Nalco Tests New High

Reports that French aluminium maker Pechiney is planning to bid for a stake in Nalco resulted in the later's share price hitting a 52-week high of Rs 93 on the Bombay Stock Exchange (BSE). The stock slipped later to close 12.92 per cent higher at Rs 87.75.

Nalco has been keeping an upward trend owing to the proposed divestment of the government's stake in the company. From Rs 53.05 on January 30, the stock has surged 50.8 per cent in a month's time to Rs 80.

The government currently owns a 87 per cent stake in Nalco. The Divestment Commission earlier recommended that the government should offload a 15 per cent stake in Nalco to international investors, 10 per cent to institutional investors and another 5 per cent to retail investors to be followed by a 31 per cent strategic stake sale.

Nalco, meanwhile, is also seeking shareholders' nod for hiking foreign institutional investor's investment ceiling in the company to 49 per cent. Nalco is the only aluminium company left in the public sector since Bharat Aluminium Company was privatised in February 2001.

The Centre deferred the Nalco divestment till the second quarter of the next fiscal mainly because of the poor performance of Nalco's shares on the bourses.

Nalco is Asia's biggest alumina producer and owns a bauxite mine, an aluminium refinery, an aluminium smelter, its own captive power plants and a port facility.

Nalco is the largest alumina and the second-largest aluminium producer in India. It is one of the lowest-cost producers of alumina in the world and derives more than 50 per cent of its sales from exports. The company is one of the most efficiently run and profitable public sector units.

Due to a fall in aluminum and alumina prices on the London Metal Exchange and a subsequent fall in realisations for the same, the company registered a fall in profit in the third quarter.

For the quarter ended December 2001, sales declined 2 per cent to Rs 593.10 crore and margins were down from 48.4 per cent to 36.3 per cent. Profit after tax fell 43 per cent to Rs 110.19 crore Nalco is likely to commission a rolled products unit (RPU) plant shortly to enter the downstream value-added products segment consisting aluminium sheets, coils and rolled products.

Currently, Nalco is one of the few exceptions in the country that have not ventured substantially into the value-added products segment. But the commissioning of RPU will change the scene and will provide necessary impetus for the company to be competitive in the global market.