Changing perception: Sanjeev Gupta's Liberty Steel Group to publish audited results in early 2021

The Sanjeev Gupta-led Liberty Steel Group, which has been often singled out by critics for not being transparent enough about its financials, has taken multiple steps that could be a 'game changer' for its perception, a senior executive has said.

The $15 billion group that has operations in 10 countries, including in India, had earlier this year appointed a board that includes independent non-executive members. "We have now appointed one global auditor, bringing all our units together to make a whole. All these units will have the same financial standards, including the same financial year," Jay Hambro, Chief Investment Officer of GFG Alliance, told Moneycontrol.

Liberty Steel Group, or LSG, is part of the GFG Alliance, which also has the Gupta family's interests in financial services, aluminum and mining.

Importantly, LSG will make public its annual report for 2019 and this will include the consolidated accounts of the company. "The report is for the period ending March 2020. We will be publishing the annual report at the start of the next year," Hambro said.

This will be a significant step for LSG to evolve from a disparate group of geographic entities with different year ends, and accounting standards, something that has been often criticised." LSG is like a butterfly coming out of a chrysalis. We are now reporting, and have corporate governance standards like any public company," added Hambro, who had joined Gupta when the business had 40 employees. Now it has 40,000 across five continents.

Critics are quick to point out that this is not the first time that the company has talked about publishing audited results. LSG had plans to do so in the beginning of 2020, but changed plans post-COVID-19.

Hambro takes a different view.

"It's very easy to criticise a private company because of lack of disclosure. But that is the nature of a private company. We don’t have to disclose these things. However, we have taken a very proactive and hopefully constructive step to be on the front foot with disclosure," says the 45-year-old,  who was earlier the chief investment officer of Petropavlovsk PLC, Russia’s second-largest gold producer that was co-founded by his father.

Executives close to the company said LSG's annual report may also include numbers from the first six months of the 2021 financial year. "But that hasn't been finalised yet," the person said.

Hambro, however, declined to comment if the company will begin sharing financial numbers every quarter. But he signalled that the annual reports will become the norm.

The annual report will include details of Adhunik Steel, the bankrupt company that the LSG had brought through the bankruptcy route in February this year. In October, Adhunik restarted production.

Interest in Thyssenkrupp

While Gupta emerged out of the sidelines in the last few years to pick up loss-making units across the world and build the $15 billion empire, his biggest bet is LSG's interest in Germany's Thyssenkrupp.

The German conglomerate is selling its steel business and is now in talks with LSG. "We are working closely with them to conduct the process," is all Hambro said, citing confidentiality clauses around the deal. If successful, the merger of LSG's steel businesses in Europe with Thyseenkrupp will create the continent's second-largest steelmaker, only behind ArcelorMittal.

"We are comfortable with our financial wherewithal to complete the transaction," Hambro said when asked about how the group plans to finance a deal that is expected to be upwards of $5 billion, and probably $10 billion.

All the steps being taken to improve corporate governance standards will help the group attract more capital. "That will improve access to capital and puts in a strong position in 2021," says the senior executive, who began his career in finance with NM Rothschild & Sons and then with HSBC.

M&A in COVID-19 times

Managing a deal during the pandemic has been difficult, admits Hambro.

"That is much more challenging; conducting an M&A during a crisis where you can't travel and interact with people and create a bond that you need to do, in a deal," he said. Hambro cites the example of the acquisition of the aluminum facility in Duffel, Belgium, to say that M&A was still possible.

The facility was owned by Aleris, which has been acquired by Hindalco Industries. Hindalco had to sell the unit to get approval from the regulators for the deal. The unit has now been bought by Alvance, the aluminium arm of LSG.

"We worked with stakeholders, including those in financing, EU commission and several management teams. It's possible,  but by no means, easy," said Hambro on working during COVID-19 times.