What is your vision of what is happening in the world of raw materials? Do you think this is a supply constraint or a geopolitical risk?
I think both and I am a positive person. I look at the advantages and how we can take advantage of our location in India due to our geopolitical situation. The goal is to be independent as soon as possible. The world is in conflict. India has fewer conflicts and the prime minister talks about being aatmanirbhar (self-sufficient). He said the government had nothing to do. He is the one who talks about a minimum of transparency and a maximum of governance and less interference from the machinery of government and self-certification. India is basically like America, which encouraged its entrepreneurs to take risks and supported them.
For commodity producers, it has never tasted so good. In all of the businesses in which we operate, underlying commodity prices are at an all-time high, whether it is crude, aluminum, zinc or even gold. The shareholder would expect to make more money in the event of a geopolitical crisis and disruption of supply and demand. If a big player like Vedanta is in the right place at the right time, he will hit the jackpot!
The shareholders are very happy. Input costs have also increased and a company like ours cannot keep up with global standards because we are a developing country. We have to go and see more and more what we can do inside the wall.
Take the oil. We produce almost a million tons of oil. I have no doubt that in 2-3 years we will be able to produce 3 million tons. It requires a simple policy disassociating itself from any dispute and not disrupting production. It is very important. The government announced that many ONGC fields would be shared and privatized. These things take at least two years. The IBC process has begun. It’s a godsend but it takes a long time. We do not have the time. Let’s take advantage of geopolitical issues and make a decision. There is no better mind than our bureaucrats, but they have to make decisions.
Are you still considering making an offer for BPCL, why don’t you clear the air?
I’m like my grandfather who had a fabric store. He used to open a shutter every morning and when customers came in, we greeted them. I opened the store. I will evaluate everything because we have experience, we have an entrepreneurial spirit, we have huge financial backing, we have our own treasury – almost 7 billion dollars. We’ll see what we can do. Two years have passed since the idea of privatizing BPCL was floated.
We have two big gold mines – Bharat Gold Mines, Hutti Gold Mines, everyone said there is no gold in them. Within 60 days, we are looking for a partner who can take over. There is no risk for the government. There is also a risk for shareholders. The state government holds so much and the central government holds so much. The central government can sell its share. But who will run the state government? Who will manage the people? One thing is certain, we are not going to lay off a single person. This will never happen in India.
Do you have a reserve price in mind for BPCL?
Vedanta will never go for BPCL. The world has enormous faith in us and thinks we’ll be able to handle it. We would like to involve all the financial partners who will fund this and we can manage very efficiently. We will work with existing people. We can create three times more synergy in this business but Vedanta will not finance BPCL.
ET Now: Over the past three years there has been a lot of back and forth in terms of capital allocation. Why were there so many back and forths? What made you change in your thoughts?
Anil Agarwal: We have never changed in terms of capital allocation. We have been very disciplined in capital allocation. India is a developing country. It’s not America. We like to look at disruptive ideas where we don’t invest capital but develop a model with a lot of hard work and what opportunity we can envision. But at this point, we’ve never acquired anything that wasn’t under our capital allocation.
Would Vedanta expand its business lines to acquire other commodity assets or would you expand your reach into logistics and cash flow, which are booming in commodity, to create a more formidable business empire ?
We have decided to invest $20 billion for capital allocation and we are working with the government. We see that there is oil in the ground and we would like to produce 500,000 barrels of oil in the short term and supply it at the lowest cost in the world. We need a few billion dollars that we have allocated and we would like to work with the government, the judiciary.
I can tell you that the world does not want us to produce these goods. They want us to remain a market and this is the first time the government has realized that the world wants us to be a market and not a supplier. We are fully determined to be self-sufficient. In these geopolitical situations, we must be autonomous. We produce virtually the entire range of merchandise. Nickel is also very important. We are trying to acquire a company for Nickel through the IBC process. Coal is also a very important asset and imports can be reduced.
At the moment we have no other merchandise. I will definitely look at copper. Copper is a very important factor as we import 100% copper. I have always said that we are not going to close a business but to solve the problems, whether in Goa, Tuticorin or elsewhere.
If we stop production and start importing, everyone loses. So other than that, I have no vision. We are the fourth largest producer of glass in the world, whether it is fiber optics, glass for television, for cell phones, for laptops. I have to commend the Indian government for coming up with a policy on semiconductors. I’m sure a few players will come. We will literally be the leaders in the production of semiconductors and glass.