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http://www.theaustralian.news.com.au/story/0,25197,23737708-5013584,00.html

Indian giant joins resource investment queueFont Size: Decrease Increase Print Page: Print Michael Sainsbury | May 22, 2008

INDIA has fired a major shot in its battle with China for Australian resources, as the world's biggest steel company, ArcelorMittal, seeks a $631 million stake in Macarthur Coal.

Yesterday's deal is the biggest investment by an Indian corporation in an Australian company.

ArcelorMittal, which is controlled by India's richest man, Lakshmi Mittal, made a surprise a swoop on 14.9 per cent of Macarthur, beating major players such as BHP, Rio Tinto, Brazil's Vale and Switzerland's Xstrata to a strategic stake in the Queensland coal miner.

The move reflects growing investment in Australia by Indian companies and compounds a foreign investment headache for Kevin Rudd, created by a several recent Chinese investments, or applications to invest, in Australian mining companies.

"The difference between India and China is that under the Nehru-Gandhi governments a lot of family companies grew up, where China relied on inward investment from companies such as Wal-Mart," Austrade chief economist Tim Harcourt said. The Mittal family started its steel business at Surabaya, Indonesia, in 1978, 30 years ago.

In 2006 Australia was already the sixth-largest exporter of materials to India, according to Austrade figures.

In the same year India invested $2.2 billion in Australia, up from $1.1 billion in 2005.

"India has a huge infrastructure gap to China," Mr Harcourt said. "There is huge demand for raw materials. In this decade so far, growth in the resources trade with India has been faster than with China, although coming off a lower base."

Macarthur exports pulverised coal, a form of coking coal but far more economic in price per tonne and efficiency, which is essential for making high-quality steel in modern furnaces.

The first major Indian investment in Australian resources was when Hindalco Minerals, a subsidiary of giant Indian conglomerate Aditya Birla, bought Western Australian copper miner Western Minerals. Aditya Birla Minerals Limited is now listed on the Australian stock market.

Another Indian group, Bhushan Steel, holds a 10 per cent stake and a board seat on Queensland coal miner Bowen Energy.

Earlier this week, Indian-born entrepreneur Pankaj Oswal launched an Australian stock market listing for his Western Australian ammonia maker Burrup Holdings.

The group's facility near Karratha has been valued by the float's promoters at up to $2.5 billion and Mr Oswal is planning another $500 million plant to produce ammonia nitrate, with his Norwegian investor Yara.

Mr Oswal is making a splash in Perth with plans to build an Indian-style riverside mansion worth as much as $70 million. Indian companies are also starting to get active at the more speculative end of the Australian mining sector, with Bangalore-based Mineral Enterprises Limited this week buying into South Australia's Lincoln Minerals.

AcelorMittal must seek approval from the Foreign Investment Review Board to take any more than a 14.9 per cent stake in Macarthur.

The board is already mulling several applications from Chinese companies but it is unclear just how many it (and the Treasurer, who has discretionary powers) will allow.

The difference is that the Indian companies are privately owned while the Chinese investors have a much more opaque relationship with China's government.

"The Government welcomes foreign investors but obviously they must meet the national interest test," a spokesman for Treasurer Wayne Swan said.