Sanjeev Gupta consolidates Liberty Steel
The steel production and mining interests of Sanjeev Gupta are to be consolidated into a single company.
Billionaire Sanjeev Gupta has merged his steel businesses including South Australia’s Whyalla steelworks into a single $15 billion business under the Liberty Steel Group banner after conceding a need to boost transparency within his sprawling international empire.
The new group with annual revenues topping $15bn will produce consolidated accounts in 2020 and develop a “united strategy” while noting each individual business will keep a high degree of autonomy to reflect local market conditions.
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Mr Gupta said the move was made partly to address market concerns over his use of opaque funding models that have seen his business empire quickly transform into a global steel player.
“We will now be clearly transparent to the world so everyone from our staff through our customers and suppliers will be clear about where we sit and where our opportunities lie in various continents around the world,” Mr Gupta told The Australian from Milan on Tuesday night.
“We are rising to the call of our stakeholders and what they’ve been asking for. It was actually good to have that pressure because it helps us along the journey. It’s not easy to do this, so having a bit of pressure allowed us to focus and ultimately move a bit faster than we may have otherwise.”
Liberty Steel Group – which also revealed a new goal of becoming the world’s first carbon neutral steel company by 2030 – will become the eighth largest steel producer outside China, employing 30,000 staff in 10 countries and producing 18 million tonnes of rolled steel capacity annually.
Mr Gupta said the recent focus on Liberty’s rampant growth had led to questions from stakeholders and he expects the move to unite the businesses into a broader group would ultimately prove a strong move for the company.
“There has been pressure and questions and that has an impact on other stakeholders who then started asking questions. But we are a people business at the end of the day and if we can get our people and our supply chain on board that will go a long way.”
The move is understood to partly be driven by the steel tycoon’s push to improve transparency over parts of his global operations as underwriters and investors seek deeper insights into the structure of the businesses.
Mr Gupta also expects it will allow the group to access new capital markets and boost its reputation across the countries where it operates.
“It means we will have a consolidated picture and the strength of the group means we’ll be able to demonstrate to all and that will allow us to access different capital markets and look at opportunities in other parts of the world,” Mr Gupta said.
The British industrialist’s recent foray into the debt capital markets produced a mixed performance. Mr Gupta was forced to commit $US150 million ($219m) of his own cash to top up a disappointing debt raising for Australian steel manufacturing unit Infrabuild.
The tycoon committed to the deal in September after a plan to raise $US475m to refinance short-term loans was scaled back to a debut $US325m bond at a high coupon of 12 per cent.
The industrialist has led an international acquisition spree over the past few years, including the purchase of Arrium’s financially troubled Whyalla steelworks in South Australia while touting $1bn of investments in solar, wind, battery and pumped-hydro generation to support the now profitable steel business.
However, a report in late 2018 stated insurer QBE had cut the level of trade credit it provides to Whyalla’s suppliers due to financial transparency concerns, sparking fresh questions over the entrepreneur’s strategy and sources of funding for deals.
Mr Gupta had originally hoped to conduct a local initial public offering of his ‘green steel’ business this year which has plants in Melbourne, Sydney and Newcastle. It supplies 15,000 customers in Australia and includes electric arc furnaces acquired when his GFG Alliance bought the Arrium business out of receivership in 2017 for $700m.
The consolidated plan still keeps the door open for a float but will likely be at least 12 months from now to allow the new business to take hold, Mr Gupta said.
“Infrabuild is the first showcase where we have done financial reporting, governance and a public facing business which can access public markets whether debt or equity. At the moment in Australia we want to have a year of performance and then we will look again. The point is to be ready and then when the markets are ready we can move.”