INTERNATIONAL - The financial distress at Vodafone Group Plc’s Indian venture has dragged down the wealth of Kumar Mangalam Birla, whose group is the second-largest investor in the teetering wireless carrier.
The tycoon, who joined forces with the British operator last year, has lost about a third of his fortune since the end of 2017 as mounting losses and debt decimated the equity of the troubled Vodafone Idea Ltd. In addition, shares of his flagship firms that produce chemicals, metals and cement have also tumbled amid a demand slump, eroding his wealth.
The net worth of Birla has shrunk to about $6 billion from $9.1 billion two years ago, according to the Bloomberg Billionaires Index. A majority of his fortune is derived from his ownership of Aditya Birla Group, a conglomerate that controls his main holdings.
Birla is the latest mogul to burn his fingers in India’s cutthroat phone-services market since Mukesh Ambani’s Reliance Jio Infocomm Ltd. entered the fray in 2016 and drove two rivals to bankruptcy. Formed by the merger of Vodafone’s local unit and Birla’s cellular operator, Vodafone Idea last week reported the worst loss in the nation’s corporate history, while the British partner flagged the risk of a collapse.
Aditya Birla Group has a stake in Hindalco Industries Ltd., the world’s largest aluminum rolling company, and owns a part of Grasim Industries Ltd., which controls India’s biggest cement maker.
Hindalco, which makes aluminum and copper, reported a 33% drop in profit for the latest quarter as the prices of both the metals slid in the three months through September. Shares of Hindalco have tumbled 31% since end-2017, cutting its market value to $5.9 billion. The S&P BSE Sensex has gained 19% in the same period.
The slowdown in India’s $2.7 trillion economy has cooled demand for commodities such as cement to chemicals and textiles manufactured by Grasim. Its stock has dropped 33% since end-2017. Vodafone Idea’s troubles have also weighed on Grasim, which owns about 12% of the carrier.
This week brought some signs of relief to Vodafone Idea shareholders. Its shares have more than doubled in the four days through Nov. 20 as the three rivals -- including Jio and Bharti Airtel Ltd. -- signaled an end to the price war. Bharti reported a record quarterly loss last week as well.
Aditya Birla Group chairman, Kumar Mangalam Birla, left, talks with Vodafone Group CEO Vittorio Colao, during a press conference in Mumbai, India, Monday, March 20, 2017. British telecom company Vodafone's Indian unit has announced a merger with Idea Cellular, a local company, creating the country's largest telecom operator with nearly 400 million customers. The companies said Monday that Vodafone will own 45.1 percent of the combined company and Idea, which is owned by India's Aditya Birla Group will have a 26 percent stake, while the rest will be owned by public shareholders after the merger, which is expected to be completed next year. (AP Photo/Rafiq Maqbool)
On Wednesday, the government deferred airwave payments for two years, providing some relief for the industry roiled by high license fees and spectrum costs. Finance Minister Nirmala Sitharaman has said she wants all companies to flourish and none to fail.
“The tariff hikes are positive,” Jefferies analysts led by Piyush Nahar said in a note this week. Despite the positive move, relief from the government remains crucial, especially for Vodafone Idea, they wrote.