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Agarwal’s American loss

Anil Agarwal might have lost out on the American Dream, but his investments closer to the premium market in Australia and Chile might get him back into the fold

Published: Nov 16, 2009 08:03:56 PM IST

Anil Agarwal’s Sterlite Industries intended to roar onto the global scene by adding Asarco LLC to its growing list of annexures. His bid to conquer the American repository of copper failed after when a US District Judge in Texas awarded it to Grupo Mexico.

Anil Agarwal lost an opportunity to scale up in the copper hierarchy to the second largest copper producer from the current fifth position that his company holds. The successful acquisition would have shot up the copper production to 900,000 tonnes. The Indian billionaire had recently acquired Sesa Goa and Dempo’s mining assets over the last few years.
Few actually expected the maverick entrepreneur to lose in the see-saw battle over Asarco – probably one of the very few integrated copper players in the developed market that was available for ambitious players like Agarwal. The Marwari businessman had the reputation, the backing of the Asarco management, union and the funds to bankroll this operation at a time when major mining companies were floundering.

Anil Agarwal, founder, Vedanta
Anil Agarwal, founder, Vedanta
What does Anil Agarwal do with over $3 billion of reserves?

Agarwal in an interview with Forbes India after the Dempo acquisition had said that his focus was on increasing investments in African Mines. His unused $3 billion reserves might also be directed towards at copper mines in Australia or Chile, which is closer to the developed markets.

“Even though Asarco was a high cost producer – at over $3,000 a ton – the fact that copper prices have risen to over $6,000 a ton in the last few months and that Asarco would have been Agarwal’s first step in the developed market, it was significant for him,” says Prasad Baji, senior vice president and analyst at the Mumbai-based brokerage Edelweiss Securities. 

Arasco was an opportunity lost, but the markets in India rejoiced. Shares of the Anil Agarwal-company rose to its highest price in a month on the Bombay Stock Exchange.

Investors in India though are more enthused about Agarwal’s mining plans in the country and the power projects of Sterlite Energy, a group company.

Asarco would place Sterilite on the mantel of the premium North American market and hence would have commanded better profit margins.

It was part of Agarwal’s bigger plan to make Vedanta Resources move up the global pecking order in the non-ferrous metals category. It is now the world’s fifth largest producer of copper and zinc. It is also on the way to joining the top five integrated aluminium producers and the largest maker of silver in Asia.

Vendanta’s iron ore’s resources added to his increasing market share in other metals would have him hobnobbing with global big wigs like CVRD and Rio Tinto.

Buying a company in the developed market could have also improved the public profile of Agarwal. He has been on one of the favourite flogging boys of environmentalists who have portrayed him as an ultra-aggressive businessman whose mining projects in India was displacing the natives. Asarco also had its tryst with environment-related issues but Agarwal had ring-fenced himself from possible litigations had he bagged the deal.

The former scrap metal dealer had first laid eyes on Asarco more than two years ago and had meticulously and patiently pursued his prey. But Anil Agarwal is known to bounce back. Many years ago, he lost Indal to Hindalco Industries, but now produces more aluminium than its domestic rival. It might just be a matter of time when he remerges in the American market.

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