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Is India's pride in Mittal misplaced?

By Nandini Lakshman, BusinessWeek
Last updated on: June 29, 2006 15:47 IST
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Lakshmi Niwas Mittal made his fortune outside of his native India, but that hasn't stopped his compatriots from hailing the chairman and chief executive of Rotterdam-based Mittal Steel as something of a national hero. After winning a five-month battle for control of Luxembourg-based steelmaker Arcelor to create the world's largest steel conglomerate, Mittal has become the talk of India.

"Our man Mittal has become the global steel king," says Bombay taxi driver Krishnadas Tiwari. He heard the news on his pocket radio as he was checking out World Cup soccer scores from Germany.

Mittal's triumph in the $33.6 billion takeover has stoked Indian national pride in a big way, even though he paid a steep price -- in terms of both money and managerial control -- to close the deal. It scarcely seems to matter that Mittal hasn't lived in India for decades and resides in one of the most valuable private homes in Britain, a sprawling mansion in London's Kensington Palace Gardens.

Pride And Power

From India's perspective, the takeover struggle was basically about one of its own taking on the European business establishment and winning big. Indian sensibilities were rubbed raw early on in the takeover battle when Arcelor CEO Guy Dolle dismissed Mittal Steel as a "group of less than average businesses" and proclaimed in a rejection of the unsolicited bid by the Indian steel dealmaker that his own company embodied "European cultural values."

Now that Mittal has prevailed, India's political establishment has been quick to cast the takeover as an affirmation of their country's economic ascendancy. Indian Finance Minister Palaniappan Chidambaram gushed, "A person of Indian origin has achieved so much." And even the president of India's powerful Confederation of Indian Industry, R Seshasayee, issued a press release declaring, "Mittal has set a new benchmark in a globalizing world and in raising the banner of the power of Indian enterprise."

Mittal Steel, which post-merger will be known as Arcelor-Mittal, is starting to take notice of India's growth potential as well. Though the tycoon never before invested a single rupee in India, last October Mittal announced a $9 billion investment to build mining and steel making operations with a total capacity of 12 million metric tons in the poor but resource-rich tribal state of Jharkhand.

Hero to many

Mittal, of course, is hardly alone. South Korean steel giant Pohang Steel Company, better known as Posco, has already signed a memorandum of understanding with the Orissa state government in east India to build a $12 billion integrated steel making complex.

Great Britian's Corus Group and even Arcelor were also fine-tuning their India strategies. But Indians are especially glad to have one of their own investing so heavily. That's one big reason New Delhi has been rooting for Mittal to prevail over Arcelor.

Mittal's ambitious plans for India will be a boost for this emerging economy. For years, India's aging steel plants have been in need of investment. Today, India produces 40 million tons of steel a year. By 2010 demand will hit 65 million tons. Little wonder outside investors have their eye on Indian steel. "Most of the global players are looking for iron ore in India and coal in China," says one Bombay steel analyst.

Taking credit

To date, though, India 's raw materials have been poorly exploited. The country has total iron ore reserves of 24 billion tons, but just 150 million tons are mined in any given year. And just 60 million are used for domestic consumption, while the rest is exported. That's why many are banking on the combination of Mittal's industry experience and deep pockets to help transform India into a steel industry player.

Still, some Indian executives view all the hoopla over the Mittal-Acelor deal as excessive. "The Arcelor deal is the triumph of Indians and not India," says Harsh Goenka, chairman of retailing and tire-making conglomerate RPG Enterprises. "We are proud of Mittal, but India can't take credit for what he was able to do."

Goenka recalls Mittal's lack of enthusiasm about the country of his birth. Last November, Goenka asked Mittal why he was a latecomer to investing in India. "I didn't think the Indian market would grow so fast," Goenka recalls Mittal saying. But it is, and Mittal, the not-so hometown hero, now wants a piece of the action.

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Nandini Lakshman, BusinessWeek
 

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