Davos WEF 2018: Why Anil Agarwal Wants Debt-Ridden Electrosteel Steels
Vedanta’s Anil Agarwal is eyeing stressed assets of Electrosteel Steel due to geographical synergies.
Indian mining tycoon Anil Agarwal’s Vedanta Ltd. has bid for insolvency-hit Electrosteel Steels Ltd. because of the proximity of its assets in Jharkhand to one of the group’s iron ore mines, as the billionaire looks to add steel into his sprawling empire.
“We have a iron ore mine there (in Jharkhand) so it’ll be a good match to use that mine,” Agarwal told BloombergQuint’s Menaka Doshi on the sidelines of the World Economic Forum in Davos, Switzerland. “I like Jharkhand. I met the chief minister and he is also looking to open up the state,” he added.
The entry into steel is to convert iron ore, Agarwal said. India, a net importer of iron ore, prefers that miners sell the ore for domestic consumption rather than exports. Hence, it’s more profitable for miners to convert it into steel before selling. Citing global examples, Agarwal said the big iron ore miners like BHP Billiton Ltd. and Rio Tinto Plc. do not own any steelmaking assets. “But in India, if you own iron ore, it has to be used as captive mine for making steel,” he explained.
It is very unfortunate, because India has one of the best iron ore in the world. We have to produce 500 million tonne of iron ore, we have reserves because we only do 100-150 million.Anil Agarwal, Founder & Chairman, Vedanta Resources
Agarwal is positive on Vedanta’s bid for the steel company. “I believe we've put in a very phenomenal price [for Electrosteel Steels]," he said. “Other plants are also coming and we are evaluating that.”
He expects the commodities rally seen in 2017 to continue further. “I am pretty confident that there is still room for prices to move up 10 percent, across the board, in metals,” Agarwal said. And zinc will be “at the top of the pyramid” because of its scarcity and steelmakers’ move to galvanise steel to prevent corrosion, he added.
Agarwal is looking to invest $8 billion over the next three years to increase capacities across most of his ventures. He outlined his production targets for the commodities where Vedanta is now present.
- Oil: 500,000 barrels a year from around 250,000 barrels
- Zinc: 1.2 million tonnes from 1 million tonne
- Copper: 400,000 tonnes from 100,000 tonnes
- Aluminum: 3 million tonnes from 2 million tonnes
- Copper smelter: 1 million metric tonnes from 400,000 metric tonnes
- Silver: 1,000 tonnes
- Iron Ore: 50 million tonnes
His stake purchase in Anglo-American Plc. last year is purely a portfolio investment “at the moment”, he reiterated.