From copper to aluminium, Anil Agarwal-led Vedanta's smaller biz looking up

With domestic zinc and energy businesses continuing to be the cash cow for Anil Agarwal-led Vedanta, its smaller businesses have also started to look up. 

For the past two years, the company’s aluminium revenue has been growing quarter after quarter. Its top line jumped by about 43 per cent in March quarter of FY19 as against June quarter of FY18 despite not-so-strong London Metal Exchange (LME) prices and amid absence of any captive bauxite supply resource.

At one end, the company has been reviewing its cost of production from time to time, it, on the other hand, still imports nearly 50 per cent of alumina to feed its smelters. Vedanta has alumina refinery at Lanjigarh and smelter at Jharsuguda both in Odisha. 

Going ahead, Vedanta aims to remain focused on high margin value-added products and is planning to set up a hot metal park at Jharsuguda in partnership with the state government.

The company has an aluminium metal capacity of 2.3 million tonnes (mt). Last year, it ramped up alumina capacity by 25 per cent at Lanjigarh.

In copper, while the company’s Tuticorin unit remains shut, it recently emerged the preferred bidder for two copper mines in Maharashtra. This has opened a new door for the metal and mining company as it can look to sell copper concentrate in the domestic market. “Copper ore of 4.8 mt produced annually is at present only by Hindustan Copper, which is largely used for captive consumption. Hindalco and Vedanta rely entirely on imports of ore to run their smelters. So with any amount of ore coming in domestic market, it will only benefit the two players,” said Hitesh Avachat, group head of corporate ratings, Care Ratings.

Vedanta is a diversified natural resources company that involves producing oil & gas, zinc-lead-silver, copper, iron ore, aluminium, and commercial power.

In Goa, where Vedanta has its iron ore operations and was among the largest exporter of the ore, as many as 88 of over 300 mining leases have run into legal hurdle, stalling operations in the sector. Apart from Goa, Vedanta also has few mines in Karnataka. 

As Vedanta’s smaller businesses show some ray of hope in terms of revenue growth, the company has forayed into steel business. It recently won Electrosteel Steels through the Insolvency and Bankruptcy Code.

Vedanta Resources, parent of Vedanta, plans to pump about $4 billion into Electrosteel Steels to scale up its capacity from the existing 1.5 mt per annum to 7 mt in the coming years. 

Cairn Oil & Gas, the group’s arm, is involved in the oil business and operates around 25 per cent of India's domestic crude oil production. On the other hand, Vedanta’s operating subsidiary Hindustan Zinc is a strong source of dividend for parent Vedanta Resources.