Younger brothers of Lakshmi Mittal, Pramod and Vinod, going their own ways

KOLKATA/MUMBAI: Struggling businesses, frequent run-ins with lenders and more recently, a big fat wedding have marked the journey for Pramod and Vinod Mittal, post sale of Ispat Industries in late 2010.
The less-prominent brothers of Lakshmi Mittal, the larger-than-life owner of Arcelor Mittal, Pramod and Vinod had announced mega plans in the nineties. These included for Ispat Industries, which is in Maharashtra, and a foray into telecom through Hughes Ispat, a provider of landline services, which was sold to the Tata group.

The two brothers, whose combined market capitalisation is just about 0.5% of big brother Lakshmi’s, are now trying to carve out a new future for their group. Lakshmi, 63, who is oldest of the three, left Calcutta (as it was then known) in 1976 to embark on a career that has made him – despite problems currently faced by Arcelor Mittal – the poster-boy of Indian entrepreneurship abroad. Pramod, 57, is the middle brother and Vinod, 56, the youngest.

In December 2010, the two younger brothers ended their own foray into steel making. Weighed down by debt, the Mittals sold a majority stake in Ispat Industries, their flagship company, to JSW Steel in December 2010.

When it was sold, Ispat Industries owed over Rs 7,200 crore to 15 lenders and overdues exceeding Rs 400 crore while its consolidated loss stood atRs 323 crore for a 15-month period. Pressure from lenders led to the sale, though the promoters resisted for a while.

Currently, Balasore Alloys and Gontermann-Peipers (India) are the only two significant businesses for the Pramod Mittal’s group operations in India.

In 2013, the Mittals sold their remaining stake in Ispat to JSW, which is believed to have fetched them about Rs 1,000 crore, a source privy to the deal said.

While Pramod is on the board of Balasore Alloys and Gontermann-Peipers (India), Vinod is not on either board; Pramod’s daughters, though, are on the boards of Balasore and Gontermann.

Vartika, the elder daughter, is on the board of Balasore Alloys while Shrishti Mittal (the youngest daughter of Pramod Mittal, who got married recently in a 65-million euro ceremony in Barcelona) is on the board of Gontermann.

(Vartika was married to Utsav Goenka in July 2011 in a lavish wedding at Istanbul. Earlier they had got engaged at a marquee London venue – The Boiler House in the Battersea Power Station. For the 2011 wedding, over five hundred guests from around the world were believed to have been flown into Turkey for the three-day festivities.)

News of the lavish wedding of Pramod’s daughter last month did not go down well with lenders. “It (the wedding) is supposed to have cost nearly ¤65 million. How can they spend so lavishly while their lenders, suppliers and employees are yet to get paid?” a former chief executive of one of PK Mittal group companies said.

Post the JSW-Ispat deal, Vinod Mittal has made a foray into the foods business. He acquired 80% stake in Om Pizzas & Eats, the Indian franchisee of Papa John’s pizza chain. Atulya, a Harvard Business school grad was earlier a vice-president at Ispat, is said to be spearheading the venture.

These seemingly divergent business interests have led to rumous of the two brothers parting ways. But Anil Surekha, managing director of Balasore Alloy and a trusted confidante for PK Mittal, denies this.

“There is no formal or informal division of business interests between the brothers. Vinod ji is part and parcel of the family and they remain together as family. Historically, Vinod Mittal has always been associated with Ispat Industries while Pramod Mittal has been in charge of Balasore Alloys and Gontermann-Peipers (India) (GPI). It is just that he (Vinod Mittal) is no longer on the board of Balasore Alloys and GPI,” Surekha said.

Kolkata, the erstwhile homebase of the Ispat group founded by Mohan Lal Mittal, is still the home base for Pramod Mittal’s businesses.

BUSINESSES IN INDIA

“Balasore Alloys and Gonter mann-Peipers are the two main companies so far as the PK Mittal group operations in India are concerned,” said Surekha, who was earlier director (finance) at Ispat Industries. Balasore Alloys, which has mining and alloy manufacturing units, reported a turnover of Rs 686 crore in FY13 and a profit after tax of Rs 28.7 crore. Its market capitalisation is a measly Rs 75 crore.

Gontermann-Peipers, a lossmaking company with revenues ofRs 135 crore (in FY13 and FY12) has market capitalisation of a mere Rs 7 crore.

Balasore is under a corporate debt restructuring (CDR) scheme since 2009, but is said to have turned around and is now the flagship of the group. It owns the Kalipinya chromite mines in Odisha’s Suk-hinda Valley where the Tatas and Jindals also own mines. It also owns Bagha Jhumpa quartz mines in Odisha, Hatoda manganese mines in MP and a ferro alloys manufacturing facility at Balasore in Odisha.

“Our vision is to expand the capacity of the plant from 1 lakh tonne per annum (ltpa) to 4 ltpa in stages over the next five years. We have taken up a number of process improvements to achieve this target,” said Surekha. An integral part of future plans is to expand the capacity of the Kaliapani chromite mine. “While it is currently being operated as an open pit mine, plans are afoot and to start underground mining there to raise mine capacity from 3.5 ltpa to 1 million tonne per annum. Development work on this has already started,” he said.

“The largest consumers of ferrochrome and charge chrome are producers of stainless steel, which is doing well. Balasore Alloys owns very good captive mines and its raw material cost is very low. Secondly, the chrome market has been doing very well globally, despite the downturn in the steel market.

Hence, margins remain high,” a former chief executive of one of PK Mittal group companies said. Ferrochrome (FeCr) is an alloy of chromium and iron containing between 50% and 70% chromium. It is chromium that imparts the corrosion resistance property on stainless steel.

Gontermann, which filed for corporate debt restructuring in August 2013, makes cast and forged rolls. A new managing director, Susanta Ghosh, was brought in with the mandate to turn it around.

Ghosh is a group insider and was previously with Ispat Industries as V-P (operations). Ghosh said that in the last 10-11 months, GPI’s production has gone up nearly 200%.

“We hit a low of around 600 tonnes per month. The company is now producing nearly 1,200 tonnes. By April 2014, it hopes to touch 1,500 tonnes per month and the target is to reach 2,000 tonnes by November-December 2014,” Ghosh said.

GPI earlier announced an investment in a national multi-commodity exchange in September 2010. It is yet to take up these plans. Another group company, Ispat Profiles, that makes rails and structurals, has remained closed for nearly 7-8 years. Ispat Profiles has an outstanding debt of Rs 168 crore. Asset Reconstruction Company of India (ARCIL) is its largest creditor with dues of Rs 84.26 crore of principal amounts while total outstanding including interest amount to over Rs 1,174.86 crore. In an order issued on January 23, BIFR has ordered that the company should be wound up.

OVERSEAS VENTURES

PK Mittal-promoted Global Steel Holdings (GSHL), which has its corporate headquarters in Dubai, is believed to be gearing up to revive operations at Delta Steel in Nigeria. “Plans are afoot to revive the Delta steel company in Nigeria.

Most of the local issues have been resolved,” a top group executive said. Reports in the international media suggested that the employees at Delta had not been paid for a number of months since January 2012.

Ajaokuta Steel, also in Nigeria, was re-nationalised by the Nigerian government a few years back after the PK Mittal group failed to run it properly.

GSHL also has operations in Bosnia-Herzegovina where it runs Global Ispat Koksna Industrija Lukavac (GIKIL). GIKIL is the leading metallurgical coke producer in the region. The financials of Global Steel Holdings are not in the public domain and the company declined to discuss numbers.

The Dubai-headquartered company is said have operations in various countries including East Europe, Africa and Asia. These rust buckets, as steel companies in East Europe were called, were acquired at dirt cheap prices which were later sold for a good profit after a few years. It also owns iron and coal mines in Liberia, Afghanistan and North Korea and facilities in Philippines.

The financials of these companies are not in the public domain. PK Mittal also acquired Kremikovstzi Steel, the country’s largest steel company in Bulgaria, but could not run it and gave up in 2008.