Vedanta Group chairman Anil Agarwal says the government’s incentive scheme on semiconductors has the potential to turn India into another Silicon Valley or Taiwan. Electronics, he said, is one sector where the country has immense potential to grow.
“Today we only have branded products like mobile phones etc., once we have the raw material also (chips), the cycle would be complete. We can create a Silicon Valley in India or another Taiwan,” Agarwal said in an interview with FE.
Agarwal said Vedanta is confident of getting global orders once its semiconductor manufacturing unit is up and running in India. The company is already into manufacturing fab glasses and optic fibre globally, so it is not going to be a new business.
He also said that funds for the semiconductor business – which is capital intensive and has a long gestation period — in India would not be a problem as other businesses like oil and gas, mining, iron and steel would generate enough cash to feed the fab unit. “We decided not to de-merge our businesses into separate verticals of aluminium, iron and steel, oil and gas so that cash flow can move. This year we would generate a profit of $10 billion so cash flow would be there,” Agarwal said. The chairman expects approval from the government for the semiconductor units to come within two months but work on design, identifying land and location etc. is going on parallelly in the company. “We have an initial investment plan of $2 billion which would go up to $20 billion finally as we scale up. Various state governments have approached us for providing land for the project, and we are in talks with several of them. We will soon identify the location to set up the unit. We want to see which state can create an entire cluster of units,” he said.
Five companies have applied for the government’s `76,000-crore incentive scheme for the development of the semiconductors and display manufacturing ecosystem. Of this, two proposals are by Vedanta Group – one where it has formed a joint venture with Foxconn for manufacturing chips and the second, on its own for display fabs.
Talking about Hindustan Zinc (HZL), Agarwal said that Vedanta has withdrawn its arbitration against the Union government over the second call option to acquire a 29.5% stake in the company. The withdrawal of arbitration was done after assurance came from the government that it would expedite the residual stake sale. Though Vedanta can’t buy more than 5% because of a cap, Agarwal said that with private parties coming in, the company would not have to go to the government for every small thing. The government by selling the stake can also get Rs 40,000 crore. He said that if the government removes the cap, he would be willing to buy more but even a diversified non-government holding is fine.
In November 2021, the Supreme Court had allowed the Centre to disinvest its residual stake in HZL in the open market, citing that the firm had long ceased to be a government company. In 2002, Vedanta had bought a 26% stake in HZL. It exercised the first call option in 2003 and acquired an 18.9% additional stake. Later, Vedanta acquired another 20% through an open offer. To take over the government’s remaining 29.5%, it exercised the second call option in 2009, but it was rejected by the government. Following this Vedanta had initiated arbitration proceedings against the government. Agarwal said that he’s suggested to the government that going forward instead of privatising government-owned companies, it should corporatise them for better returns and wider equity participation. “In corporatisation, the government can sell its entire share in the market but put a cap that an entity cannot buy more than 5%. This way the new owners can look for professional management and the company can run better and it won’t be a case of a single owner becoming richer and richer,” Agarwal said.
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