Hind Copper sticks to capex plan despite FPO delay

With the continuing uptrend in copper prices leading to handsome profits, Hindustan Copper, the country’s lone vertically integrated copper producer, is hoping it can fund its capex plan without much difficulty despite the haze surrounding its follow-on public offer (FPO).

The company plans to invest close to ¤4,600 crore over the next five years to boost its copper ore output from the present 3.4 million tonne per annum (mtpa) to 12 mtpa.

“There is uncertainty about the timing of the FPO, but due to improved financials of the company, its dependence on FPO for funding expansion plans has significantly reduced,” Shakeel Ahmed, chairman and managing director of the state-owned company, told his staff in an internal communication.

Hindustan Copper had floated the request for proposal for the follow-on offer from merchant bankers last May. Though no official reason has been cited, sources say the delay is due to apprehensions over valuation.

The government intends to divest 10% of its existing shareholding of 99.59% in Hindustan Copper, while the company plans to issue fresh shares to the extent of 10% of pre-issue equity through public offer.

Meanwhile, copper prices have risen sharply, from around $6,600/tonne last June to $9,705/tonne on the London Metal Exchange on Thursday —- a tad below the $10,000/tonne high seen in early February.

“On the strength of superior physical performance and supporting LME prices, the financial performance has been extremely good, with profit before tax till December standing at Rs252 crore,” Ahmed said. That’s around 2.5 times the year-ago figure of Rs98.22 crore.

Output of copper ore and metal-in-concentrate up to February at 3.25 million tonne and 28,868 tonne, respectively, too have surpassed previous full-year production levels, the communication said.

Ahmed said mine expansion plans are on schedule with tendering for opening mines in process. Tenders for mines in Ghatshila, Malanjkhand, Khetri and Kolihan were opened earlier, while bids for environmental impact assessment studies for Kendadih and Rakha mines were issued recently.