HCL may hedge on comexes

State-run copper producer Hindustan Copper (HCL) is likely to begin hedging on domestic commodity exchanges early next year. The company has nearly completed all pre-entry formalities.

HCL would be the first metal producer to hedge on commodity exchanges in the country. "Our plans have been delayed by four-six months, but we can start trading anytime soon. Could be early next year," said a company official.

The company has been planning to hedge on domestic commodity exchanges for the last 12-18 months but was delayed due to lack of trained manpower and infrastructure.

Analysts believe HCL's entry would raise confidence in the trading systems on commodity exchanges, among other participants. Commodity exchanges strive to attract big corporates on their platforms as they help easy participation of other stakeholders as well.

The company is in the process of developing a full-fledged hedging system with trained manpower. "Being a public sector company, we needed to be in tune with the trading requirements.

Additionally, we needed to change placement systems, recruit staff, make structural changes within the organisation, which is almost over," said the official. HCL has received proposals from five players to trade on its behalf, according to the official.

Market sources said that it has shortlisted Religare Enterprises and Karvy Comtrade.

Earlier, the company said it was also looking for a consultant to hedge on the London Metal Exchange (LME). The plan, however, is on hold the time being.

Without giving away the quantum of the hedge, the official said the company has set a minimum target but it was too early to talk about market strategy.

Early this year, HCL had identified MCX as the possible avenue to trade on, which has, reportedly, extended all possible support and obtained an assurance from the copper producer to hedge risk on its platform.

Copper is a non-deliverable contract on MCX generating an average daily volume of 46,000 tonnes amounting to Rs 1,700 crore.

On whether its participation would include the terms to make the contract deliverable, the official said: "We are looking at all-round potential."

HCL reported sales of around 70,000 tonnes during 2006-07 with 49 per cent capacity utilisation.