• OUTLOOK ARENA
  • VIEWS ON NEWS
  • JANUARY 13, 2009

Aluminium: Investments on track.

BSE Metal index had been among the worst performing index in 2008. Aluminium stocks which form a major component of the metal index have been among the worst hit. The LME price of aluminium has fallen to three year low.

Considering this gloomy situation, one is likely to conclude that capital investments by Indian aluminium companies will also be cut back. However, if we analyse the projects that are been undertaken by some of the major aluminium companies, long term picture for the sector seems to be promising. In this article, we have summarized the investments that are being undertaken in the sector.

As per Centre for Monitoring Indian Economy (CMIE) capex survey, around 46 projects with total outstanding investment of Rs 1,100 bn were outstanding at the end of September 2008. These investments were higher by around 77% as compared to the corresponding period last year. Around 35% of the total outstanding investment in the sector is to be made by Hindalco alone. During the September 2008 quarter alone, three new projects were announced, which included Adani groups plan of setting up refineries and smelters. While on the other hand, Hindalco completed its expansion at Hirakud by 43,000 tonnes, thus taking its total primary aluminium capacity to around 500,000.

Aluminium: Investment on track
Company Place Product Capacity (tonnes / Mw ) Investment Completion
NALCO Orissa Bauxite mines 1,500,000 Rs 50 bn Dec-08
    Alumina refinery 520,000    
    Aluminium smelter 110,000    
    Captive power plant 240    
           
Vedanta Aluminium Orissa Aluminium 500,000 Rs 70 bn Sep-09
    Power plant 675    
           
Hindalco Orissa Aluminium 80,000   Aug-09
           
Gujarat Foils Gujarat Foils 6,000 Rs 600 m Jun-09
           
Century Extrusions West Bengal Aluminium products 8,000 Rs 370 m Jul-09
Source: CMIE

Primary steel producers like Hindalco, Nalco and Vedanta are not likely to face any liquidity problems to fund their ongoing expansion plans and are likely to complete them as per the schedule. Downstream manufacturers like Century Extrusions and Gujarat Foils are also expected to complete their projects on time. However, if the LME price of aluminium remains subdued for a longer time, it may hurt long term investment plans in the sector.

Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (Research Analyst) bearing Registration No. INH000000537 (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA, Canada or the European Union countries, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

Equitymaster Agora Research Private Limited (Research Analyst)
103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407