Sterlite plans big steel, power push

The Anil Agarwal-promoted Sterlite Industries, which raised about $1.5 billion through the sale of American depositary shares (ADS), will develop 11,000 mw of capacity over the next three years.

The company will also enter into steel manufacturing, sources in the know said.

The US offering of 12.34 crore shares was priced at $12.15 (Rs 591.15) each, Sterlite said on Thursday, a discount of 6% to Wednesday’s closing price for Sterlite in the US and one cent higher than the minimum price of $12.14 set by Sterlite.

London-listed parent Vedanta bought $500 million of the issue and will have a  57.5% stake in Sterlite after the issue.

The ADSs are being offered at Rs 591, lower than the closing price of Rs 628 on BSE on Wednesday.

Pawan Burde, senior research analyst with Angel Broking, said Sterlite has very ambitious expansion plans and needs a lot of money.

“They are going in for quality expansion. Raising funds should not be a problem for them as they have one of the lowest production costs, and they were able to maintain margins even when aluminium prices were low,” he said.

 Its subsidiary Sterlite Energy is currently in the process of setting up two commercial power projects — a 2,400 mw plant at Jharsuguda in Orissa and another 1,980 mw utility in Punjab for a total investment of Rs 15,000 crore.  

It plans to commission the first phase of the power project (600 MW) in Orissa by December this year.

A Sterlite official told DNA that the power project in Punjab will generate an EBITDA of $500-600 million and will have a payback time of three years. The official confirmed that the company is not planning to announce an IPO for Sterlite Energy. He said, “These are all rumours and there is no IPO being planned.”

Sterlite is locked-in a three way battle to acquire beleaguered American copper miner, Asarco. It is offering to buy Asarco for $1.87 billion (cash $1.1 billion), Grupo Mexico has offered $1.5 billion and Harbinger Capital has proposed $500 million for the miner.

Sterlite’s ADS sale was handled by JPMorgan and Morgan Stanley, who have an overallotment option equivalent to 15% of the offering size. This option to the book runners excludes the $500 million allotted to Vedanta, the company said.

The deal comes amid a flurry of planned capital-raising by power companies looking to fund expansion to meet an acute electricity shortage in Asia’s third-largest economy. Adani Power plans to raise as much as $600 million in an IPO set to launch later this month, sources said, while Indiabulls Power Ltd said it had filed a draft prospectus for a listing that media reports have said could raise about $310 million. State-owned power firm NHPC Ltd said on Thursday it plans to launch an IPO on August 7.