TURNAROUND ARTISTE

The tycoon from Punjab who swam against the tide to rescue the British steel industry

Quartz india
Quartz india

In Britain today, Superman isn’t as much the Man of Steel as Sanjeev Gupta is.

The newspapers chose Kal El’s sobriquet for 45-year-old Gupta not just because of his interest in commodities—that is, apart from banking, engineering, and other sectors—but also the way he has emerged as the saviour of the beleaguered British steel industry.

Over the past few years, his 25-year-old, $6.8 billion Liberty House Group has mopped up the assets of many distressed companies, especially in this sector.

During the past 18 months alone, the conglomerate has purchased the British properties of India-based Tata Group and Essar Steel and the UK’s Rio Tinto and Caparo, among others. In the process, it has also rescued a number of jobs at a time of glut in the global steel industry. The group, which Gupta founded in 1992 as a college student, today has over 4,200 employees across 30 countries, up from about 1,500 just over a year ago.

“We’re not afraid to swim against the tide as was evidenced by our willingness to get involved in UK steel and engineering at a time when others were running away,” Gupta told Quartz in an email.

From India to UK

Gupta was born in India as the third of four children of Parduman K (PK) Gupta in Ludhiana, Punjab.

PK Gupta is the chairman of the $2.7 billion SIMEC Group with interests in bicycles, shipping, mining, energy, and cement, among others. A 13-year-old Gupta was enrolled at the prestigious St Edmunds school in Canterbury, Kent, when he refused to return to India following a visit there to meet his elder brother. After completing his A-levels, Gupta dabbled in his father’s bicycle business for two years in Turkey before pursuing economics at Trinity College, Cambridge.

“While I was at University, I started Liberty,” Gupta said. “It was originally aimed at our own family business in India and Nigeria and so on. I was basically trading products for my family’s business—buying everything from steel to rice & sugar, FMCG, engineering goods, and even dried fish heads, selling in countries such as Nigeria.”

Soon, Gupta was trading upwards of £1 million a day from his dorm room. Reprimanded for doing business on the campus, he moved out of the hostel. By the time he finished college in 1995, Liberty was clocking exponential growth.

Over the next few years, it diversified into specific commodities and brought together the trading business under three categories—steel, chemicals, and agriculture.

In 2009, it entered steel making, buying plants in Africa. A year later, it was in Asia, setting up the regional headquarters in Singapore and a hub in Hong Kong in 2012 to focus on China. In 2013, Liberty House Group bought Mir Steel UK, a steel mill in Newport, South Wales, stopping it from being shut down. He had now gained a foothold in the British steel industry, once the economy’s backbone.

In 2015, the Newport plant resumed operations, after being renamed Liberty Steel Newport.

Steel baron

Soon after, Liberty purchased the UK-based Caparo Tubular Solutions, a tube components manufacturer, owned by the Indian born businessman, Lord Swraj Paul. This was followed by two mills in Scotland from Tata Steel Europe.

In December 2016, Liberty paid £330 million for Rio Tinto’s aluminium smelting plant in Scotland, and followed it up with the purchase of Midlands car-parts maker CovPress, saving 750 jobs. In February this year, Tata Steel signed a definitive agreement to sell its UK specialty steels business to Liberty for £100 million (Rs838 crore). In April this year, it also agreed, in-principle, to acquire ArcelorMittal’s Georgetown Steelworks in South Carolina. ArcelorMittal is owned by Indian-born businessman Laxmi Mittal.

“Once the management team and I have identified an opportunity and satisfied ourselves regarding the strength of proposition available to us then we move quickly to capitalise on it,” Gupta said. “We are not daunted by the scale of any project. If the proposition is compelling and it falls within our core strategy then we will go for it.”

In April, the Gupta Family Group Alliance, which includes Liberty House as well as his family’s resources and energy group SIMEC, acquired Mesabi Metallics Company LLC, formerly known as Essar Steel Minnesota LLC and ESML Holding Inc for over $550 million. This included a seven million tonnes-a-year iron ore pellet plant at Nashwauk, Minnesota, with an expansion potential of upto 14 million tonnes a year.

Where does he go from here

Gupta’s business is centred around his concept of Greensteel—using local supplies of scrap and renewable energy to make the alloy instead of importing expensive raw materials such as iron ore and coking coal.

“Others are now starting to see what we saw and the tide is beginning to flow our way,” he said.

For years, the global steel industry has been stuck in a rut as excess and cheap supplies from China have flooded the market. Between 2000 and 2014, annual global production doubled from 800 million tonnes to around 1.6 billion tonnes, largely driven by Chinese production.

“We are conscious of the huge global over supply of steel but we have invested in assets where we see potential to supply locally-made metal competitively to local markets through more efficient production and downstream integration,” Gupta said.

Meanwhile, Gupta’s emergence as the saviour of British steel has led to greater scrutiny, particularly of Liberty House Group’s financials.

A report in the Financial Times newspaper last year said:

According to filings, Liberty House in the UK, which covers shipping activities but not steel, had less than $60 million of revenues in 2014 and profits of $90,626, on which it paid tax of $6,497. The company received a tax deduction because of exchange rate differences. In 2013, the company paid tax of $71,201 on profits of $274,169. Liberty House UK is owned through a company registered in the Isle of Man. Mr Gupta was also the director of Liberty Commerce, an entity incorporated in 1995 which bought a £1.4m property in Mayfair to use as its headquarters. Liberty Commerce was deregistered in 2011 and its capital transferred elsewhere. Twice in the past three years Liberty House has been threatened with being struck off the UK companies register and dissolved for filing accounts late. On each occasion in 2013 and 2015 the warning was lifted after accounts were filed with Companies House. Liberty said the accounts filed with Companies House in the UK was for a “non-core” part of the group.

Over the next few months, the group is expected to tap the stock markets. “…but we would seek to retain a majority share of those businesses, so (that) we can continue to drive them forward,” Gupta said.

The saviour is firming up plans for further acquisitions across countries. “India is certainly among them.”

Kal El’s coming back home!

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