How a small trader became a metal king

Anil Agarwal, 52, dreams of being the best mining and metal-maker in the world. To get there, he thinks three to five years is a "reasonable" time. Surprised? Those who know him are not.

Agarwal, executive chairman and founder of the London Stock Exchange-listed Vedanta Resources, is growing at a very fast pace - from Rs 15 crore (rs 150 million) in 1985 to nearly Rs 20,000 crore (Rs 200 billion) in the nine-month year to 2006.

Agarwal's is a classic story of a small trader becoming metal king. The secret, he says, lies in believing in himself and in the country's potential.

"Also, I am fortunate to have wonderful people with me. Without them, it would not have been possible for me to reach this level," he told Business Standard after announcing the acquisition of Sesa Goa on Tuesday.

Agarwal came to Mumbai when he was 19 after completing his matriculation from Patna in 1975. He was so impressed with the grand edifice of the The Oberoi that he decided to lodge himself there as he set out to pursue his career as a scrap trader.

But due to his poor command over English, he had to seek the help of a friend to book himself in the hotel. Once there, he would eat out so the cost would not exceed the daily rent of Rs 200.

Today, his annual salary is over Rs 4.5 crore (Rs 45 million), not to mention his stock options and shareholding. He owns a home in Mayfair, London, drives a Bentley, wears the most expensive suits and has the best staff in the industry working for him.

But all this has not changed him. "I am a proud Bihari," he says. "But I have done nothing for Bihar and Jharkhand. In fact, this was the added attraction for my interest in Sesa Goa, which has a prospective licence in Jharkhand," he says.

An ambitious Agarwal wants to have a production capacity of 1 million tonnes each in his three areas of business - copper, aluminium and zinc, and wants to set up a 10,000 MW power plant. "We are investing $13 billion to achieve the target and are half way through [to it]," he says.

It was this ambition that drove him to launch a hostile takeover bid to acquire Indian Aluminium (Indal) from the American giant, Alcan, which failed. Instead, he bought the ailing Madras Aluminium.

Later, he acquired Bharat Aluminium and Hindustan Zinc from the government and purchased India Foils from the Khaitan group of Kolkata. In all these cases, the Birla group was one of the contenders. On his part, Agarwal shrugs off the theory of rivalry with the Birla group. "There is enough water in the sea for every fish," he says.

As of now, the uncrowned non-ferrous king of the country is making his foray in the ferrous market. Sesa Goa has a reserve of 207 million tonnes of iron ore and produces 10 million tonnes a year, and has mines in Orissa, Karnataka and Goa. He differs with those who believe that he paid a hefty premium.

"The premium of 16 per cent is actually cheap, compared to the international instances where the acquirer pays 40-50 per cent more than the market price," he says. With Sesa Goa in his fold, he seeks to be an integrated metal junction with interests in copper, aluminium, zinc, lead and iron ore.

As for failures, he has had his share. His acquisition of India Foils has proved to be unwise. The company is still bleeding. But he is candid in confession. "India Foils contributes a small portion to the group's overall turnover. We may disinvest our interest when we get the right price," he says.

Iron ore exporters, however, are a happy lot with the company coming under the Vedanta fold. They feel they now have a strong man to fight the steel lobby in the corridors of policy making.

Excerpts from his recent interview:

What is the secret of your spectacular growth in the past 20 years?

My efforts are to understand India, have faith in India and to show the world the strength of India. Outsiders do not know the potential of the country. They still believe we are from the land of snake charmers and Taj Mahal. It would be audacious on my part to say that I have fully understood the country. But I have realised that you can build a huge organisation out of this country, having your roots here. Also, I believe in empowerment. I am lucky to have wonderful people with me. They are really responsible for the success of the group.

What is your vision for the future?
I want to have one million tonne capacity each in three major areas I operate - copper, zinc and aluminium. We are half-way through our target. And I want Vedanta to be the best mining and metal company in the world in the next three-five years. I would love to see people calling Vedanta as India's CVRD, the Brazilian mining giant.

And how do you plan to achieve it?

We are investing $13 billion (Rs 54,100 crore) for organic and inorganic growth. The investment will be done in three years. Just to remind you, Vedanta is a debt-free organisation. Over the past years, we have funded all our projects from own resources. This tradition will continue.

This is for the third time you have outbid the Aditya Birla group, the first two being Balco and Hindusthan Zinc. How do you explain it?

There is nothing to read between the lines. The corporate rivalry in India is pass�. I believe there is enough water in the sea for every fish.

What is your plan with India Foils, the ailing aluminium foils maker. Do you intend to pull out of it?

India Foils' contribution to the group is small. We are trying to put the company back on the rails. However, we are open to the idea of divesting our interest in the company, if we get proper valuation.

How much will you invest in Sesa Goa in the immediate future?

We have not applied our mind on the future investment in the company. However, all I can say is that finance will not be a constraint for the growth of the company. This is among the lowest iron ore producers in the world. I am sure, the company will further prosper under the Vedanta realm.

Vedanta University

In the largest donation ever made to a single higher-education institution, a foundation created by an Indian tycoon has committed $1-billion to establish a large, multidisciplinary research university in the Indian state of Orissa. The institution, to be called Vedanta University, is scheduled to begin enrolling students in 2008, and will model itself after campuses like Stanford University. Its goal is to create an “economic hub” in India comparable to what Stanford has produced in Silicon Valley, according to a release issued on Wednesday by the Anil Agarwal Foundation.

Anil Agarwal, the chairman of Vedanta Resources, a metals and mining company in India, had said in February that he planned to finance an elite institution that would cater to more than 100,000 students. He recently announced the $1-billion donation, to be given in phases. During a brief ceremony at the State Secretariat in Orissa, he signed a memorandum of understanding with the Orissa government.

The government has identified 8,000 acres of land for the campus and plans to pass specific legislation to give the university complete administrative autonomy, according to a written statement by Werner Kreuz, managing director of A.T. Kearney, Germany, the consulting firm that is handling the project.

That autonomy will set Vedanta University apart from India’s most respected higher-education institutions, such as the All India Institute of Medical Sciences, the Indian Institutes of Management, the Indian Institutes of Technology, the University of Delhi, and the University of Mumbai, all of which are state-run.

Although the country has made public higher education a priority, the existing institutions struggle to accommodate India’s college-bound population, and many within the system criticize universities’ emphasis on rote learning and say they do not adequately prepare graduates for the job market.

Mr. Agarwal has high hopes for Vedanta University’s contribution to higher education in India. “The Vedanta University will make global standards of educational excellence more accessible to future generations of our country, thereby creating tomorrow’s Nobel laureates, Olympic champions, and heads of government and state,” Mr. Agarwal said after Wednesday’s ceremony, according to a news release.

As the university’s enrollment grows past 100,000, it is also likely to absorb a substantial portion of the Indian students who might otherwise have been expected to pursue a higher education abroad. More than 80,000 Indian students came to the United States in 2004-5, representing the largest foreign contingent on American campuses, according to data reported last fall by the Institute of International Education. Substantial numbers of Indian students also study in Australia, Britain, and Canada.

To design the master plan for the university, the Anil Agarwal Foundation has appointed Ayers/Saint/Gross, an architecture firm in Baltimore. The firm has 90 years of experience with higher-education projects, and has designed buildings and facilities at such institutions as Duke University, Georgetown University, and Swarthmore College. Dhiru Thadani, the project’s lead master planner, said in a written statement that “this is the project that I have been training for all of my life — to apply my 30 years of architecture and planning experience to further develop India as a knowledge economy.”