Agarawal may merge Vedanta entities into single conglomerate

Anil AgarwalMining baron Anil Agarwal, chief of the UK-listed Vedanta Group, is thinking of merging Cairn India and Hindustan Zinc into his holding company to create a global natural resources giant that would rival Rio Tinto or BHP Billiton, he said in an interview.

Agarwal, the ebullient former scrap-metal dealer who became one of India's most prominent self-made industrialists, said consultants have been appointed to explore if it would make sense to merge the two firms into Sesa Sterlite.

"We have asked a consultant to look at it," he said in an interview with PTI.

The consultant will look at if it made sense to "keep oil and gas and energy companies separate or merge Hindustan Zinc, merge Cairn, so that we can have a company like BHP. That can be one model. It all depends on shareholders...How value can be created, how smooth. We are open for merger if the recommendation comes," he said.

Sesa Sterlite, India's biggest zinc and aluminium maker, is laden with debt, Rs29,769 crore as on 31 March 2014 while Cairn and Hindustan Zinc (HZL) are its cash generating units. Sesa holds a controlling stake in both the firms. Cairn and HZL account for about 80 per cent of Sesa's pre-tax earnings.

Insisting that no decision has been taken on merger, Agarwal said Vedanta chief executive Tom Albanese, the former Rio Tinto boss who he hired last year, is on board and whatever recommendations come, the decision will depend on that.

While his firm's share buyback in Cairn met with poor response, merger of HZL will depend on a similar proposal.

"Cairn should be another mini Exxon or a better Exxon, which is an Indian energy producer, an oil and gas producer which every citizen of this country should be proud of," he said.

"We are producing at the moment 200,000 barrel of oil per day. I am looking to produce 3,00,000 bpd may be in two to three years' time. Also 100,000 barrel equivalent of gas. We need to put in between $3 to 4 four billion to make this investment," he said.

To increase the production the company needs certain government nod and it is working on it. 

Stressing that any country which does not produce more than 50 per cent of its energy needs cannot eradicate its poverty, Agarwal said, "We are the ambassador, we are the showpiece. We have increased the production. We have given last year almost Rs 30,000 crore in terms of royalty and the cess which was not in their budget."

Now the company is looking at the government to keep this as a showcase and keep the policies very simple, transparent so that the company can make their investment.

"I believe it is lucrative, more than 80 per cent goes to the government. It is the biggest money spinner for the government. Keep things simple, give a lot of responsibility to us and we will fulfil those responsibilities. Simplifying the process is very important for us to taking it forward," he said.

On further acquisitions he said, "We have grown our company. One of the pillar was acquisition. There is nothing at the moment in the pipeline but any thing comes up we will definitely look at. We are open to organic as well as inorganic growth."

Agarwal said he was "pained" to see people unemployed but was confident that Modi government will bring changes and investments in usher in and then "you will find shortage of manpower here. Tis will happen."

On allocation of coal blocks in India, Agarwal said he has always been against allotment and was in favour of auctioning.

"We are looking at participating in the coal block auction. We are evaluating. Once we do the evaluation we will decide to bid," he said.

The Vedanta chief's advice to budding entrepreneurs is to "dream big and never dream small".

An unabashed Narendra Modi fan, he has earlier said his company is looking at investing more than $30 billion if the climate picks up after Modi taking charge of the union government.