It has never been smooth sailing in India for the UK-based Vedanta Group. From the acquisition of Balco a decade ago to the recent Cairn deal, questions have been raised.

Last week, the group announced its intention to merge Sterlite into Sesa Goa, which, needless to say, has drawn a fair amount of flak from the investor world to market pundits.

However, none of the developments appears to have ruffled feathers in Vedanta's boardroom.

An unperturbed Mr Anil Agarwal, Chairman, said, “It is like the case of a ‘ bahu' going to her new home, she may face hurdles initially but she is there to stay.

“So is the case of the merger. Opposition is bound to be there. It is a passing cloud. We are confident and patient,” he said, in an interview with Business Line . Excerpts:

Why the merger?

A lot of companies have done the same. We were thinking about this for quite some time now. When children grow up, we have to get them married. We have grown for 10 years and it was always on the cards. When the Cairn deal came our way, we thought it can be done after completing the deal. We wanted to put oil and gas to make it a nice pie.

With large natural resources and huge demand for metals in India, we found it fit to have an Indian company to rank among the world's largest mineral resource majors.

Why now? You could have waited for all assets to stabilise financially?

The river is flowing. We wanted to take a position at some point of time. Cairn is a limited prospected asset and it is a base.

It looks very big, but its natural prospecting is still going on. But we have created a good base. It is a national asset and we are only trying to put it together.

Did you expect this kind of response from investors?

We expected some sort of confusion among investors as the whole merger process is a little complicated. Questions were raised on the valuation. People are talking of debt.

No asset can be transferred without the associated debt. We had followed the clearly defined set of regulations prescribed by the Government.

Our finance guys are talking with large institutional investors to make them understand the procedures followed on valuation and the synergy of the merger.

Are Vedanta Resources investors happy with the merger?

They had also expressed concerns over transfer of Cairn assets to Sesa, but were largely convinced after understanding the long-term benefits. In fact, the whole merger was long-pending demand of these investors. They wanted to have a clear structure so that they can follow the business prospects.

Are you put off by the hurdles?

In a democratic set-up these sorts of hurdles are common. In olden days, we had only public sector companies developing mineral resources of the country. If India has to leapfrog to the global arena, we need active private partnership. We are not in a hurry to get our things done.

The Government is a partner in all our endeavours, be it Balco, Hindustan Zinc or Cairn with a huge public participation. We have started each of our businesses at the base level and have nurtured it to the current exalted levels.

The Government has recently found NGOs working against its Kudankulam nuclear power project. Do you see a similar hand working behind your projects?

(Laughs) We are not as big as the Government to detect these kind of activities. I can give you some facts and you can arrive at your own conclusion. Production cost of aluminium in India is about $2,000 a tonne, while it is $2,400 a tonne for a marginal global player. These global players are just surviving as aluminium price on LME is ruling above $2,400. If India starts producing aluminium in large quantities, these global players will be wiped out. Odisha has the largest of bauxite resources of 3,000 million tonnes. The bauxite is so rich that it can bring down production cost to $1,000 to $1,200 a tonne.

Now, the question is, why has no major bauxite mining taken place in India in last 30 years? We have invested $6 billion in Odisha, another $7 billion will be invested after getting various approvals from Government.

>suresh@thehindu.co.in

>murug@thehindu.co.in

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