Indian tycoon loses $3b as mobile war weighs on wealth

Bloomberg

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 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.
For the Aditya Birla Group, the hit on the telecommunications business couldn’t have come at a worse time. Cooling global growth amid a trade war between the US and China, as well as an economic slowdown at home has curbed demand for industrial raw materials the group produces.
Vodafone Idea’s woes deepened last month after India’s top court sided with the government’s demand for $4 billion in fee-arrears from prior years. Already burdened by $14 billion of debt, the order came as a blow to its finances weakened by a brutal war with Jio. Ambani’s operator this year became the country’s No. 1 carrier with 380 million users by offering free calls and cheap data.
Shares of Vodafone Idea, in which Birla’s groups owns a little over 27%, have plunged 90% since end-2017 in Mumbai, shrinking its market value to $2.6 billion.
“Vodafone and Idea have been going through a complex merger and, at the same time, trying to keep their heads above water in the battle with Reliance Jio,” said Rishikesha T Krishnan, a professor of business strategy at the Indian Institute of Management in Bangalore. 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 30% since end-2017, cutting its market value to $5.9 billion.