Description
It describes about Industry Trends of aluminium industry, PEST Analysis of aluminium Industry, Competitor Analysis of Hindalco, SWOT analysis, Company Description, General Information about the Hidalco it's Finance performance, SWOT analysis of Hindalco and Various Strategies employed.
HINDALCO
Industry Analysis
The aluminium industry is the largest non-ferrous metal industry in the world economy. Aluminium is a material with a wide range of applications, e.g. transport vehicles, construction, packaging industry, electronic production, household appliances, etc., and consequently the economic activities of these industrial sectors determine the overall demand for aluminium. Copper is a main and prominent source of energy. Applications of copper are mainly in the energy sector i.e. electrical, automotive, machined products/industry, telecommunications, & also in the environmental (marine) & health sector (anti-microbial). Global Perspective: ? The worldwide primary Aluminium production is dominated currently by Europe & Russia, Asia & North America. The top 5 producers being: China, Russia, Canada, US, Australia with China alone producing about 26% of total. The world consumption of aluminium in total, both primary and secondary, has grown, at the rate of 5-8%, with Asia being in the lead (with China as the primary consumer: about a fourth of total) followed by Europe. This increasing demand is largely due to the parallel increase in the automotive & construction industry along with the rapid urbanization in Asian countries. Production of copper has been steadily increasing since the past decade with Chile, Australia & the Americas (US, Mexico, South America) being the pre-dominant producers. The global production of refined copper is over about15 million tons. World apparent usage of copper grew by 10% principally owing to strong growth in Chinese apparent usage. However, the overall world usage (apart from China) declining by about 2.5%. China accounts for nearly 40% of global copper consumption.
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Indian Perspective: ? It is one of the leading industries in the Indian economy. India has the 5th largest bauxite reserves (5%) of the world. However, the production far outweighs the consumption. India’s market share in terms of aluminium capacity stands at about 3% globally, standing at No.5 in aluminium production in the world. The power, infrastructure, and transportation and related industries are the main aluminium consumers. The major players are HINDALCO, NALCO, Sterlite, & INDAL. A decade ago, the Indian Copper Industry consisted of a single state-owned company and now the copper industry in India takes up about 3% of the entire world market for copper (about 4lakh tons). The Three Copper Indian companies are – Sterlite Industries, Hindalco, and
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Hindustan Copper. Hindalco and Sterlite industries account for more than 80% of the total copper production in India. The Indian Copper Industry has grown at a CAGR of around 10%.
PEST Analysis: Political Factors:
? ? The 2012 Budget proposed an increase in excise duty from 10% to 12%. This is predicted to have a neutral impact as the hike in prices is expected to be passed on to customers. It also proposed removal of customs duty on coal import. This exemption is not expected to have a significant impact on most aluminium companies, as they source coal from Coal India Ltd or through the e-auction route. There have been several measures taken to revive/save the related sectors to which the aluminium & coal industry caters to: power, construction, automotive etc. However, industry players are upset with the “lengthy approval procedures &stringent transparency measures” adopted by the government & the slow pace of policy reforms.
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Economic Factors:
? ? The aluminium industry is the 2nd largest in the Indian economy after steel. The performance of the copper industry is forecast to accelerate, with an anticipated CAGR of 14.1% for the five-year period 2010-2015, which is expected to drive the industry to a value of $510.7 million by the end of 2015. The spurt in input raw material and fuel costs has impacted aluminium operations adversely. While the cost of production has gone up, the price of the metal has not kept pace, but has remained in the $1,800-2,200 band.
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Social Factors:
? ? The mining industry, in general , is facing stricter regulations because of increasing concerns about health hazards. The aluminium & copper industry employs thousands of workers which is multiplied when taken into considerations the related industries for which these are the primary suppliers: automotive, telecommunications, construction, consumer goods.
Technologies:
? Aluminium alloys are currently used in the moulding of safety parts such as components for the automobile and aeronautics industries (car wheel rims, steering knuckles, brake parts, and so on), all requiring high-performance mechanical properties. Alcoa has announced the first commercial success of its ColorKast technology in the consumer electronics market. The result is cosmetic 3D products with the rich, metallic
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“look and feel” of anodized aluminum. The first use of the ColorKast technology appears on Samsung’s new digital camera NX210. Copper has long been used in solar heating/hot water systems, where it is commonly used in heat exchangers. Copper based solar cells are also being introduced. The anti-microbial properties of copper are also seeing increasing use in the healthcare & pharmaceutical industries.
SWOT Analysis:
Strengths: ? Abundance of natural mineral resources. ? Greater margin of production compared to consumption (in India) which in turn boosts export. ? Strong demand globally. The demand for both is significantly high in China & also in developing countries as well as the automotive & electrical industry worldwide. ? Low cost, efficient, available labour. Weaknesses: ? ? ? High cost of energy/fuel. The recent shortage of coal has adversely impacted both the industries in India. Increasing adverse environmental concerns. Import of mining/refinery machinery etc.
Opportunities: ? ? ? ? Rapid urbanization especially in China, India & other Asian countries. Greener technologies which can address environmental issues as well as new technologies which can reduce rising input costs. The consumer durables market for aluminium products like in packaging. The healthcare sector for copper.
Threats: ? ? ? ? Uncertain global economy and market fluctuations. Global economic slowdown. Several austerity measures the world over have affected the firms that are directly or indirectly dependent on these two industries. Stringent laws & governance issues. Unavoidable environmental issues.
COMPANY ANALYSIS:
The Hindustan Aluminium Corporation Ltd, renamed HINDALCO in 1989, is involved in production & sale of aluminium & copper. The copper division is called Birla Copper. It is a Fortune 500 company. ? ? ? ? ? ? ? ? ? It is a subsidiary of Aditya Birla Group co-founded by G.D. Birla & Adithya Birla Established in 1958. All units are ISO 9001:2000, ISO 14001:2004 and OHSAS 18001 certified. The first aluminium production facility was established at Renukoot, UP in 1962. It produces primary Aluminium (alumina) & aluminum products. By-products include: Metals (gold, silver), DAP fertilizers, sulfuric acid & phosphoric acid Value-added products: Everlast Roofing Sheets, Freshwrapp kitchen foil, Freshpakk semi-rigid containers. The Birla Copper plant , established at Dahej, Gujrat is the largest single-location coppersmelter in the world. Its Aluminium is accepted for delivery under the High Grade Aluminium Contract on the London Metal Exchange (LME). Birla copper is registered on LME as Grade A Copper Brand It’s aluminium production share is 46% in the country with a market share (in value terms) is 42%
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Location of Headquarters: Hindalco Industries Ltd Century Bhavan, 3rd floor Dr. Annie Besant Road Worli Mumbai 400 030 Companies: ? Utkal Alumina International Ltd. ? Novelis Inc. ? Aditya Birla Minerals Ltd.
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Top management:
? ? ? ? ? ? ? Mr. Kumar Mangalam Birla – Chairman Mr. D. Bhattacharya -- MD Mr. Praveen Maheshwari – Chief Financial Officer Mr. Raghuvendra Dhulkhed – Senior President Of Operations Mr. Suryakant Mishra – CEO Utkal Alumina International Ltd. Mr. Philip Martens –President & CEO Novelis Inc. Mr. Sunil kulwal – CEO & MD Aditya Birla Minerlas Ltd
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Number of Employees: 19,341 (2011)
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Shareholding Pattern:
Holder's Name Promoters Foreign Institutions Financial Institutions General Public Other Companies NBanks MutualFunds Foreign Ocb Foreign NRI Others Central Govt No of Shares 613797188 494340574 235143118 166898101 137748354 56565578 32555710 11632916 6099497 345520 % Share Holding 32.06% 25.82% 12.28% 8.72% 7.19% 2.95% 1.70% 0.61% 0.32% 0.02%
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Financial performance:
? ? ? ? ? Consolidated Sales & Operations revenue= Rs. 72,078 crores Aluminium unit= RS. 56,084cr Copper unit= Rs.15,887cr Net Profit= Rs. 2,456 cr Earnings per share= 12.83
SWOT Analysis
? Strengths: ? One of two major aluminium producers in the country ? Cost effective access to quality bauxite ? Superior operating efficiencies ? Superior managerial efficiency ? Strong Chinese copper demand & increase in US refined copper consumption Weaknesses: ? Slow growth rate I the copper division ? High input costs ? High coal rates/ shortage of coal Opportunities:
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? ? ? Threats: ? ? ? ?
Capitalizing on the urban consumer market by innovation more consumer durables Innovating new technologies to reduce cost of input Coal acquisitions in new markets like Australia Global economic slowdown Competitors such as Nalco & Sterlite Government & global regulations. Slow pace of national policy reforms. Environmental regulations
Strategies & Acquisitions:
? ? ? ? ? ? Hindalco acquired controlling stake in Indal in 2000 which came up to 96.5% equity stake in 2003 In 2003, it became a majority stakeholder in Utkal Alumina, a joint venture with Alcan In September 2005, company split shares 10:1 (each share with FV Rs.10 split into 10 shares of re.1 each) to enhance liquidity & encourage participation from retail investors. Hindalco acquired Novelis (USA) in May2007 to become the largest Indian investor in North America In 2011, it refinanced Novelis debt of $4billion. Hindalco got back 50% of invested equity within 4 years & this also opened up a novel funding avenue between Hindalco & Novelis. In April 2012, Novelis signed an agreement with the Changzhou National Hi-Tech district to build the company’s first automotive sheet manufacturing facility in China. This is keeping in mind the high rate of growth of the automotive industry in China. It is already the leader in automotive sheet supplier in Europe.
REFERENCES: Hindalco.com Nalco.com Aluminium.org Aluminium-india.org Indianmirror.com ICSG.org (Intl. copper Study Grp) Scope & Potential of Indian Aluminium Industry—by Sunildro L.S. Akoijarn Prespective Study of World Aluminium Industry—by Zheng Luo & Antonio Soria Frontlineonnet.com Indiatimes.com: Times of India, Economic Times Livemint.com
Competitor Analysis
? ? ? ? NALCO: Natioanl Aluminium Company Ltd is a Government of India (public sector) enterprise established in 1981. It is the sixth largest, integrated aluminium complex, encompassing bauxite mining, alumina refining, aluminium smelting and casting, power generation, rail & port operations. It has its own section of port facilities at Visakhapatanam. It has considerably reduced transportation costs. Its biggest strength is the quality of its bauxite ore. Orissa (company headquarters) has some of the best reserves of bauxite in the world; about 70 per cent of all bauxite reserves in India are in the State. It’s aluminium production share is 40% in the country with a market share (in value terms) is only about 23% The company is the least-cost producer of alumina in the world: While Nalco's cost of producing alumina is about $100 a tonne, the next best-competitive price, of a global major, is $140 per tonne. Nalco's return on capital employed is far better than Hindalco's. The take over a private company, Indian Aluminium Products Ltd (IAPL), which belonged to the Mukand Group is expected to enable the company to make inroads into markets for downstream products.
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doc_802537099.docx
It describes about Industry Trends of aluminium industry, PEST Analysis of aluminium Industry, Competitor Analysis of Hindalco, SWOT analysis, Company Description, General Information about the Hidalco it's Finance performance, SWOT analysis of Hindalco and Various Strategies employed.
HINDALCO
Industry Analysis
The aluminium industry is the largest non-ferrous metal industry in the world economy. Aluminium is a material with a wide range of applications, e.g. transport vehicles, construction, packaging industry, electronic production, household appliances, etc., and consequently the economic activities of these industrial sectors determine the overall demand for aluminium. Copper is a main and prominent source of energy. Applications of copper are mainly in the energy sector i.e. electrical, automotive, machined products/industry, telecommunications, & also in the environmental (marine) & health sector (anti-microbial). Global Perspective: ? The worldwide primary Aluminium production is dominated currently by Europe & Russia, Asia & North America. The top 5 producers being: China, Russia, Canada, US, Australia with China alone producing about 26% of total. The world consumption of aluminium in total, both primary and secondary, has grown, at the rate of 5-8%, with Asia being in the lead (with China as the primary consumer: about a fourth of total) followed by Europe. This increasing demand is largely due to the parallel increase in the automotive & construction industry along with the rapid urbanization in Asian countries. Production of copper has been steadily increasing since the past decade with Chile, Australia & the Americas (US, Mexico, South America) being the pre-dominant producers. The global production of refined copper is over about15 million tons. World apparent usage of copper grew by 10% principally owing to strong growth in Chinese apparent usage. However, the overall world usage (apart from China) declining by about 2.5%. China accounts for nearly 40% of global copper consumption.
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Indian Perspective: ? It is one of the leading industries in the Indian economy. India has the 5th largest bauxite reserves (5%) of the world. However, the production far outweighs the consumption. India’s market share in terms of aluminium capacity stands at about 3% globally, standing at No.5 in aluminium production in the world. The power, infrastructure, and transportation and related industries are the main aluminium consumers. The major players are HINDALCO, NALCO, Sterlite, & INDAL. A decade ago, the Indian Copper Industry consisted of a single state-owned company and now the copper industry in India takes up about 3% of the entire world market for copper (about 4lakh tons). The Three Copper Indian companies are – Sterlite Industries, Hindalco, and
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Hindustan Copper. Hindalco and Sterlite industries account for more than 80% of the total copper production in India. The Indian Copper Industry has grown at a CAGR of around 10%.
PEST Analysis: Political Factors:
? ? The 2012 Budget proposed an increase in excise duty from 10% to 12%. This is predicted to have a neutral impact as the hike in prices is expected to be passed on to customers. It also proposed removal of customs duty on coal import. This exemption is not expected to have a significant impact on most aluminium companies, as they source coal from Coal India Ltd or through the e-auction route. There have been several measures taken to revive/save the related sectors to which the aluminium & coal industry caters to: power, construction, automotive etc. However, industry players are upset with the “lengthy approval procedures &stringent transparency measures” adopted by the government & the slow pace of policy reforms.
?
Economic Factors:
? ? The aluminium industry is the 2nd largest in the Indian economy after steel. The performance of the copper industry is forecast to accelerate, with an anticipated CAGR of 14.1% for the five-year period 2010-2015, which is expected to drive the industry to a value of $510.7 million by the end of 2015. The spurt in input raw material and fuel costs has impacted aluminium operations adversely. While the cost of production has gone up, the price of the metal has not kept pace, but has remained in the $1,800-2,200 band.
?
Social Factors:
? ? The mining industry, in general , is facing stricter regulations because of increasing concerns about health hazards. The aluminium & copper industry employs thousands of workers which is multiplied when taken into considerations the related industries for which these are the primary suppliers: automotive, telecommunications, construction, consumer goods.
Technologies:
? Aluminium alloys are currently used in the moulding of safety parts such as components for the automobile and aeronautics industries (car wheel rims, steering knuckles, brake parts, and so on), all requiring high-performance mechanical properties. Alcoa has announced the first commercial success of its ColorKast technology in the consumer electronics market. The result is cosmetic 3D products with the rich, metallic
?
? ?
“look and feel” of anodized aluminum. The first use of the ColorKast technology appears on Samsung’s new digital camera NX210. Copper has long been used in solar heating/hot water systems, where it is commonly used in heat exchangers. Copper based solar cells are also being introduced. The anti-microbial properties of copper are also seeing increasing use in the healthcare & pharmaceutical industries.
SWOT Analysis:
Strengths: ? Abundance of natural mineral resources. ? Greater margin of production compared to consumption (in India) which in turn boosts export. ? Strong demand globally. The demand for both is significantly high in China & also in developing countries as well as the automotive & electrical industry worldwide. ? Low cost, efficient, available labour. Weaknesses: ? ? ? High cost of energy/fuel. The recent shortage of coal has adversely impacted both the industries in India. Increasing adverse environmental concerns. Import of mining/refinery machinery etc.
Opportunities: ? ? ? ? Rapid urbanization especially in China, India & other Asian countries. Greener technologies which can address environmental issues as well as new technologies which can reduce rising input costs. The consumer durables market for aluminium products like in packaging. The healthcare sector for copper.
Threats: ? ? ? ? Uncertain global economy and market fluctuations. Global economic slowdown. Several austerity measures the world over have affected the firms that are directly or indirectly dependent on these two industries. Stringent laws & governance issues. Unavoidable environmental issues.
COMPANY ANALYSIS:
The Hindustan Aluminium Corporation Ltd, renamed HINDALCO in 1989, is involved in production & sale of aluminium & copper. The copper division is called Birla Copper. It is a Fortune 500 company. ? ? ? ? ? ? ? ? ? It is a subsidiary of Aditya Birla Group co-founded by G.D. Birla & Adithya Birla Established in 1958. All units are ISO 9001:2000, ISO 14001:2004 and OHSAS 18001 certified. The first aluminium production facility was established at Renukoot, UP in 1962. It produces primary Aluminium (alumina) & aluminum products. By-products include: Metals (gold, silver), DAP fertilizers, sulfuric acid & phosphoric acid Value-added products: Everlast Roofing Sheets, Freshwrapp kitchen foil, Freshpakk semi-rigid containers. The Birla Copper plant , established at Dahej, Gujrat is the largest single-location coppersmelter in the world. Its Aluminium is accepted for delivery under the High Grade Aluminium Contract on the London Metal Exchange (LME). Birla copper is registered on LME as Grade A Copper Brand It’s aluminium production share is 46% in the country with a market share (in value terms) is 42%
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Location of Headquarters: Hindalco Industries Ltd Century Bhavan, 3rd floor Dr. Annie Besant Road Worli Mumbai 400 030 Companies: ? Utkal Alumina International Ltd. ? Novelis Inc. ? Aditya Birla Minerals Ltd.
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Top management:
? ? ? ? ? ? ? Mr. Kumar Mangalam Birla – Chairman Mr. D. Bhattacharya -- MD Mr. Praveen Maheshwari – Chief Financial Officer Mr. Raghuvendra Dhulkhed – Senior President Of Operations Mr. Suryakant Mishra – CEO Utkal Alumina International Ltd. Mr. Philip Martens –President & CEO Novelis Inc. Mr. Sunil kulwal – CEO & MD Aditya Birla Minerlas Ltd
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Number of Employees: 19,341 (2011)
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Shareholding Pattern:
Holder's Name Promoters Foreign Institutions Financial Institutions General Public Other Companies NBanks MutualFunds Foreign Ocb Foreign NRI Others Central Govt No of Shares 613797188 494340574 235143118 166898101 137748354 56565578 32555710 11632916 6099497 345520 % Share Holding 32.06% 25.82% 12.28% 8.72% 7.19% 2.95% 1.70% 0.61% 0.32% 0.02%
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Financial performance:
? ? ? ? ? Consolidated Sales & Operations revenue= Rs. 72,078 crores Aluminium unit= RS. 56,084cr Copper unit= Rs.15,887cr Net Profit= Rs. 2,456 cr Earnings per share= 12.83
SWOT Analysis
? Strengths: ? One of two major aluminium producers in the country ? Cost effective access to quality bauxite ? Superior operating efficiencies ? Superior managerial efficiency ? Strong Chinese copper demand & increase in US refined copper consumption Weaknesses: ? Slow growth rate I the copper division ? High input costs ? High coal rates/ shortage of coal Opportunities:
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? ? ? Threats: ? ? ? ?
Capitalizing on the urban consumer market by innovation more consumer durables Innovating new technologies to reduce cost of input Coal acquisitions in new markets like Australia Global economic slowdown Competitors such as Nalco & Sterlite Government & global regulations. Slow pace of national policy reforms. Environmental regulations
Strategies & Acquisitions:
? ? ? ? ? ? Hindalco acquired controlling stake in Indal in 2000 which came up to 96.5% equity stake in 2003 In 2003, it became a majority stakeholder in Utkal Alumina, a joint venture with Alcan In September 2005, company split shares 10:1 (each share with FV Rs.10 split into 10 shares of re.1 each) to enhance liquidity & encourage participation from retail investors. Hindalco acquired Novelis (USA) in May2007 to become the largest Indian investor in North America In 2011, it refinanced Novelis debt of $4billion. Hindalco got back 50% of invested equity within 4 years & this also opened up a novel funding avenue between Hindalco & Novelis. In April 2012, Novelis signed an agreement with the Changzhou National Hi-Tech district to build the company’s first automotive sheet manufacturing facility in China. This is keeping in mind the high rate of growth of the automotive industry in China. It is already the leader in automotive sheet supplier in Europe.
REFERENCES: Hindalco.com Nalco.com Aluminium.org Aluminium-india.org Indianmirror.com ICSG.org (Intl. copper Study Grp) Scope & Potential of Indian Aluminium Industry—by Sunildro L.S. Akoijarn Prespective Study of World Aluminium Industry—by Zheng Luo & Antonio Soria Frontlineonnet.com Indiatimes.com: Times of India, Economic Times Livemint.com
Competitor Analysis
? ? ? ? NALCO: Natioanl Aluminium Company Ltd is a Government of India (public sector) enterprise established in 1981. It is the sixth largest, integrated aluminium complex, encompassing bauxite mining, alumina refining, aluminium smelting and casting, power generation, rail & port operations. It has its own section of port facilities at Visakhapatanam. It has considerably reduced transportation costs. Its biggest strength is the quality of its bauxite ore. Orissa (company headquarters) has some of the best reserves of bauxite in the world; about 70 per cent of all bauxite reserves in India are in the State. It’s aluminium production share is 40% in the country with a market share (in value terms) is only about 23% The company is the least-cost producer of alumina in the world: While Nalco's cost of producing alumina is about $100 a tonne, the next best-competitive price, of a global major, is $140 per tonne. Nalco's return on capital employed is far better than Hindalco's. The take over a private company, Indian Aluminium Products Ltd (IAPL), which belonged to the Mukand Group is expected to enable the company to make inroads into markets for downstream products.
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doc_802537099.docx