Sterlite Industries had its eyes on becoming one of the countrys top non-ferrous metal producers when it bid for 10 per cent of Indals stake yesterday. Through careful capacity expansions and strategic acquisitions, Sterlite has grown from a meager jelly filled cable manufacturer to a multi product company with its own copper and aluminium smelting capacities (Malco).
With the current possible acquisition, Sterlite is likely to emerge as the largest primary aluminium producer. It is one of the leading suppliers of telecommunication cables to the DoT. The company supplies include both jelly filled cables as well as optical fibres. It is also a major supplier of copper rods.
Sterlites product portfolio also consists of downstream aluminium products which include sheets and foils.
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In 1996-97, its performance was hit as sales grew moderately by 6.4 per cent to Rs 1,071.44 crore while net profit fell about 10 per cent to Rs 126.92 crore.
Lower offtake of jelly filled telephone cables (JFTC) and optical fibre cables (OFC), which account for 47 per cent of Sterlite's turnover, affected growth. This was caused due to the delay in the placing of orders by the DoT.
Sterlite's capacity of 6.3mckm makes it the fourth largest player in the JFTC segment. The company is likely to secure orders for 5.5mckm of JFTC this fiscal. Since copper accounts for 30 per cent of the material cost in JFTC, Sterlite's in-house facility for continuous casting copper rods (CCCR) will help it remain competitive. To achieve its objective of becoming the largest non-ferrous metal producer, Sterlite has gone in for the possible acquisition.
The company is flush with funds. At the end of June 1997, it had a healthy balance-sheet with cash and bank balances to the tune of Rs 330 crore and a debt-equity ratio of 1.1 which makes it comfortable to go in for additional debt.
The debt-equity ratio will be further down since the company yesterday announced it planned to further raise equity through a preferential allotment to the promoters at a price of Rs 180 per share.
According to company sources, if the acquisition is a success, Sterlite may even revamp Indal to again become a major primary metal producer. After this Sterlite can go slow on its alumina refinery to be located at Jharsuguda, Sambhalpur, in Orissa.
The project is expected to come up near the bauxite mines in the Kalahandi district at a cost of Rs 2,520 crore.