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The Vedanta threat increases

Published by MAC on 2004-02-23

The Vedanta threat increases

As predicted on this web-site in January (London Calling Special) Vedanta, the new mining company launched with such clamour last year on London's Stock Exchange, isn't letting the grass grow under its feet (or that of many other people). This week, the company's chief architect, Anil Agarwal of Sterlite Industries, announced that, Vedanta/Sterlite is to up the capacity of its planned Orissa alumina refinery by another 400,00 tonnes per year, in the teeth of growing opposition from local people and human rights activists (see Tribal Villages Bulldozed as the Shadow of Vedanta Looms).

Even while the Indian Supreme Court debates whether or not it was legal for Sterlite to take over formerly government-owned Hindustan Zinc five years ago, Agarwal now threatens to bid for the 49% he doesn't yet own of Balco - the other publicly-owned minerals company which Sterlite came to control at around the same time.

Meanwhile Vedanta's London-based financial officer announces that the company intends to increase its holding of Sterlite to 75%, so long as it can raise new funds.

This is despite the fact that Vedanta's share price fell 11% in late January, when US investment bank Morgan Stanley warned that Vedanta was over-reaching itself.

Vedanta to consolidate India operations

By Staff Correspondent, The Hindu

23rd February 2004.

MUMBAI, - Vedanta Resources, which was the first primary listing by an Indian company on the London Stock Exchange (LSE) in December 2003, has chalked out a strategy to consolidate its position in the Indian metals industry.

VR's capital programme involves investment of $2 billion in India and according to Brian Gilbertson, non-executive director and Chairman, Vedanta Resources, the $ 870 million raised offshore, will be brought back and invested here. Vedanta will also be appointing one or two non-executive directors this week.

Essentially, Vedanta has controlling interests in Sterlite, Orissa Alumina, Malco, Hindustan Zinc and Balco. Vedanta acquired 5 per cent of Sterlite's equity in January taking its holding to 65.8 per cent. Sterlite also announced $350 million rights issue in December 2003.

According to Anil Agarwal, CEO and Managing Director, VR, "the company is positioned to meet metal demand in India. In zinc, through Vedanta-Hindustan Zinc, we have 62 per cent of the market and are the only integrated player, in copper, through Sterlite, we have 42 per cent of the market and are one of two players and in aluminium, through Balco and Malco, we have 21 per cent of the market and are one of three players.''

In zinc, the company is planning a $320 million expansion from the current 2.10 lakh tpa [210,000 tonnes per year] four lakh [400,000] tpa zinc ingots by January 2006. In copper, the company has a 1.80 lakh tpa of copper anode and cathode and 1.40 lakh tpa copper rods and is expanding the anode and cathode capacity to three lakh tpa by June at a cost of $80 million.

In aluminium, it has a 135,000 tonne capacity and is adding a 2.50 lakh brownfield aluminium smelter and power plant at the cost of $800 million to be ready by January 2006. The company is also setting up a 1.4 million tpa alumina refinery and a 85-125 MW captive power plant at a cost of $800 million.

The company's strategy revolves around optimising the asset base by de-bottlenecking plants, expanding capacities and driving down unit costs. Also, the completion of the two major projects for the 2.50 lakh aluminium smelter at Korba in Orissa and entry into the alumina market through the 1.4 million tpa refinery. Mr. Gilbertson said half of the output would be used captively and the other could be supplied to consumers.

Third, the company will go in for increasing shareholder value by using IPO (International Public Offering) proceeds for growth, consolidate Hindustan Zinc and Balco ownership and offer a medium term exchange offer for Sterlite shareholders.

The company is also looking at growth opportunities inside and outside India. Regarding the exchange offer, Mr. Gilbertson said in future, VR and Sterlite could see a consolidated shareholder base. Regarding opportunities, Mr. Gilbertson said, "Further privatisations would be in the frontline. Nalco privatisation is unlikely to happen soon. Orissa is a mineral-rich state and we could see other opportunities in areas like even Iron ore mining."

© Copyright 2000 - 2003 The Hindu

Sterlite may buy govt's 49% stake in Balco

Mansi Kapur, Reeba Zachariah in Mumbai, Business Standard (India)

February 24, 2004

Sterlite Industries is looking at buying Bharat Aluminium Company from the government. Sterlite, which controls 51 per cent in the aluminium major, has a call option for the residual 49 per cent stake, which can be exercised after March 1.

Sterlite chairman Anil Agarwal told Business Standard, "We are planning to put forth a proposal to the Sterlite board on this issue as we are inclined to increase our stake in the company. However, no final decision has yet been taken. At the moment, we are in the process of evaluating various options."

Sterlite had acquired 51 per cent stake in Balco from the government in 2001 at a consideration of Rs 551.5 crore (Rs 5.51 billion).

The company had yet not decided on the method of raising funds for picking up the remaining stake in Balco, Agarwal said.

Sterlite has also lined up expansion plans for Balco. It is planning to invest around $800 million for the expansion project.

The existing one lakh tonne capacity at Balco's Korba smelter will stand enhanced to 350,000 tonne by March 2006.

Sterlite is also planning to set up a 1.4 million tonne alumina refining unit in Orissa. "We are looking at using 50 per cent of the alumina produced at the Orissa refinery for captive purposes. The alumina will be used for the expanded capacity at Balco's Korba smelter," Agarwal said.

The combined domestic market share of Balco and Madras Aluminium Company in which Sterlite holds an 80 per cent stake, is almost 21 per cent of aluminium sales.

Vedanta Resources, which holds around 60 per cent in Sterlite, has recently raised $1 billion at the London Stock Exchange through an initial public offering.

The proceeds from the IPO will be used to fund Sterlite's expansion projects in group companies Balco, and Hindustan Zinc.

Vedanta plans to hike Sterlite stake to 75%

Mansi Kapur, Reeba Zachariah in Mumbai, Business Standard

February 24, 2004

Vedanta Resources, the holding company of Sterlite Industries, is planning to increase its stake in the company to 75 per cent from its current holding of 65 per cent.

Peter Sydney Smith, CFO, Vedanta, said: "We are looking at bringing in more funds into Sterlite. We are considering the option of increasing our stake in Sterlite to the permissible 75 per cent. We may try to bring in the funds through loans or through external commercial borrowings as well."

Vedanta has recently hiked its stake in Sterlite to 60 per cent from 55.1 per cent by purchasing 4.98 per cent shares from the market. The acquisition had raised Vedanta's stake in Sterlite to 65.8 per cent owing to the additional 5 per cent stake that it owns in Sterlite, through its 80 per cent subsidiary Madras Aluminium Company. Madras Aluminium holds 7 per cent in Sterlite.

"About 50 per cent of the total proceeds of the Vedanta IPO have already come in to Sterlite. We are looking at bringing in some more funds in the near future," Smith added. Vedanta Resources raised $1 billion at the London Stock Exchange at pounds 3.9 a share.

Sterlite had also come out with a 3:10 rights issue in December 2003, which will rake in Rs 1,400 crore. The company had come out with a rights issue to transfer the funds from Vedanta into Sterlite. Sterlite has slated an investment of $2 billion for its expansion projects in its group firms Balco and Hindustan Zinc.

The company will be investing $800 million for the expansion at Balco to take the installed capacity to 3.5 lakh tonne a year and another $800 million for setting up an alumina refinery in Orissa with 1.4 million tonne

Vedanta plans aluminium plants in Orissa Times of India, February 25 2004

UK- based Vedanta PLC, the holding company of Sterlite Industries, would invest about $1600 million to set up a 2.5 lakh tonnes per annum aluminium smelter at Korba and 1.4 mtpa alumina refinary in Orissa. The group is considering to bid along with other investors for Nalco when the PSU (Public Service Unit) comes up on the disenvestment block. " We would invest about $ 800 million each in the Korba and Orrisa projects as part of our growth strategy for 2-3 years" Vedanta's non- executive chairman Brian Gilbertson told reporters. The Orissa project, which includes bauxite mining, and the establishment of of a 1.4 mtpa alumina refinary and 85-125 mw captive power plant would be commissioned by March 31, 2007, he said, adding that half of the alumina production in the project would be utilized internally. The company founded by Anil Agarwal, would add about 2.5 lakh mta aluminium to the present smelter capacity of 1.35 mtpa and a power plant and would also spend $350 million for expansion to touch 4 lakh tonnes zinc ingot capacity. Gilbertson said that the company was interested in Nalco and would consider partnering with other players to jointly bid for it.

Vedanta may offer swap to Sterlite shareholders

Mumbai, The Hindu

February 24 2004

Indian investors may soon be able to own shares of Vedanta Resources Plc, the LSE-listed holding company of the $981-million Sterlite group.

The mining and metals major is planning a medium-term exchange of Sterlite shares listed on Indian stock exchanges with that of Vedanta, which recently collected about $1 billion through a global IPO, Mr Brian Gilbertson, Chairman of Vedanta Resources, told newspersons here.

Mr Gilbertson said that the company was working on how its ownership could be offered to Indian investors. He said they could be given a choice of holding Vedanta shares in exchange of equity holding in Sterlite Industries that also owns controlling equity stakes in Hindustan Zinc, Balco and the 1.4-mtpa alumina project in Orissa. Vedanta shares should be more valuable because it also owns the other assets of the group such as Malco.

A company official told Business Line that the exchange could be either through an issue of Indian Depository Receipts or by a simple swap of Sterlite shares with those of Vedanta.

Even though the Government has in-principle approved issue of IDRs by foreign companies, a regulatory framework for it is yet to be put in place. Similarly, even though the Government has allowed Indians to invest in listed foreign companies that have a listed Indian subsidiary, it is yet to issue clear guidelines for such investments.

"We would do it as soon as there is regulatory clarity on IDRs or the international swap," the official said. Meanwhile, Sterlite has just completed a one-for-one share bonus issue and a three-for-10 rights is underway. The price of the issue has yet to be announced but Vedanta had earlier said that it would use funds it raised through the IPO to subscribe to the rights.

Vedanta debuted on the London Stock Exchange in December at a price of £3.9 per share but currently trades at about £3.6 a share. Even though the global IPO of the company was oversubscribed five times, it could manage a price only towards the lower end of the book-building band. The share has never really recovered from the lows that it touched immediately after listing.

Mr Gilbertson said the share price was depressed after the Indian Government slashed duties helping imports to compete with domestic products. Litigation against the Government's privatisation programme also affected Vedanta shares. He, however, insisted that overseas investors were yet bullish on the `India story', especially about the prospects of the mining and minerals industry.


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