Indo Gulf Corporation, the copper and fertiliser major from the Aditya Birla group stable, has sought the Reserve Bank of India's (RBI) approval for hedging of precious metals like gold and silver.
In India, the central bank allows hedging of precious metals only against exports. But with Indo Gulf setting up its own precious-metals refinery, the company needs to hedge the price risk arising due to the time lag in the purchase and sale in the domestic market.
In 1998-99, the company had become the first Indian company to receive approval for hedging on the London Metal Exchange, after the RBI allowed hedging in commodities.
The company has since put in place a risk-management team, with its policy being to match "price-in" and "price-out" every fortnight and any mismatch is purchased, or sold, in the forward market of LME.
However, the linkage of domestic copper prices with that of the landed price of imported copper provides a natural hedge to its forex requirement for the import of copper concentrates.
As private-sector companies cannot mine copper, Indo Gulf has to entirely depend on import of copper concentrates. While Sterlite Industries, the other private-sector player, has bought mines abroad, Indo Gulf is yet to take any such step.
The precious-metals refinery uses anode slime, a residue from the copper-making process, and extracts gold and silver from it. Indo Gulf has set up substantial capacity in the refinery, much more than it would require.
The company plans to enter into long-term supply arrangements with the two other main copper producers in the country, Hindustan Copper and Sterlite.
