KING OF PERFECT TAKEOVERS

Vedanta Group Chairman - Anil Agarwal explains his company’s $ 20 bn investment in India

MAIL TODAY, DELHI EDITION - 16th MARCH 2014








SI VIS pacem, para bellum, which is Latin for if you want peace, prepare for war, is so apt for Vedanta Resources Plc chairman Anil Agarwal’s mindset. Agarwal is constantly scaling up, fortifying himself locally and globally to stay one step ahead of the eight ball. Agarwal’s rise coincides with the disinvestment of Balco during the NDA administration in 2001.

One could liken him to a hunter who goes after the predefined quarry.

His code predicated on an acquisitive strategy, much akin to Lakshmi Mittal’s a decade earlier.

Mittal remained true to his core competence as he acquired steel plants and turned them around with the help of ex- Steel Authority professionals till he made the big leap when he acquired Arcelor. For most part, the 59- year- old Agarwal has followed a route less traveled for an Indian industrialist. A first generation entrepreneur, truly a child of India’s disinvestment programme, he has managed to pouch Balco and Hindustan Zinc and bulked up in next to no time.

Hard wired to be a risk taker, the metals magnate has kept a war chest of Rs 21,637 crore ready to buy residual shareholding in both Balco and HZL.

BEGINNINGS
Over the years, as a journeyman, I have managed to interface with most Indian business tycoons – big and small – but I hadn’t had a close encounter with Agarwal. So when Agarwal says that raising the first Rs 25 lakh was the biggest challenge, you wake up, smell the coffee and say – ‘ hey, this guy still has his feet planted firmly on terra firma.’ Agarwal said, “ Sitting in Manipal waiting for the Syndicate Bank manager to give the cheque for Rs 25 lakh in 1977 was the biggest baby step. Equally, hiring my first manager was important. Now, when I think of those days, I smile to myself.” Agarwal’s acumen for a shrewd buy is standing him in good stead. In the recent past, he has pouched Sesa Goa and Cairn Energy India. By acquiring mass, he has surely but slowly grown his business swathe with revenues in excess of $ 15 billion and profit after tax of $ 2.1 billion. Ask him the secret of his success and he will turn around and tell you that he is a product of the P V Narasimha Rao’s unfettering of Indian economy age, but he actually got toe to toe to eyeball Indian biggies during the Vajpayee administration.

Loathe to talking too much, initially it was difficult to elicit responses from him. But as he warmed up to the conversation, he began to describe his journey from a scrap dealer in Bihar to the one of the toniest parts of London - Mayfair. He said, “ I started out with 10 employees, now we have a family of 250,000 people working for us. We pay taxes to the tune of Rs 6,000 crore annually to the Govt of India. After taking over Cairn India, we have paid Rs 24,000 crore as taxes and royalty to the government. This is most satisfying, for unarguably, we would be one of the biggest private sector partners with the government.” Agarwal is clear that manufacturing is the only way out for a moribund India if it needs to provide employment to its conveyor belt of youth. And for that, India needs to leverage its natural resources.

Agarwal remains India- centric for some of his biggest assets are in the country. According to him, as a diversified conglomerate with interests in oil, gas, aluminium, copper, silver, zinc, bauxite, he reckons that he can add value through his investments in India and Africa where there is significant headroom and upside available. Pragmatic to the core, he says, “ I come from Bihar where I grew up and studied in Miller High School, I went to Mumbai looking for a future and a fortune, I stayed at the Oberoi using it as a business address, but ate out and then went off to London 15 years ago.” He claims that he relocated to London simply because “ nobody was taking me seriously in India.” London has given him a vantage point it has given him the necessary edge and ability to raise capital to funnel into his new businesses.

ACQUISITIONS

Using that as the whetstone, he has emerged as a merger and acquisition specialist. With old ally Tarun Jain ( chief financial officer for the group) by his side, Agarwal has gradually acquired business after business. But, he believes this hasn’t changed anything because the operating credo isn’t greed. He believes the India story is still intact, but India has to decide on what it wants to do, “ We cannot continue to import our energy requirements, we have to become self reliant. The key to everything is simplification – a combination of tendering/ auction and privatisation is the way forward for India. We have to dismantle archaic laws and ossified apparatuses. Who would have believed that Delhi will have an airport of this class and size? You have to involve the private sector to work in conjunction with the Govt. It is the only way out.” A votary of auctioning of precious natural resources, he feels revenue sharing with the government as a partner in progress is the most credible mechanism to rid India of its sloth. Giving the example of importing all our copper and now even coal, he argues that large dosage of capital can revolutionize the way we mine. The bedrock has to be a free, fair and transparent auction – we don’t want an approval process, rather India needs a self declaration process.

Doing business in India should be made taqleef ( problem) proof.

With $ 20 billion invested in India, the $ 70 billion strong Vedanta ( group market capitalisation) is putting his money where his mouth is. Of this Agarwal has raised $ 15 billion in foreign capital, other than for M& A. Knowing full well that investments in India are fraught with danger – Lanjigarh and Niyamgiri in Odisha – bear testimony ( government has rejected mining here as recently as January 2014 after 12 tribal groups refused to green light the same) to that fact, Agarwal who has sunk in Rs 50,000 crore in the state is still willing to punt on India. Equally, his recent consolidation exercise resulting in the creation of mining major Sesa Sterlite suffering due to suspension of iron ore mining in Karnataka and Goa has consolidated gross debt of Rs 84,063 crore as of September, 2013.

Despite these setbacks, his understanding is that you need to make money from business in order to reinvest. As he says, “ Government cannot change the goalposts it has to offer a level playing field to both the private and public sector. Our goal has to be narrow focused – eradicate poverty at all costs – by using the country’s mineral resources.”