Billionaire Anil Agarwal avoided aggressive expansion during the commodity boom. Now when rivals are licking their wounds, he begins his game
The first move came out of the blue. In April 2007, Anil Agarwal, the scrap dealer-turned-metals billionaire who runs Vedanta Resources, paid $1 billion to buy Sesa Goa, an iron-ore company. By all accounts, it appeared like straying from its core business. Vedanta had always been known for copper, aluminium and zinc and this entry into iron ore sent confusing signals to investors. There was also this feeling that Agarwal may have overpaid for Sesa Goa, just to wean it away from rival suitors steel baron Lakshmi Mittal and the Mumbai-based A.V. Birla group. Vedanta’s stock plunged in the next two sessions of trade, reflecting investor disapproval.
Ore to the Fore
Agarwal started his career in the mid-1970s but got into mining for non-ferrous metals only in the 1990s. He realised that the profitability of his telecom cable business fluctuated wildly with the prices of raw materials — copper and aluminium. He decided to control his input costs by making the metals himself. Through the acquisition of Madras Aluminium and by setting up India’s first private sector copper smelter, he set the foundation for a mining empire.
Toehold in the West
Asarco caters to the premium North American market and hence can command better profit margins than its counterparts can do, say, in India. This base in the US will also come handy as Vedanta eyes the growing market in South America, which offers its own vast reserves of mineral resources.
(This story appears in the 28 August, 2009 issue of Forbes India. To visit our Archives, click here.)