Thursday, July 26, 2007
Jul 26th 2007
From The Economist print edition
Anil Agarwal has built a mining and metals giant in less than a decade
AS HE looks out over Mumbai's main airport, where a queue of planes wait their turn to ascend into the leaden monsoon sky, Anil Agarwal describes the transformation he has watched through his office window. In three years, he says, “the number of planes has grown four times—can you imagine?” Many Indian-based companies have experienced galloping growth in recent years, airlines among them. But few have kept pace with Mr Agarwal's Vedanta Resources, a London-listed mining and metals group, of which he is the chairman, founder and, with his family, owner of a 54% stake.
When Mr Agarwal founded the company in 1979 he was a scrap-metal merchant with ambitions to own a cable-making company. By the early 1990s, when India embarked on the liberal reforms that were to enable him to make his fortune, he was battling to establish a modest copper smelter. But in the past two years the market capitalisation of Vedanta—named after Mr Agarwal's mother—has increased fivefold to $10 billion. Last month 20% of the group's flagship company, Sterlite Industries, one of India's biggest producers of zinc, copper and aluminium, was floated on the New York Stock Exchange for over $2 billion—the biggest overseas sale of shares by an Indian company. Last year Vedanta turned over $6.5 billion, an increase of 76% on the previous year, and nearly half of it profit.
High metal prices, driven in part by India's own rapid growth, help explain the surge. But so do Mr Agarwal's instincts for his market: Vedanta's float in London in 2003 proved to be brilliantly timed. He has been equally adept at turning around a series of unprofitable, formerly state-owned companies. The group encountered little competition when it bid for a controlling stake in Hindustan Zinc, a loss-making state-owned firm, in 2002. It proceeded to cut its costs in half and increase its capacity fivefold. Hindustan Zinc is now the group's most profitable unit and the lowest-cost zinc producer in the world. With such a record, Mr Agarwal laughs at the prospect of lower prices. “Everyone's going to die,” he says. “But we must die last.”
In an industry in which size matters, he is pushing ahead with Vedanta's expansion. The group plans to invest $8 billion in the next three years to consolidate existing ventures and launch new ones. In April he extended his reach into iron ore by acquiring 51% of Sesa Goa, India's largest iron-ore exporter. The group also has ambitions in power generation, arguably the biggest constraint on India's growth. It has proposed building a $1.9 billion power station in Orissa, where it is also awaiting approval for a vast greenfield bauxite mine. Despite big investments in Australia, Zambia and elsewhere, India is where Mr Agarwal sees the group's greatest potential for growth. The group is skilled at handling the country's sometimes slippery officialdom—unlike foreign-based rivals, such as BHP Billiton and Anglo American, which have no presence in India. “It helps that we understand India,” says Mr Agarwal.
In a way, he is emblematic of India's emergence. Around half of India's dozen richest businessmen are self-made men. But none more so than Mr Agarwal, now 53, whose personal fortune is estimated at $5.4 billion. When he left school at 15, he knew no English, the language of India's seasoned elite. Even after a decade based in London, his English remains imperfect. “We are very humble,” he says, his unwitting use of the royal “we” perhaps making him sound rather grander than he intended.
Start small, think big
In the 1990s Mr Agarwal's copper and cable businesses grew on the back of the telecoms boom. He then raised his game in 2001 with Sterlite's successful bid for 51% of the Bharat Aluminium Company (BALCO), India's first privatisation. The deal was consistent with his strategy of backward integration—but also with Mr Agarwal's record for controversy. In 1998 Sterlite was briefly banned from India's capital markets over allegations of insider trading, though the order was later repealed. The BALCO deal was marred by a two-month strike by the company's workers. As the symbol of a still-controversial (and now apparently mothballed) divestment programme, it remains politically sensitive. Sterlite has therefore been unable to exercise an option to buy the remaining 49% of BALCO.
Few Indian companies have grown so fast without stirring controversy. Just as remarkable was the ease with which Mr Agarwal graduated from managing a medium-sized company to running a large group. This has not sated his appetite for risk. As he puts it: “As an individual, we're very strong as an entrepreneur.” Mr Agarwal says he remains interested in further acquisitions, but concedes that his hands are rather full. If approved, Vedanta's plans in Orissa, which holds the world's fourth-biggest bauxite deposit, will keep him particularly busy. He faces strong opposition from environmentalists and local tribes, however. The example of POSCO, a South Korean steelmaker, is not encouraging. Three years after announcing plans for a $12 billion steel project in Orissa, it is still waiting for the requisite permits and land. Then again, Mr Agarwal is not South Korean.
He is Indian, and proud to be—hence, he says, his philanthropic scheme to donate $1 billion to found a world-class university in India. Vedanta University will be constructed on a 3,200-hectare site in Orissa and will cater for 100,000 students when it is completed, around 2025. “When you go to the US, you see their large universities, Harvard and Berkeley, and we don't have them,” says Mr Agarwal. “Yet the biggest thing you can give to people is education.” Sceptics say he has chosen Orissa as the site for the university for political reasons. It is certainly an extraordinarily ambitious scheme. But there is no doubting Mr Agarwal's ability to overcome obstacles and establish giant enterprises with surprising speed.
Raman Singh- Chief Minister of Chhattisgarh
Nexus- Both exploiting the Indigenous People of Chhattisgarh
Facts- Vedanta Group sold electricity to the State Government at higher rates on the pretext that they have to Import coal.
Its been three years and not a single piece of coal has been imported.
Thousands of acres of land has been forcefully occupied by the Vedanta Group at Korba but State Government has not taken any action so far.Is it because Electricity Department is under Raman Singh?????
Today 08/08/07 foundation is being laid for Vedanta Groups Cancer Hospital and Research Center at Raipur
and also a MOU is being signed by Vedanta Group with the State Government for the expansion of their Balco Unit
Irony- Produce Cancer Patients by polluting the environment at Korba and then send them to their Cancer Hospital at Raipur