Sanjeev Gupta leads the fast-growing GFG Alliance, a worldwide industrial group headquartered in London with activities spanning steel and aluminium production, recycling, mining, commodities trading, power generation, property and financial services. As he embarks on a plan to transform his 200-plus steel businesses into a single carbon neutral entity, Damian Stewart, Managing Partner EMEA & Asia at Human Capital, sat down with him in London to discuss what lies ahead.
I last met Sanjeev Gupta in April 2018, shortly after his successful rescue of the troubled Arrium mining and steel business in Australia. Eighteen months and several major acquisitions later, and the group has grown to become a $20 billion global industrial conglomerate, employing some 35,000 people in 270 locations worldwide.
We meet in Gupta’s office on Maddox Street in Mayfair, just days after he announced plans for a fundamental transformation of the GFG business; his vision: to unite Liberty’s steel empire into a single business entity, creating a new company called Liberty Steel Group that will rank as the world’s eighth largest steel producer outside China.
GFG is a federation of companies grouped under four divisions – Liberty, SIMEC, Wyelands and JAHAMA – and until now it has adopted an operating model that it calls ‘decoupled integration’. In the past year, that model has come in for criticism. “That’s very much a GFG term,” says Gupta, “and it’s actually very simple. You try to take all the synergies from the group as a whole, but you still operate each company independently. So, we are interdependent, but not dependent on each other. It is like the strings of a violin – we do things together, and take advantage of our synergies, but each company has its own resource, whether that’s financial or human, and each one is ring-fenced.”
The model delivers two great advantages, he says; namely, the ability to grow very quickly by bolting on new businesses without the need to immediately integrate them, and the ability to have different businesses growing at different paces. Gupta explains: “I can buy a super-distressed business that is going to take years to transform and really has to go through some pain. And then I can buy a top-end investment grade business that has got everything going for it, with good governance and a good culture. And those two can co-exist without contaminating each other.”
The result has been no single balance sheet, no single auditor, and no single face to the world. That has drawn scrutiny from stakeholders, and particularly the media, over an apparent lack of transparency. “That scrutiny is partly because we are an enigma,” says Gupta. “We are different, we have gone against the grain and tried to break away from the past. Ultimately, we do things that others can’t do, and we succeed where others have failed.”
The plan to unite the steel business is a natural progression for a company that has grown incredibly quickly. “As you grow, integration becomes a bigger imperative than it was previously,” says Gupta. “Let’s say, the weight shifts in favour of integration. So that’s why I have announced this initiative to merge all our steel businesses into one global corporate, with one set of accounts, one board and one auditor.”
He continues: “We will report as if we were a public company and be transparent, even though we are not obliged to given we are privately-owned. I think that will benefit the group, because it is a profitable, progressive group, and if we can demonstrate that conclusively to the market, that will help a great deal in terms of how we fund the business, our access to capital and access to opportunities.”
Gupta says he will take the businesses into the capital markets when they are ready, recognising the need to keep improving governance and accountability with scale, and the ability of the public markets to help with that.
But for a man who is passionate about corporate culture, the transformation will not be easy: “The challenge will be to get the best of both worlds,” he says. “How do you keep your independence, keep your entrepreneurial spirit and agility, and keep your ability to pace different businesses at different speeds, yet become one large corporate? How do you take advantage of central procurement but not disempower your businesses from making their own decisions and running their own P&Ls? That’s going to be a big challenge, and I’m not underestimating that. I think that’s my next learning.”
Gupta is not afraid of a challenge. In addition to a large-scale restructuring, he has also just set a 2030 target for making his global steel interests carbon neutral. This ambitious target represents a natural extension of GFG’s existing Greensteel strategy, which relies on the recycling and upcycling of scrap steel and using electric arc furnaces powered by renewable energy rather than smelting iron ore and carbon in traditional blast furnaces.
Greensteel plays to Gupta’s belief in three sustainabilities that underpin everything he does: economic, social and environmental. “I believe there is a new era coming, or already upon us, which is the ecological or environmental revolution. That will see us taking responsibility for our planet,” he says. “It will require us to become much more locally oriented and focus much more on our consumption and our resources. There will be much more recycling, in every industry and in everything we do.”
He continues, “What is humbling for me is that we can now lead the global steel industry, our industry, into a carbon neutral era, and that has been my crusade from the very beginning,”
Gupta sees the 2030 target not just as a personal crusade, but as a mission that all of his employees can get behind: “We are going to clearly demonstrate what we are doing, track how we are doing against our targets, and really define this 11-year journey as much as we can,” he says. “Everyone can participate in this initiative because we will be making carbon savings in every single part of the business and that will be incredibly powerful.”
Gupta has steel in his blood – he is a third-generation industrialist whose earliest memories are of running around his grandfather’s steel plants in Ludhiana in India where he was born. He moved to boarding school in the UK aged 13, before starting his own business while reading Economics and Management at Trinity College, Cambridge, in 1992.
“For me, the industry entry point was already written,” he says. “It has always been about family. I’m a family man and I genuinely regard my business as my family. It has always been a very incestuous relationship because there is no separation between work and pleasure.”
When Gupta bought the Newport steel plant in South Wales in 2013 it had just been closed by its previous owners. He sent all employees home on half pay for two years while he waited for conditions to improve. “I was passionate about it, that’s why I did it,” says Gupta. “But you could say I bit off more than I could chew, because it took me a lot longer than I thought to turn that around and I did question my resolve.”
Seven years later, Gupta says he still sometimes gets up in the morning not believing what has been achieved. “Of course, the more significant and the more relevant you can be, the more impact you can have. I was very happy back in Newport, because I had one plant, I lived nearby and I turned up and was making a difference,” he recalls. “Today, I joke that the sun doesn’t set on our steel production globally, from Australia to America, Europe, everywhere. It’s much more gruelling, but I’m not complaining, I enjoy it very much.”
Gupta tells me that whilst GFG has grown far beyond what he would ever have imagined, size is not what motivates him; ultimately it is still all about his team. “I’m very proud of who we are and I’m very proud of our people,” he says. “I tell my colleagues, for every person that doubts us, there are ten that believe in us. If you’re going to be brave and break new ground, there will be doubters, and you have got to be prepared for that. But we are always going to do more and be different. That’s the message for whoever reads this from amongst our people.”
Gupta has built a challenger brand in steel faster than anyone could have imagined, and now he is embarking on a radical shake-up of the company to answer his critics and shape up for the future. There will be plenty more to come.