So Lakshmi Mittal wants to buy a piece of a business in India that has no recession – cricket. It is not surprising, given the dismal fate of his other business initiatives in the country of his birth (read my post earlier this year)
The steel baron is said to be interested in buying a stake in Delhi Daredevils, the IPL team that is presently owned by fellow billionaire businessman GM Rao, whose GMR group has benefited from its ownership of the team that it bought in 2008 for $84 million. Then a relatively unknown company that was re-developing Delhi’s airport, the success of new terminals and exploits of Delhi Daredevils (at least in the first two editions of IPL when it reached till the semifinals) on the field helped GMR increase its brand equity.
The team’s downhill ride since then, mirroring the poor form of its star player Virendar Sehwag, is what makes it similar to Mittal’s acquisitions in the steel sector. The owner of ArcelorMittal had built the largest steel empire in the world by acquiring cheap plants that had rich legacy but were faring poorly when the businessman bought them.
Mittal’s conquest of the world started from Indonesia and traveled all over, including Europe, North America and South America. Acquisition of Arcelor was the cherry on top of it (at least then though now critics question that ambitious, ego-filled decision). During the peak of commodity run in 2007-2008, ArcelorMittal was producing 110 million tons of steel every year, about 10 per cent of the world production. The second largest was not even producing half of ArcelorMittal.
Delhi Daredevils too has lost its mojo. The team needs inspiration and new leadership to turnaround its performance. Newspaper reports say that it is close to break-even but that remains unconfirmed. This report by Mint earlier this year says that the Delhi team has been narrowing its losses and quotes its official who claims that the club should breakeven “this year.” Mittal has the charisma and money (personal, that is. ArcelorMittal is still besieged by debts) to bring that change in Delhi Daredevils.
His interest in the IPL team is again similar to the just 200,000 pounds that Mittal had to pay for 20 per cent stake in the troubled English football team Queen Park Rangers in 2007. The team had begun to do well since then, entering the Premier League for two season before relegating again earlier this year. At present, Mittal owns 34 per cent stake in the club. Tony Fernandes, promoter of Air Asia, is the majority shareholder.
Mittal’s other sports interest in India is the Mittal Champions Trust, which supports talented Indian athletes in their quest for Olympic glory. The Trust’s biggest success till now is shooter Abhinav Bindra who won the gold in 2008 Beijing Olympics.
Now it remains to be seen if Mittal’s negotiating and bargaining skills are intact and at what valuation he gets a stake in Delhi Daredevils.