Billionaire Agarwal Regrets $8 Billion Aluminum Spending

Billionaire Anil Agarwal, who controls London-based Vedanta Resources Plc, said he regrets investing 500 billion rupees ($8 billion) on an aluminum complex in India that’s faced a shortage of raw materials.

“I could either invest in Vedanta Aluminium or I could have bought Asarco,” Agarwal said in an interview with Bloomberg TV India in New Delhi aired today, referring to U.S. copper miner Asarco LLC. “If you ask me today, I regret it.”

Complex government procedures are delaying project approvals in India and impeding companies, Agarwal said. His Sesa Sterlite Ltd. has seen its iron-ore business slump following court-imposed mining bans in two states, while the group’s failure to obtain a mining permit for bauxite in the eastern state of Odisha has driven the aluminum unit into losses.

“Its aluminum project is a dead investment because of lack of raw material,” Giriraj Daga, Mumbai-based analyst at Nirmal Bang Equities Pvt., said in a phone interview. “There is no horizon for this business unless they are able to secure their own bauxite.”

Industrialists including Agarwal, Naveen Jindal and Kumar Mangalam Birla have faced project delays in India.

Vedanta lost a bid in 2009 to acquire Asarco for more than $2.5 billion, cheering investors and boosting the company’s stock at the time.

“I would have done better if I had bought Asarco,” said Agarwal, whose net worth is calculated at $2.8 billion, according to the Bloomberg Billionaires Index. “It would have been a feather in my cap.”

Local Tribes

Vedanta Aluminium is running below capacity after failing to get approval from local tribes to mine bauxite.

Vedanta would have been better off by not investing in the aluminum business at all, Abhishek Shukla, an analyst at Societe Generale said in an e-mail. Some factors that make it a poor investment include government red tape and too much spending by the company without clarity on bauxite supplies.

Vedanta rose as much as 1.3 percent to 907 pence and traded at 902 pence as of 11:07 a.m. in London. Shares of Sesa Sterlite Ltd., which controls Vedanta Aluminium, gained 4.6 percent to 183.10 rupees at the close in Mumbai.

Asked if doing business in India is more difficult than elsewhere, Agarwal replied: “That’s for sure.”

His employees have to run from “table to table” for permission to re-open the company’s iron-ore mine in the southern state of Karnataka, months after a court partially lifted a ban on mining there, he said.

Mining Bans

India, which exported 101.5 million tons of iron ore in the year to March 2010, banned mining in two of the nation’s biggest producing states in August 2011 and September last year as it probed charges of illegal mining. Exports dropped to 18 million tons in the year ended March 31, while companies have been forced to import, according to the Federation of Indian Mineral Industries. The court-ordered bans have since been eased. Companies still require government clearances.

India has the potential to produce as much as 700 million tons of the steel-making ingredient if it simplified its policies and quickened approvals, Agarwal said. The nation produced about 140 million tons in the year ended March 31.

Agarwal said he plans to devote most of his personal wealth to philanthropy, in particular, eradicating malnutrition in India under a Vedanta project called ‘Khushi’, which means happiness.