Sterlite to invest Rs 20,000cr in 3 yrs

Aim - become India's largest aluminium producer.

Anil Agarwal-controlled Sterlite Industries has lined up investments of Rs 20,000 crore in three years to establish itself as the country's largest aluminium producer and the world's second-largest zinc maker.

This marks a significant departure from other corporations' plans to grow through foreign acquisitions.

Sterlite's investment in organic growth, at a time when most downstream metals companies on sale globally are loss-making, is double the amount the group injected in the last three years.

It is expected to catapult the group to a place among the world's top five metals companies.

"This is a sequel to our recently completed investment of Rs 10,000 crore in the last three years, which was perhaps the highest in the Indian manufacturing sector," Anil Agarwal told Business Standard.

The investment will largely be funded by internal accruals and debt.

Almost half the investment (Rs 9,345 crore) has been earmarked for an aluminium smelter with an annual capacity of 500,000 tonnes, to be built in two phases, and a 1,215Mw captive power plant in Orissa. The first phase is expected to be complete by 2009 and the second by 2010.

Once completed, the project, which is being implemented by Sterlite Industries' subsidiary Vedanta Alumina Resources, will take Sterlite's production capacity to 1 million tonnes.

The second largest portion of the investment (Rs 8,455 crore) will be on a 2400 Mw integrated power plant in Orissa. The first unit is expected to be commissioned by December 2009 and another three in the three subsequent quarters.

The investment for the power project will be routed through Sterlite Energy, a Sterlite subsidiary. Sterlite will inject $ 500 million (Rs 2,250 crore) towards its equity contribution to the company.

This will be funded though part of a $2 billion (Rs 9,000-crore) American Depository Share (ADS) issue for which Sterlite has filed an application with the Securities and Exchange Commission. $1.5 billion of the ADS will be kept aside to buy the government's 30 per cent stake in Hindustan Zinc.

Other investment plans include a Rs 1335-crore expansion of Sterlite's zinc smelter by 170,000 tonnes a year, which is expected to be complete by March 2008.

The company also plans to increase the capacity of its Chanderiya smelter in Rajasthan by 88,000 tonnes a year at an investment of Rs 756.5 crore.

This project is expected to be complete by June 2008 and will increase Sterlite's zinc-smelting capacity to 658,000 tonnes a year, making it the second largest in the world after Korean Zinc.