If 2005 was the coming out year for Lakshmi Mittal, 2006 has been the year of the dog fight.
Last year he was on a roll, shelling out $100 million for a 12-bedroom mansion in London’s posh South Kensington district. Just the year before, the man ranked number 3 by Forbes in a list of world billionaires, had splashed out $60 million to host the five-day wedding of his daughter at Versailles.
The sun king of the 21st century had arrived. Or so it seemed.
This year, the 55-year-old steel king has dominated headlines across the world for different reasons. His hostile bid for the Luxembourg-based Arcelor, Europe’s largest steel company, is turning out to be a grittier fight than anyone could ever have predicted. And although Mittal has lost round one — with Arcelor’s acquisition of Russian steel major Severstal — the war is far from over.
In most business circles, Mittal’s bid for Arcelor has been seen in cultural terms: young Indian money’s attempt to muscle its way into old European aristocracy. France’s finance minister Thierry Breton said Mittal had a ‘grammar problem’ while the Prime Minister of Luxembourg Jean-Claude Juncker declared that the hostile bid needed a reaction that was ‘at least as hostile’.
But in India, Mittal is seen as a folk hero. He’s the man who rose from rags to riches through sheer hard work; the man who’s put an Indian stamp on the global map. If Mittal has been bemused by the overwhelming support he’s received in India — a country he left the year Indira Gandhi declared Emergency —he’s hidden it well. Arcelor’s resistance has been covered in angry commentary while Mittal is lionised as a ‘great visionary’.
Last year, he even made a symbolic return to the country of his birth by agreeing in principle to build a new factory in Jharkhand.
Sadulpur to South Kensington
Lakshmi Niwas Mittal was born nearly penniless in Sadulpur, Rajasthan, in a house built by his grandfather. The village in the Shekhawati region did not have electricity. His father Mohan Mittal studied only up to high school, but his contemporaries saw him as a visionary with the extraordinary ability to identify potentially profitable technology.
In the early ’60s, the family moved to Calcutta and Mohan Mittal took over a small steel factory. Lakshmi enrolled at St Xavier’s College to study business and accounts in the morning and worked in the family business in the evenings.
The steel story began when father and son founded Ispat (Sanskrit for steel) in 1976. Lakshmi Mittal soon branched out to Indonesia to turn around an ailing 65,000 tonne plant in a modus operandi that was to define his business strategy right up till the ’90s: Buy ageing, money-losing plants, plough in the latest technology, hire target-driven managers and, voila, you have a turnaround.
That’s what he did in Mexico in 1992 when he bought Sicartsa, the country’s third largest steel plant, for $220 million. The plant was, at that time, losing $1 million a day but it went on to become the ‘crown’ of the Mittal empire, accounting for 63 per cent of the group’s profit.
The Mittal touch was evident again in Kazakhstan, where he took over a state-owned plant in 1995. Workers had not been paid for six months at that point but, in less than a year, production had doubled. Profits are now estimated to be $700 million and Mittal has found place in that country’s Foreign Investment Council.
Mittal Steel spans four continents and produces 57 million tonnes of the metal every year — over 14 million tonnes more than its closest rival. The largest steel producer with revenues of over $31.2 billion in 2004, Mittal has steel-making facilities in 15 countries and sales and marketing offices in another 11. It employs over 160,000 people.
Bump and Grind
Although he has retained his Indian passport, Lakshmi Mittal is regarded as British by Britain as any blue-blooded Englishman. His success story is highlighted as a case study of the opportunities Britain offers.
It hasn’t always been smooth sailing though. In 2002, he found himself slap bang in the middle of a controversy the British press dubbed ‘garbagegate’. In brief, the controversy revolved around a £125,000 donation made by Mittal to Tony Blair’s Labour party. Within a suspiciously short time of receiving that donation, Blair had dashed off a letter to the Romanian government supporting Mittal’s bid to buy out a state-owned company, Sidex. The buyout pushed Mittal into fourth spot of the world steel maker’s rankings.
It’s ironic that if one row over Blair’s recommendation for Sidex led to the British people hearing about Mittal, it’s another row — Arcelor’s doggedness to avoid an ‘Indian’ takeover — that has made him a familiar name for whom the British press is now rooting.
In London, Mittal, his wife, Usha and his son, Aditya have managed to keep a low profile. He’s a patron of Pratham — a UK-registered charity (among its board members: Ramola Bachchan) that funds education projects for underprivileged children in India— and dutifully turns up for its fund-raisers. But unlike his flashier compatriots, he’s seldom seen on the ‘Indian circuit’. Perhaps he has his father’s advice in mind: “The day you go high profile is the day you fall.”
So, the odd aberration — a house purchase here, a daughter’s wedding there — apart, Mittal shuns publicity. His friends say he has an innate ability to ‘melt’ into anonymity: It’s difficult to say whether the suit he’s wearing is Armani or Paul Smith or something stitched by a tailor in Kolkata.
As the Arcelor battle unfolds, it seems that it is going to be increasingly difficult for Mittal to maintain that traditional low profile. There’s an unconfirmed report that he has already spent £ 300 million in his fight. That’s a lot of money for most people, even billionaires. But perhaps what’s at stake is not just the acquisition of a company that will make Mittal the steel king of the world, but another acquisition on an unstoppable roll.
(With Vijay Dutt in London)