Vedanta's rocky road
Published by MAC on 2006-07-21
Vedanta's rocky road
21st July 2006
As Vedanta Resoures plc heads for its third annual general meeting in London (on August 2) the company has a lot to boast about. Its growth over the last quarter (FY1 2007) has been spectacular - nearly three times what it chalked up in the first quarter of financial year (FY) 2006.
Vedanta's prize expansion project remains its controversial alumina refinery in Lanjigarh, Orissa. Anil Agarwal, the company's executive chairman, recently said it would open for for "test trials" in August, even though its very construction was condemned as illegal by an Indian Supreme Court sub-committee last September.
However, even if the plant does open on schedule, Agarwal faces the knotty problem of sourcing bauxite on a scale sufficient to bring the refinery into commercial production.
From the outset of the Lanjigarh project, he's planned to obtain the raw material from the adjacent Nyamgiri hills. As readers of this website will be aware, that has sparked massive and vociferous dissent from local Adivasi (tribal) communities, a wide range of Indian politial parties, and from outside the country.
In February this year, the Supreme Court asked the Ministry of Environment and Forests (MoEF) to evaluate the environmental consequences of mining Nyamgiri.
Last week the Wildlife Institute of India (WII) published a damning report on the proposal.
Morever, Orissa's main opposition party has accused, both Vedanta and the state's Chief Minister, of having brokered a fraudulent agreement which would effectively lease these bauxite resources to Vedanta at a dirt-cheap price.
The road for Mr Agarwal will clearly - at least in the short term - be a rocky one even if investment bankers, JP Morgan, are highly optimistic about Vedanta's prospects over the next six months (as they were in an analysis delivered last week).
But then they would be, wouldn't they? For, as the Financial Times recently revealed, the man who brought this reprobate outfit to the London Stock Exchange in late 2003 was none other than JP Morgan Cazenove's executive director - a "tough SAS reservist who spent time working the Gulf."