Will use money to up metals capacity, power generation.
London-listed Vedanta Resources, controlled by billionaire Anil Agarwal, will invest another Rs 40,135 crore towards building its capacity in aluminium, zinc, copper, iron ore and power in India. With the revival in market conditions, the company has also decided to begin construction of its power project in Punjab, which was on hold after the financial downturn. The first of its major projects completed would be the 500 kilo-tonne per annum (ktpa) aluminium smelter and associated captive power plant at Jharsuguda in Orissa by the end of this financial year. The investment of Rs 9,900 crore for the project has been almost completed. Except a power plant, all the remaining projects would be completed by 2012.
With the improved market conditions and significant Indian GDP growth, the company has reviewed its capital expenditure plan and decided to reactivate its 1,980 Mw Talwandi Sabo commercial power project, put on hold last year, said the company in its business review report. The cost of the project, scheduled to commission by 2014, would be Rs 10,000 crore. Vedanta has reported a 46.2 per cent decline in profit at $188.2 million for the six-month period ended September, impacted mainly by weak metal prices. Its total revenue fell 25.6 per cent to $2.9 billion.
Chief Executive M S Mehta said, on a conference call, that no financial provisions were needed to cover the fraud probe into its iron ore unit. Sesa Goa, India’s biggest iron ore exporter, said on October 29 that it was under investigation by India’s Serious Fraud Investigation Office for financial and other irregularities, sparking a slide in its shares. But the probe related to issues in 2003, four years before Vedanta bought its 51 percent stake in Sesa, Mehta said.
Shares of Vedanta, which have outperformed the UK mining index by 40 percent this year, dropped 3.7 per cent to 2,205 pence at 1.22 pm London time, compared to a two percent fall in the mining index as metals prices fell. However, the shares of its subsidiary, Sterlite Industries, gained 2.16 per cent on the Bombay Stock Exchange (BSE) and closed at Rs 786.70. Another group company, Hindustan Zinc, has risen 0.41 per cent to Rs 900.65 a share, while Sesa Goa gained 0.6 per cent to Rs 298 on Thursday.
Vedanta controls the Konkola Copper Mines in Zambia and Copper Mines of Tasmania, in addition to the controlling stakes in unlisted entities such as Bharat Aluminium Company, Madras Aluminium Company, Vedanta Aluminium and Sterlite Energy. Of this, Sterlite Energy, the power generator, has recently filed regulatory applications for a Rs 5,100 crore initial public offering.
Until September, the company had spent Rs 35,800 crore for its expansion, with a mix of debt and equity. The gross debt stood at Rs 32,539 crore, up from Rs 24,000 crore in March, following new convertible debt of Rs 5,880 crore raised in July, and other smaller debts raised at subsidiary levels to fund the capex requirements.
Despite its higher debt component, analysts noted the company’s cash reserve of Rs 28,000 crore reduces the risks and ensures higher leverage. Besides, the company has already tied for the major chunk of an additional Rs 40,000 crore required for completing projects in the pipeline, added the analysts.