The coming decade will see an upsurge in capital expenditure across many sectors, Aditya Birla Group chairman Kumar Mangalam Birla said in a post on his reflections of the last two years. Birla said the twin-balance sheet problem of stressed loans and over-leveraged corporates is behind us and “we have upon us a forthcoming decade of ‘Capex Mahotsav’ in India”.
Birla said a generation of entrepreneurs in India are now taking advantage of the 1991 economic reforms. The private sector, he added, is also firing on two-engines — the conventional and the new-economy. “I call it the ‘Double-engine growth’. Investors are excited about growth prospects in core sectors as well as sunrise sectors. In my view though, the word sunrise sector applies to the entire landscape in India, which includes both conventional sectors like cement, steel, power & auto and emerging areas like digital & renewables. Both hold the promise of high and sustained growth,” said Birla.
With a work “awash in capital”, Birla said there has perhaps rarely been a better time to be an entrepreneur, as everyone from angel investors to the public markets line up to back ideas. “The competition for investment opportunities and the ‘fear of missing out’ (FOMO) have driven up valuations of many fledgling companies to stratospheric levels. Historically, the key question for any new business was whether it fulfilled an unmet consumer need. A hallmark of some new businesses today is that they seek to use the brute force of capital, combined with smart technology and operations, to create new needs that you did not even know existed! For example, is receiving groceries at your doorstep in less than 10 minutes a service that you cannot live without? Clearly many consumers think so,” said Birla.
However, he added, “Ultimately, my own view is that at some stage unit economics will have to matter. And trusty old concepts like cash flows and gross margins will guide behaviour and actions. The only sustainable moat is the one based on intellect. Large waves of cheap capital will eventually erode all other entry barriers. From Aditya Birla Group’s experience in multiple businesses, across multiple geographies, I can say that in the long run sustainable and successful businesses are those that generate tangible profits, prosperity, livelihoods quarter after quarter. Valuation and business longevity will automatically follow.”
In the note, which had a Zen-like tone to it, Birla said, “I often get asked how to deal with the highs and lows of life, and I think the biggest factor is equanimity. It is an acceptance that both adversity and windfall gains are impermanent. And that real success lies in the quiet acceptance of both. Equanimity helps one make sense of the vagaries of the world with the ability to dispassionately learn from the past and plan for the future. The deepest chasms are often a precursor to an impending improvement.”
Birla said the exigencies of the pandemic have pushed the boundaries of innovation. While recognising the collective human endeavour that has generated astonishing outcomes that were achieved with 10 billion doses of the vaccine having been administered globally, he noted that it took several decades to develop and inoculate every child on the planet with the polio vaccine. “A world where traditional rules didn’t apply, freed thinking from its conventional shackles. And we are staring at an extraordinary decade,” he said.
(With inputs from agencies)