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Sterlite plans to treble aluminium capacity

Arijit De

Anil Agarwal of Sterlite refuses to be tied down. After acquiring two state-owned metal companies in the past 12 months, the Sterlite group is planning a major expansion that could catapult his group into becoming India's largest non-ferrous metals player.

On the cards is a three-fold expansion in aluminium capacity to 400,000 tonnes per annum from the present 130,000 tpa, a move that could see the group overtake the Aditya Birla group major Hindalco.

Also lined up is a 50 per cent increase in copper capacity to 300,000 tpa from the present 165,000 tpa. The AV Birla group company Indo Gulf Corporation is now India's largest copper producer with an annual capacity 170,000 tonnes.

A Sterlite official confirmed that an expansion was on the cards, but declined to provide investment details. "We are still in the planning stages," he said.

Sources said the expansion could mean an additional investment of around Rs 20 billion, which could see Sterlite approach the capital market for debt, equity, or both.

The investment is particularly high because these businesses require captive power plants, so the overall costs would also include the costs of setting up fresh power plants.

The acquisition of Balco last year gave Sterlite an aluminium smelting capacity of 100,000 tonnes, while Malco produces another 30,000 tonnes.

Analysts, however, feel that Sterlite could be stretching itself financially with such huge expansion plans. The group spent over Rs 5 billion last year in acquiring Balco, and will end up investing another Rs 8 billion in Hindustan Zinc, inclusive of the amount to be spent on the mandatory public offer.

In Balco, it had to spend another Rs 2 billion when its smelter froze following a strike by the labour unions.

However, as of June 30 last year, the company had a healthy cash position with reserves of over Rs 16 billion. Besides, its debt-equity ratio was also substantially below 1.

Moreover, Sebi has also lifted the earlier ban on the company that prevented it from raising funds from the capital market.

The Rs 30-billion Sterlite also acquired two large copper mines in Australia last year.

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