I will do anything for business

Times of India, Oct 20, 2007

There is something about Anil Agarwal that makes you want to take him lightly. It is difficult to put a finger on what it is. Perhaps, it is because the chairman of the London Vedanta Resources is an unassuming man. “I can’t hold a conversation for too long,” he confesses as we leave his office. “So I hire professional conversationalists at £500 a night to be around at my parties,” he says and laughs impishly.

Or maybe, it is the fact that he isn’t like the conventionally suave and articulate CEO that you encounter regularly. But don’t, even for a moment, imagine he isn’t articulate. He is. It’s just the way he talks about himself. A bumbling boy from Patna who came to Mumbai and fell in love with the city’s arc lights; and altogether incidentally happened to be the world’s 245th richest man.

He now spends most of his time in London and operates out of an office in Mayfair, a posh locality in central London. He drives around in a Bentley and has a battery of attendants and butlers to help him around. “I don’t know anything about brands. But I understand comfort,” he says.

Outside work, his interests appear completely banal. He does the usual things regular people do—hang around with friends, cracks a few mean jokes, and watches every Bollywood flick that hits the screen. He keeps insisting he’s had an easy time.

But the truth is this: He built his fortune by turning around poorly run state-owned companies into ruthless, profit making machines. His business has grown from Rs 3 crore in 1986 to Rs 26,000 crore. His flagship company, Sterlite Industries is the second most profitable private sector company in India and is also the second highest tax payer. Vedanta, the holding company for his group’s businesses, was the first Indian company to list in the London stock exchange. In Konkola mines in Zambia, Agarwal has one of the world’s largest deposits of copper. From starting out as a scrap trader in metal, Agarwal, clearly has come a long way. He has now trained his guns at becoming one of the largest mining companies in the world.

The real McCoy: Agarwal’s rise to the top was full of strife and riddled with controversies; more than perhaps any other businessmen in recent times. On practically every deal he got into, Agarwal has found himself at loggerheads with the local administration and the government. Not just that, he has a history of rubbing people the wrong way even as he smartly maneuvered his way to achieve his goals. And his contemporaries refuse to acknowledge either his success or his style of doing business. Put all of this to Agarwal and he says: “In the software business, you don’t touch the Earth, you don’t touch the bureaucracy, the machinery or the system. I do. It is in the nature of my business. So I’m an easy target to be pilloried.”

Push him a little further and ask him whether his reputation as a master at finding shortcuts in business bothers him. He fixes you with a steely gaze before answering. “I am a single man army. I am first-generation entrepreneur. Tatas are the best people. They will do it right. I do it with passion, tremendous passion.” He adds: “When I finish my new expansions, I really want someone to stand up one day and say, amazing.”

In the last two years, Agarwal has stepped on the gas. In the next three, he is investing $7.5 billion to increase his metal making capacities. In June this year, Sterlite listed on the New York Stock Exchange (NYSE) and raised $2 billion for expansion programmes.

As early as 2003, much of Agarwal’s attention was focused on opportunities of doing business with the government. His fetish with the government goes a long way. His father was a scrap dealer and a contractor who had to deal a lot with government officers. “I learned a lot—the psychology of officers and politicians—because that was the business,” says Agarwal. After buying metal scrap from telecom companies, Agarwal found that there was a great opportunity in making cables for these companies. In those days, there was only one supplier—the state-owned Hindustan cables. A captive market led Agarwal to set up his first jelly-filled cable making plant. As days went by, thanks to Agarwal’s knowledge of the system, Sterlite remained the largest cable supplier.

Government orders went to the company that quoted the lowest prices and this in a way also moulded Agarwal’s manufacturing strategy. He always looked for cheaper ways to make his stuff. So, Agarwal’s facilities for making jelly-filled cables was on the back of a secondhand plant that he bought at a bargain from the US. Though Sterlite made cables more efficiently, competitors accused Agarwal of manipulating the system. It was a reputation that stuck with him for a long time.

Having got a foot hold as a supplier, Agarwal focused next on making more and more of the raw materials that went into making cables. With his scrap business background, he was soon making copper rods and in the late ’80s, mooted the first big idea of making copper.

After setting up the smelter, Agarwal hit a setback. He was forced to shift his plant from Maharashtra to Tamil Nadu after complaints from environment groups. Later, in Tamil Nadu, the smelter was shut for a few days after a few workmen died in a blast. “People get scared of the government, bureaucracy, union and various problems. That’s where entrepreneurship comes in and you say, let’s go ahead,” says Agarwal. “There wasn’t much choice in those days.”

Soon, aluminium got Agarwal’s fancy. First, he picked up an ailing Madras Aluminium, backed by big concessions from Tamil Nadu state government. He turned around the company but was yearning for more action. Unlike in copper, which was a state monopoly, there was the Kolkata-based Indian Aluminium (Indal) that was making the metal. Agarwal zeroed in on the company, finding its operations inefficient.

Out of the bureaucratic setup, Agarwal made an awkward move. He met Indal’s Canadian owners Alcan for tea, only to come back to India and pick up a stake in the former. Agarwal called the move friendly but soon launched a hostile bid to take over Indal. He lost the bid and later, was not even considered a buyer when Alcan sold the business to Hindalco, Agarwal’s competitor. Later, he bid 100% more than the next bidder to bag Bharat Aluminium, after the government divested its stake. “Indal was very close to my heart. I tried my best, but eventually we knew we didn’t have the money.”

It was by the turn of the century, that the big picture slowly started falling into place. Agarwal now said that he wanted to be among the biggest players in non-ferrous metals in the world. After buying out the government’s stake in Hindustan Zinc, he knew there was no more state owned metal companies available to be bought.

Opening up: Agarwal knew he had to scale up his ambition if he had to grow bigger. For that he needed big money of the kind the Indian markets were not willing to give him. As London was the biggest metal trading centre, for a year, Agarwal applied himself to studying the listing process in LSE. The UK media scoffed at the idea.

To get around the disdain, Agarwal did something smart. He got Brian Gilbertson, former chief of BHP, the world’s largest mining company, to come and certify his factories in India. Later, he hired Gilbertson as the chairman of Vedanta, an idea that worked to get his issue subscribed. To impress Gilbertson, a passionate cyclist, Agarwal rode with him from Oxford to London. He retired half way but got what he wanted. “I’ll do anything for my business,” he says. “If somebody asks me to ride a horse, I’ll do that. If they want me to swim or go to a night club, I’ll do it.”

The first of the expansion to go on stream was the aluminium project in Kalahandi, Orissa. Despite initial opposition from the green lobby, Agarwal has sunk in more than a billion dollars. But, there is small change in the way Agarwal is doing it this time. Kalahandi, being a backward district, Agarwal is spending a lot of money building amenities for people around that area. He has built over a 1,000 toilets in Chattisgarh. “We realise that in the mining business the local people are the key to a project’s success.”

The next round of growth, Agarwal feels may well come from a large acquisition overseas. Vedanta is also on the look out for mining companies that the Indian government is likely to put on the block. He is also keen to bid for infrastructure projects like ports or airports. “The business we are in are either government-owned or a private-public partnership. The government will always be involved.” What he doesn’t tell us is, how does he work the system, in spite of the odds that are seemingly stacked against him.