Make in India’ campaign aims to raise India’s renewable energy capacity to 175 GW by 2022 from 45 GW at present.

Healthcare and Wellness
Healthcare is not an uncharted terrain for Jindal Aluminium. The company runs multiple healthcare institutions, including the popular naturopathy facility, Jindal Naturecure Institute, and a couple of general hospitals under the Sitaram Jindal Foundation. But the group’s new commercial venture in the herbal and Ayurvedic health and wellness space will have a global scale and it plans to pursue it aggressively in the new growth drive. With this, the company will shortly announce its branded Ayurvedic and herbal products for the global market.

“We have our research and development team already working on these innovative products business and should be ready with the marketing set up in another five to six months,” said Pragun Jindal. Jindal’s Naturecure Institute, with a focus on drugless therapy, naturopathy and yoga, was the pioneer in drugless treatment in India.

“Natural healthcare and wellness products that use traditional knowledge and scientific development processes, are one of the most promising and fast emerging areas in the world of healthcare,” pointed out Raja B. Smarta, noted consultant in pharmaceutical and healthcare marketing and managing director, Interlink Marketing Consultancy.

The Jindal Naturecure Institute takes a holistic approach towards medicine and is inspired by the evidence-based, traditional medicine of India. This institution already attracts thousands of patients from both within and outside India. It will remain a charity under the Sitaram Jindal Foundation, as the group does not want to mix it up with the new venture.