New Delhi: Pramod Mittal, younger brother of the UK-based billionaire businessman Lakshmi Mittal who was sentenced to one-month detention in Bosnia Thursday, has a reputation of being a risk-taker in India, where the firm he once owned, Ispat Industries, had run up huge debts.
Mittal was arrested in Bosnia Tuesday, along with two of his company officials, on charges of suspected fraud. He heads the supervisory board and co-owns Global Ispat Koksna Industrija Lukavac (GIKIL), one of Bosnia’s biggest metallurgical coke producers. GIKIL is jointly run by Global Steel Holdings Ltd, the Dubai-based holding entity of Mittal’s investments, and a local public company.
Run-ins with the law
The Bosnian detention isn’t the first instance of the younger Mittal’s run-ins with the law. In just March this year, he had finally received relief from the Supreme Court of India in a long-standing legal dispute with the state-run State Trading Corporation of India Limited (STC).
The case involved non-payment of dues by Mittal’s companies Global Steel Holdings Ltd (GSHL) and Global Steel Philippines Inc (GSPI) to STC.
After a slowdown in the steel industry, these companies had defaulted on their payments in 2005. Even after a settlement under the Arbitration and Conciliation Act, STC initially managed to recover only part of its dues. The Enforcement Directorate had also initiated criminal proceedings against Mittal and his companies while the CBI had registered an FIR in the case.
After Mittal paid the remaining amount to settle a total of Rs 2,210 crore this year, the apex court quashed all cases and lookout notices against him.
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Ispat Industries and Mittal’s declining fortunes
Mittal’s business life is closely linked to the fortunes of Ispat Industries — a steel company started by his father M.L. Mittal.
The senior Mittal started his journey by buying an ailing Kolkata steel mill in 1952, before turning it around. In 1974, he started the Ispat Group with operations in Indonesia as well. In 1994, M.L. Mittal’s elder son and Pramod Mittal’s brother, Laxmi Mittal, decided to break away from the family and took over the group’s overseas operations. The control of the domestic Ispat Industries, and a few others such as Ispat metallics, fell to the two younger brothers — Pramod and Vinod. At around the same time, Ispat Industries began a sponge iron plant that was then one of the biggest globally.
Mismanagement and corruption, however, marred the company’s prospects. A major financial daily, for instance, reported long ago that, in 1994, a major portion of the money Ispat Industries had raised for a project was diverted to other group companies and through them into real-estate.
The daily also quoted a senior official of the Industrial Development Bank of India (IDBI), one of his lenders, as saying, “Pramod Mittal takes a lot of risks, which is fine, but the problem is that he takes it on our money”.
By early 2002, the value of Mittal’s total group loans had exceeded Rs 8,580 crore, and he was facing trouble repaying them.
As Ispat continued its largely downward trajectory, its losses stood at more than Rs 2,500 crore in 2010. Under pressure from lenders, Mittal decided to sell part of his family stake in Ispat to JSW Steel in 2010.
The latter acquired approximately 41 per cent stake while that of the Mittal brothers — Pramod and Vinod — was reduced to 19.26 per cent.
Mittal stepped down as the company’s chairman but continued as a non-executive director on the board for a while. Within two years, JSW Steel announced plans to merge Ispat with itself, thereby ending Mittal’s association with the company.
Opulent Lifestyle
Despite his large financial losses, Mittal is known for his opulent lifestyle. One of his houses in London was once compared to “Indraprastha, the abode of the king of Gods” by the head of a financial institution.
Similarly, it is believed that the 2013 marriage of his daughter — Shristi — was one of the most expensive ones in history. The expenditure has been estimated at around 60 million Euros.
Also read: Lakshmi Mittal accuses fellow steel tycoons of hiding funds through sham transactions