Can The Son Fill Papa's Shoes At Birla Group?

It has been a year since the unexpected death of the well-known Indian industrialist Aditya Birla. In his 52 years of life, Birla had amassed 37 companies into a mammoth, $5 billion textile, cement, and aluminum empire. When he died, the mantle passed to his son Kumar Mangalam Birla, a 29-year-old bespectacled accountant and London Business School MBA. Kumar inherited some of the biggest companies in India, including their seasoned management and solid reputation among investors.

But despite this strong position, fears are mounting among critics, large investors, and even some of the group's senior managers that the Birla scion is simply not up to the job. They accuse him of erratic behavior, an inaccessible management style, and misplaced priorities. The result has been a general dumping of Birla-related stocks. In the last year the market value of the group's four largest companies--Grasim, Indian Rayon, Hindalco, and Indo Gulf Fertilizer--has plummeted by $1 billion, a 37% drop. That's more than double the decline in the Bombay Stock Exchange index. To top it off, Kumar Birla is sending conflicting signals. Sometimes he declares his desire to please shareholders. Other times, he sounds oddly indifferent. "I don't care a damn if they dump my stocks," he told BUSINESS WEEK in telephone conversations.