‘We hope we’re through the worst of the commodities market’

| Updated on: May 29, 2016
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Group CEO Tom Albanese speaks on the challenges and opportunities ahead

The churn in the top management of Cairn India, a premium asset of Anil Agarwal’s Vedanta Group, doesn’t perturb Tom Albanese, Group CEO, Vedanta Group, too much. Cairn India, he says, has “a very capable, experienced and cohesive team. I have certainly put my faith behind it.” Heading a mines-and-minerals conglomerate is not easy, particularly in times of volatility in the commodities market, and pressures from environmental groups. In an interview to BusinessLine , Albanese explains how Vedanta’s diverse portfolio has kept it in good stead in times of adverse cycles in the commodities business. Excerpts:

How is a professionally run business different from a family-owned one?

Everything we (at Vedanta) do, we keep global best practices in mind. We measure ourselves on how we stand against our peers not just within the Indian context, but a global one.

I focus on making sure we have strong teams and that we deliver value in a volatile market.

Critics believe that with the change in promoters of Cairn India, the company’s DNA has been affected: it has seen three CEOs quit since 2012.

Cairn is not a state-owned company. It is a private company based upon market forces. It is also entrepreneurial. That is true not just since 2011, but since its inception in the 1990s.

When I look at the executives and professionals within Cairn, most of them have been in the business for long. Almost everyone has grown in the company over 5-10 years or more.

We have a few new people in the technical side, bringing the much-needed additional experience within the Group, but a majority of the Cairn executive team has been around for long.

Given commodity price volatility, how are you managing your portfolio? What will be your strategy for the current fiscal?

I cannot say they are comfortable yet, but they are looking better. We recognise that markets continue to be volatile. We hope we are through the worst of it, but we would continue to focus on operational excellence, cost reduction, prudency in capital spending and deleveraging. These are all important parts of the business. Whether you are in good or bad markets, it is an ongoing requirement for a business to protect its licence to operate.

From a strategic perspective, it is still important that we get the merger done between Cairn India and Vedanta Ltd. It is our objective to continue to strengthen the balance sheet, and deleverage.

I look forward to the ramping up of our aluminium business over the course of this year. We have brought our 9,000 MW power projects across companies on stream as on April 1. We have our iron ore business, which was suspended for three years, fully up and running. 

Do you shift focus depending on how a particular commodity market is behaving?

A diversified portfolio gives you stability so that you can invest in businesses that are most attractive. So, in the case of zinc, which most would feel has the strongest fundamentals, we are proceeding with a new zinc project in South Africa, while continuing with the expansion of Hindustan Zinc.

But this doesn’t mean we are ignoring other businesses that can generate profits. For example, in Cairn India our capital costs are projected to be lower in fiscal 2017 than they were in the previous year. But that is only because of the timing; some of our next-generation oil projects require a higher oil price than what we have seen over the past couple of months.

The recent rise in oil price gives us some hope that we can make those projects attractive over the next few months. But again, we will observe the market. In addition, we would like to advance our deep gas project in Barmer, for which we have sanctioned some capital.

However, the big capital is likely to come a year from now, as we get closer to the time when the pipeline would be ready to go.

It makes no sense to put in a lot of investment until we can evacuate that gas. So we are looking forward to that gas interconnection between Barmer and the national grid.

Published on January 20, 2018

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