Vedanta Resources Inc will invest $9.8 billion —- or Rs 44,000 crore —- on capacity expansion, which will make it the world’s No. 5 aluminum producer
Plans to list Sterlite Aluminium on NYSE, double Sesa Goa output to 25 mt
MUMBAI: Vedanta Resources Inc will invest $9.8 billion —- or Rs 44,000 crore —- on capacity expansion, which will make it the world’s No. 5 aluminum producer with an annual smelting capacity of almost 26 lakh tonnes by 2012, and also double iron ore output through Sesa Goa.
Vedanta is betting that Asian demand for the lightweight metal used to make beverage cans and in airplanes will continue to grow.
Aluminum rose to a record in London in July and is up 9% since the start of the year.
Global use will outpace production, Deutsche Bank AG and Citigroup Inc predict.
“The aluminum expansions highlight once again the scale of management’s ambitions to leverage off the company’s advantageous position in India and, in turn, the abundance of mineral resources within the country,” brokerage JPMorgan Cazenove Ltd wrote in a note.
Vedanta chairman Anil Agarwal also announced restructuring of businesses into three verticals focused on copper, zinc and lead; aluminium & energy; and iron ore to simplify the organisation and cut costs. The exercise is expected to be completed in the next 6-7 months.
The three verticals will go under the entity-names Sterlite Industries, Vedanta Aluminium and Sesa Goa.
“This is to simplify corporate structure and to ensure clear allocation of opportunities and eliminate conflict of interest,” Agarwal said on Tuesday.
“When opportunities arise, people wonder which company it should go to. With the new structure, it will be clear who will own which asset.”
Vedanta will remain the holding company of all three, Agarwal said.
Hitesh Agrawal, head of research at Angel Broking, finds the move positive.
“Greater clarity and transparency have always aided better valuations. Such recasts in the past have created immense wealth for shareholders,” he said.
Sterlite Industries will deal in base metals, Vedanta Aluminium will have Balco and Madras Aluminium (or Malco, which will be rechristened Sterlite Aluminium), and will hold all aluminium assets, including the Lanjigarh and Jharsuguda projects.
Under the new structure, Sterlite will issue equity shares to the shareholders of Malco in the ratio of one share of Sterlite for every 51 shares of Malco.
Sterlite will demerge its aluminium and energy business under Malco, which will be renamed Sterlite Aluminium Ltd.
The company intends to list Sterlite Aluminium on the New York Stock Exchange, sources said.
Vedanta will transfer 79.4% equity in Zambia-based Konkola Copper Mines plc to Agarwal said the new structure will bring more focus and transparency, unlock shareholder value and afford flexibility to raise funds.
Vedanta plans to increase production of alumina, a raw material used for aluminium, to 5 million tonnes by adding an additional 600,000 tonnes to the existing 1.4 million tonne capacity at Lanjigarh in Orissa by 2010.
Agarwal said the company will wrap up acquisition of Asarco LLC —- which it had bought in June for $2.6 billion in cash —- by the end of the year.
This will take the company’s copper production to 1.2 million tonnes.
He said Sesa Goa’s iron ore production will rise to 25 million tonnes by 2010 through an investment of $700 million.
“We are looking at producing 100 million tonnes of iron ore annually in the long term,” he said.
Shubhashish@dnaindia.net
Debarati Roy & Mark Herlihy of Bloomberg contributed to this story
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