Description
It explains about Industry Trends, PEST Analysis of Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about the company, it's Finance performance, SWOT analysis and Various Strategies employed.
Industry Analysis
1. Industry trends: Indian and Global perspectives, recent happenings 2011-12 was a year of significant changes because of volatility in the global economy. The EuroZone crisis deteriorated the sovereign credit ratings leading to sluggish growth in many industrialized countries including USA. Political unrest in Africa and the resulting increment in crude oil prices had dampened the growth euphoria. Despites these challenges commodity prices averaged higher than during FY 2010-2011. Demand for commodities will be met by global economic growth in emerging markets like China, which are expected to remain relatively robust. Following are some important areas that can be improved upon: • • Marketing and sales is an underutilized area in this industry that can improve 3 to 8 percent of EBIT margin and build a platform for growth. Operational changes with technical improvements are need of the hour and backbone of a transformation program, however it should include much broader questions related to product development, purchasing and supply management, and service operations. Organizational changes are needed to make the transformation happen and are as important as technical problem-solving approaches. This industry faces various challenges such as strong demand growth, high volatility, ongoing consolidation, shifting of profit pools across the value chain, the changing needs of customers, and differences in regional development. This pressure also includes the changing environmental needs, such as CO2 abatement, which is becoming increasingly important. There need to be various (Source: http://www.mckinsey.com/Client_Service/Metals_and_Mining) Following are some positives of the industry: • Copper prices showed a rising trend since 2010 benefitting copper producers globally. Although copper demand was down 10% y-o-y in 2009, global copper demand is seen to be growing again. Chinese demand for copper was still robust and imports of the metal were rebounding, which was supported by steady construction and infrastructure activity in the country. The improvement in copper prices would be supported by limited supply and increased demand from China.
•
•
•
With copper prices at near all-time highs, outlook for copper prices is still strong. Not denying volatility in prices that are bound to remain long term. However manufacturers might now resort to aluminum as a substitute. Market conditions are expected to be positive for copper in the next couple of years due to higher consumption of the metal in the developing nations. Companies that have a high leverage to copper prices will benefit immensely from the potential demand for the metal in the developing markets.
Industry trends: • • The price of copper has continuously improved on the London Metal Exchange (LME) since 2001. With the global economic growth copper demand is bound to rise. China's strong demand for copper for infrastructure development, automobile manufacturing and electronic appliance exports is partly responsible for supporting high copper price levels. China has historically been unable to meet its copper consumption requirements with domestic production and the resulting need for imports is expected to continue. India and Russia are also expected to show such industrial production growth which would lead to rise in copper demand. (Source: http://www.coromining.com/s/copperfacts.asp?ReportID=195367) The following are the current (2012) top 10 risks in the mining and metal industry: 1. Resource nationalism 2. Skills shortage 3. Infrastructure access 4. Cost inflation 5. Capital project execution 6. Social license to operate 7. Price and currency volatility 8. Capital management and access 9. Sharing the benefits 10. Fraud and corruption
•
While the demand outlook remains strong, the price peaks have passed and so there is a much greater imperative for mining and metals companies to remain nimble and sure-footed in how they manage these fast-changing risks. (Source: http://www.ey.com/GL/en/Industries/Mining---Metals/Business-risks-facing-miningand-metals-2012---2013)
2. PEST Analysis: Political, economic, social and technical aspects related to the industry Political Factors
• Difficulty in obtaining clearances and leases from the state governments. The list of
clearances needed for mining industry areDepartment of Mines Indian Bureau of Mines Goa State Pollution Control Board Geological Survey of India Ministry of environmental and forests Central Board of Excise and Customs Department of Heavy Industry Ministry of labour
1. 2. 3. 4. 5. 6. 7. 8. • •
The contribution of iron ore to inflation Government’s approach of giving priority to the domestic players.
Economic Factors
• • • •
The fluctuations in the exchange rates impact the performance of the mining Industry No restriction on foreign equity holdings in mining sector companies registered in India. China being the highest buyer or metals (ferrous and non ferroous), it is the key driver of the global metal and mining industry. Its economic scenario impacts the entire industry. Change in the scale.
Social Factors
• • • •
Major risk to societal sustainability as the problem created by mining is mining-induced displacement and resettlement (MIDR) The suspension of more than 50 iron ore mines in Orissa over the past few months has hit supplies for export. The unrest among local residents due to landlessness, joblessness, homelessness and changes in population dynamics. Corruption and mining scandals affect the exports and trust.
Technological Factors
•
In India, there are no exploration programs undertaken for locating new additional deposits of iron ore. Many technological improvements have helped the mining industry in cost controls, emission controls, and mineral conservation and in bringing down the alumina content of the ore.
•
• •
Technology becomes an extremely important factor in this industry as the major contributors for the operations are large machines. The accuracy and efficiency becomes an important factor. Technological advancement in this industry will improve and ensure safety. It will also help to get better operational benefits. Less Research and development in the industry.
3. Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company. Competitor - Hindustan Copper Limited It is a Government of India enterprise that came into existence in the year 1967. It is the country’s only integrated copper producing company encompassing casting, refining, smelting, beneficiation and mining of refined copper metal. They have copper plants in the states like Maharashtra, Rajasthan, Madhya Pradesh and Jharkhand. Their main product list includes copper concentrate, copper cathode and continuous cast copper rod. (Source: http://entrance-exam.net/top-copper-producing-companies-in-india/#ixzz21LUoFQMZ) Pricing of the primary product - Copper cathode price (rupees per metric ton) Hindustan copper - 450622 Sterlite Industries - 459911 Quality Hindustan copper – Process: They believe in “Customer Delight” which is visible by the ISO 9002 certification for their product line. They are the first copper producing company to be ISO 9002 accredited. They have systems equipped with modern controls, test and analysis for ensuring best quality. The final product of copper cathode are sampled batch wise and analysed by sophisticated instruments like direct reading Emission Spectrometer, Atomic Absorption Spectro Photometers and LECO Oxygen Analyser. At the “C C Rod plant” following checks are done:
• • • • •
Monitoring and control of metal temperature and oxygen content at the cast wheel Molten metal oxygen control by built in CO Analyser Control of alcohol content and pH of pickling solution and mill coolant Monitoring and control of hardness of cooling water. Monitoring and control of soundness of cast bar.
•
In line detection of flaws by eddy current flaw detector (Defectomat)
Final C C Rods are subjected to following tests:
• • • • • • • •
Diameter and ovality checks. Oxygen content analysis by LECO Analyser. Reverse twist to failure (RTF) tests. 10 x 10 surface twist test. Percentage Elongation and Tensile Strength tests. Conductivity tests. Depth of surface oxide tests. Spiral Elongation Number (SEN) tests.
Sterlite Industries – Awards and recognition for quality: • • Ramkrishna Bajaj National Quality Awards: Performance Excellence trophy – 2007 to 2010 "International Star Award for Quality 2009" under Gold category from Business Initiatives Directions, SPAIN. The award will be given to us during 34th International Star for Quality Convention to be held at Geneva during Oct 25-26, 2009.
Process: Copper cathodes - Latest Version of CS 3000 Distributed Control System of Yokogawa, Japan controls the entire Copper Smelter. Advance Process Control (APC) implementation methodology involves data collection, approximate candidate controller design, prototype controller design, simulation, testing, and final implementation. APC is implemented to control critical factors like Bath temperature and Lance height control. Continuous monitoring and analysis of refining process through an advanced DCS system ensures close process control. A well-equipped laboratory to test the cathodes for purity and structure of the deposit backs the production facility. A state-of-the-art electrolyte purification plant supplied by Ecotech helps in keeping electrolyte clean and within close limits to get superior quality product and to ensure high operational efficiencies. An acid purification plant contributes to the purification of the electrolyte, significantly enhancing the quality of the cathodes.
Continuous Cast Rods - Highly accurate measurement and control systems are used to maintain optimum level of molten metal. Online pickling, drying and waxing ensure that the rod is free of oxide scales. Online scanning with the highly sensitive Defectomat enables freedom from surface defects and ferrous contamination. Extensive process control, backed by computerized quality analysis of various data (process parameter data, online scanning data and results of a battery of off-line tests) ensures best quality of the rods. Distribution Hindustan copper – They have their regional offices in Bangalore, Kolkata, New Delhi and Mumbai. Sterlite Industries – Even they have their regional offices in Bangalore, Kolkata, New Delhi and Mumbai. Partnerships Hindustan copper – • Nalco (National Aluminium Co. Ltd.) is analyzing partnership with Hindustan Copper. The broad understanding between the two listed public sector miners is that a mutually agreed valuation of Malanjkhand assets would form the base of any joint venture proposal. It is also understood that HCL would have the majority stake in the JV. SAIL, Nalco & Hindustan Copper to jointly bid for Afghan gold, copper mines.
•
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry Strengths:
1.
Various concessions to investors engaged in mining by GOI. Concessions like-: • • • • Complete tax holiday for a period of 5years for backward districts. Environment protection equipment. Finished form of minerals exempt from excise duty Low customs duty on capital equipment used for minerals
Largest producer of mica in the world is also third largest producer of coal, top producers of iron ore, bauxite, manganese ore and aluminium. 3. Labor - cheap and easily available, hence low labor costs 4. Large quantity of reserves available 5. High demand in almost all parts of the world.
2.
Weakness:
1. 2. 3. 4. 5. 6. 7. 8. 9.
Poor productivity. Degradation of land and leading to environmental pollution because of opencast mining, which is favored over underground mining. Poor infrastructure facilities. Technology used in mining is outdated. Low innovation. Highly un-skilled and inexperienced labor. High rate of accidents. Limited capital and mines are costly. Corruption.
Opportunities•
• • •
•
Estimation says that there is a scope for exploitation of 85 billion tons of mineral reserves in India. The investment and expenditure is very less in the industry when compared to the emerging markets. This can be covered by the private sector. Joint ventures and FDI in order to mobilize finance and make a position in the global market. Development and exploration in surplus commodities like iron ore and bauxite is a great opportunity. There is potential for setting up manufacturing units for value added products. Also further research and discoveries can be made in direction of technological advancement which will improve the overall productivity and efficiency.
Threats:
•
• • •
• •
Competitors and FDI. Expansion plans of POSCO, Mittal Steel and Alcan can pose a serious threat. Takeover form foreign companies. Heavy tax burden. Stricter environment rules restricting mining activities. Drop in global commodity demand due to rising interest rates, inflation and slow down in global economies. Volatile market leading to volatile earnings and commodity prices.
Company Analysis
1. Company description (a brief introduction regarding what businesses the company is
into). • Sterlite Industries India Limited (SIIL) is the principal subsidiary of Vedanta Resources plc, a diversified metals and mining company, with principal operations located in India and Australia. Sterlite’s principal operating companies comprise Hindustan Zinc Limited (HZL) for its fully integrated zinc and lead operations; Sterlite Industries India Limited (Sterlite) and Copper Mines of Tasmania Pty Limited (CMT) for its copper operations in India/Australia; and Bharat Aluminium Company (BALCO), for its aluminium and alumina operations and Sterlite Energy for its commercial power generation business. Sterlite is India's largest non-ferrous metals and mining company and is one of the fastest growing private sector companies. It is listed on BSE, NSE and NYSE. It was the first Indian Metals & Mining Company to list on the New York Stock Exchange. Sterlite develops and manages a diverse portfolio of mining and metals businesses whilst carrying out its activities in a socially and environmentally responsible manner and creating value for the communities where it operates. The management of environment, employees, health and safety and community issues, in respect of its operations is central to the success of company’s business. Sterlite Industries specialize in the following:
o
•
•
•
•
High quality assets and resources making them a low-cost producer of copper and zinc.
o Substantial market shares across the copper, zinc and Aluminium metals markets in India. o Extensive experience in operating and expanding business in India to capitalize on growth opportunities and resource potential in the country.
o
Numerous new projects in the pipeline that will enable them to expand our production. Experience for entry into commercial power generation business in India with operations of captive power plants since 1997..
o
(Source: http://www.sterlite-industries.com)
2. General information about the company: location of the headquarters, year of founding,shareholding pattern, number of employees, top management, etc.
•
Headquarters Serlite Industries (I) Ltd. Vedanta 75 Nehru Road, Vile Parle (East) , Mumbai : 400099. Founded in 1975 (as Rainbow Investment Limited in Kolkata) and named Sterlite Industries in 1986
•
Management: o Mr. Anil Agarwal - Chairman Mr. Agarwal, who founded the Vedanta/Sterlite group in 1976, is the Chairman and was appointed to the Board of Directors in 1978. Based in the United Kingdom, he is also the Executive Chairman of Vedanta Resources Plc. He has over 30 years of experience as an industrialist and has been instrumental in growth and development of the company since its inception. o Mr. Navin Agarwal - Executive Vice-Chairman Mr. Agarwal was appointed to the Board of Directors in August 2003. His responsibilities include executing business strategy and monitoring the overall performance and growth of the organisation. He has over 20 years of experience in strategic management.
o Mr. Berjis Minoo Desai - Non - Executive Director Mr. Desai, is a Non-executive Director and was appointed to the Board of Directors in January 2003. His expertise lies in laws relating to mergers and acquisitions, securities, international commercial arbitration and in financial and international business law.
o Mr. Gautam Bhailal Doshi - Non Executive Director Mr. Doshi, is an Independent Nonexecutive Director and was appointed to the Board of Directors in December 2001. He has 24 years of experience in audit, finance and accounting. He is a Fellow Member of the Institute of Chartered Accountants of India and was a member of the Central Council and the Western India Regional Council of the Institute of Chartered Accountants of India.
o Mr. Sandeep H. Junnarkar - Non Executive Director Mr. Junnarkar, Non-executive Director, was appointed to the Board of Directors in June 2001. He is a solicitor and a partner of Messrs Junnarkar & Associates. Mr Junnarkar specializes in banking and corporate law.
o Mr.Mahendra Singh Mehta-Chief Executive Officer Mr. Mahendra Singh Mehta is currently Chief Executive Officer of Vedanta Resources Plc. He is also designated as the Group CEO. Mr. Mehta joined the Vedanta Group in April 2000 and held various leadership positions within the group. He has over 30 years of experience with companies in the steel, mining and nonferrous metal sectors.
o Mr. Din Dayal Jalan – Whole Time Director & Chief Financial Officer Mr Jalan joined Sterlite in 2001 as President – Australian Operations, responsible for TCM and CMT mines. He has over 27 years of experience with various companies in the engineering, mining and non-ferrous metal sectors.
•
Shareholding pattern: (http://economictimes.indiatimes.com/sterlite-industries-(india)ltd/shareholding/companyid-12977.cms) Shareholding pattern - Sterlite Industries (India) Ltd. Holder's Name Promoters No of Shares 120787719
Foreign Promoters Foreign Institutions Financial Institutions Other Companies General Public Banks Mutual Funds Others Foreign Others Foreign NRI Directors Foreign Industries Foreign OCB Central Government Share price:
1671144924 400729628 189830026 189235932 145843357 128469661 82606255 7965692 6087219 72000 10113 3000 2800
BSE: 52 week high – 176.45; 52 week low – 86.10 NSE: 52 week high – 176.40; 52 week low – 86.15
Employee Strength: Around 13400 employees
3. Financial performance of the company: Sales, net profit, segment wise performance of the past 1 year (Source: http://www.moneycontrol.com/financials/sterliteindustriesindia/results/yearly/SII#SII) Sales Turnover Other Income Total Income Total Expenses Operating Profit Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest PBDT Depreciation PBT Tax Net Profit Note: All figures are in Rs. Cr. 18,092.06 2,247.68 20,339.74 17,148.66 943.40 -423.32 --3,191.08 597.46 2,170.30 162.46 2,007.84 350.36 1,657.48
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the company Strengths:
•
Has a diversified business model with presence in various products like copper, zinc and aluminium. Lowest cost producers. High market share.
• •
Weaknesses: • • • Heavy dependence on its zinc business for operating profit (~68%) Low operating profit of its primary product line, i.e., copper (~15%) Lack of backward integration for copper and aluminium business due to which LME price variation benefits cannot be obtained by the company.
Opportunities: • Entering in the commercial power generation would further diversify the business model. This would also allow the management to use their experience of operating thermal coal based captive power plants. Emerging Markets Call option to acquire government’s stake of 29.5% in HZL and 49% in BALCO along with acquisition of ASARCO which is pending due to legal complications.
• •
Threats: • • • Drop in global commodity demand due to rising interest rates, inflation and slow down in global economies. Inability to complete commercial power generation project on time may lead to losses and penalties. Volatile environment and currencies leading to volatile commodity prices and profits.
5. Various strategies employed by the company in the course of conducting business (in the form of alliances, joint ventures, product innovation/ expansion strategies, acquisitions/ divestitures and any such strategies that you think may affect the business of the company) in past 2 years. (Make intelligent use of above points while trying to understand the strategies used by the company) a) Hierarchical: At the corporate level, business unit level and functional or department level of the firm b) Business Division: According to various products, divisions, markets, etc. c) Regional: Strategies devised as per regions, geographies, etc.
Sterlite Industries Strategies Company’s goal is to generate strong financial returns and create a world-class metals and mining company. To achieve this they intend to take full advantage of their competitive strengths. Key elements of strategy:
•
Increasing capacities through greenfield and brownfield projects. They intend to continue the construction of new facilities to capitalize upon the growing demand for metals in India and abroad, particularly in China, Southeast Asia and the Middle East. Leveraging project execution and operating skills and experience in building and operating captive power plants to develop a commercial power generation business. The commercial power generation business represents an attractive growth opportunity in India and their experience in building and operating captive power plants positions them to develop this as a stand-alone business. Continuing to focus on asset optimization and reducing the cost of production. Focus on reducing cost of production, including maximizing throughput and plant availability, reducing energy costs and consumption, increasing automation, improving recovery ratios, reducing our raw material costs and seeking better utilization of by-products. Seeking further growth and acquisition opportunities that leverage transactional, project execution and operational skills. They continually seek new growth and acquisition opportunities in the metals and mining and related businesses, primarily in India, including government privatization programs.
•
•
•
A major step towards this is taken by initiating the “Sesa-Sterlite” merger. It is seen as one of the major events for the success of Vedanta, which would ease out many operational, functional and management decisions and activities.
•
Consolidating corporate structure and increasing direct ownership of their underlying businesses to derive additional synergies as an integrated group. They have exercised options to acquire the Government of India’s remaining 49.0% ownership interest in BALCO and are seeking to complete this acquisition.
(Source: http://www.sterlite-industries.com)
doc_521609720.doc
It explains about Industry Trends, PEST Analysis of Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about the company, it's Finance performance, SWOT analysis and Various Strategies employed.
Industry Analysis
1. Industry trends: Indian and Global perspectives, recent happenings 2011-12 was a year of significant changes because of volatility in the global economy. The EuroZone crisis deteriorated the sovereign credit ratings leading to sluggish growth in many industrialized countries including USA. Political unrest in Africa and the resulting increment in crude oil prices had dampened the growth euphoria. Despites these challenges commodity prices averaged higher than during FY 2010-2011. Demand for commodities will be met by global economic growth in emerging markets like China, which are expected to remain relatively robust. Following are some important areas that can be improved upon: • • Marketing and sales is an underutilized area in this industry that can improve 3 to 8 percent of EBIT margin and build a platform for growth. Operational changes with technical improvements are need of the hour and backbone of a transformation program, however it should include much broader questions related to product development, purchasing and supply management, and service operations. Organizational changes are needed to make the transformation happen and are as important as technical problem-solving approaches. This industry faces various challenges such as strong demand growth, high volatility, ongoing consolidation, shifting of profit pools across the value chain, the changing needs of customers, and differences in regional development. This pressure also includes the changing environmental needs, such as CO2 abatement, which is becoming increasingly important. There need to be various (Source: http://www.mckinsey.com/Client_Service/Metals_and_Mining) Following are some positives of the industry: • Copper prices showed a rising trend since 2010 benefitting copper producers globally. Although copper demand was down 10% y-o-y in 2009, global copper demand is seen to be growing again. Chinese demand for copper was still robust and imports of the metal were rebounding, which was supported by steady construction and infrastructure activity in the country. The improvement in copper prices would be supported by limited supply and increased demand from China.
•
•
•
With copper prices at near all-time highs, outlook for copper prices is still strong. Not denying volatility in prices that are bound to remain long term. However manufacturers might now resort to aluminum as a substitute. Market conditions are expected to be positive for copper in the next couple of years due to higher consumption of the metal in the developing nations. Companies that have a high leverage to copper prices will benefit immensely from the potential demand for the metal in the developing markets.
Industry trends: • • The price of copper has continuously improved on the London Metal Exchange (LME) since 2001. With the global economic growth copper demand is bound to rise. China's strong demand for copper for infrastructure development, automobile manufacturing and electronic appliance exports is partly responsible for supporting high copper price levels. China has historically been unable to meet its copper consumption requirements with domestic production and the resulting need for imports is expected to continue. India and Russia are also expected to show such industrial production growth which would lead to rise in copper demand. (Source: http://www.coromining.com/s/copperfacts.asp?ReportID=195367) The following are the current (2012) top 10 risks in the mining and metal industry: 1. Resource nationalism 2. Skills shortage 3. Infrastructure access 4. Cost inflation 5. Capital project execution 6. Social license to operate 7. Price and currency volatility 8. Capital management and access 9. Sharing the benefits 10. Fraud and corruption
•
While the demand outlook remains strong, the price peaks have passed and so there is a much greater imperative for mining and metals companies to remain nimble and sure-footed in how they manage these fast-changing risks. (Source: http://www.ey.com/GL/en/Industries/Mining---Metals/Business-risks-facing-miningand-metals-2012---2013)
2. PEST Analysis: Political, economic, social and technical aspects related to the industry Political Factors
• Difficulty in obtaining clearances and leases from the state governments. The list of
clearances needed for mining industry areDepartment of Mines Indian Bureau of Mines Goa State Pollution Control Board Geological Survey of India Ministry of environmental and forests Central Board of Excise and Customs Department of Heavy Industry Ministry of labour
1. 2. 3. 4. 5. 6. 7. 8. • •
The contribution of iron ore to inflation Government’s approach of giving priority to the domestic players.
Economic Factors
• • • •
The fluctuations in the exchange rates impact the performance of the mining Industry No restriction on foreign equity holdings in mining sector companies registered in India. China being the highest buyer or metals (ferrous and non ferroous), it is the key driver of the global metal and mining industry. Its economic scenario impacts the entire industry. Change in the scale.
Social Factors
• • • •
Major risk to societal sustainability as the problem created by mining is mining-induced displacement and resettlement (MIDR) The suspension of more than 50 iron ore mines in Orissa over the past few months has hit supplies for export. The unrest among local residents due to landlessness, joblessness, homelessness and changes in population dynamics. Corruption and mining scandals affect the exports and trust.
Technological Factors
•
In India, there are no exploration programs undertaken for locating new additional deposits of iron ore. Many technological improvements have helped the mining industry in cost controls, emission controls, and mineral conservation and in bringing down the alumina content of the ore.
•
• •
Technology becomes an extremely important factor in this industry as the major contributors for the operations are large machines. The accuracy and efficiency becomes an important factor. Technological advancement in this industry will improve and ensure safety. It will also help to get better operational benefits. Less Research and development in the industry.
3. Competitor Analysis: Analyze pricing, quality, distribution and partnerships of the nearest competitor of the company. Competitor - Hindustan Copper Limited It is a Government of India enterprise that came into existence in the year 1967. It is the country’s only integrated copper producing company encompassing casting, refining, smelting, beneficiation and mining of refined copper metal. They have copper plants in the states like Maharashtra, Rajasthan, Madhya Pradesh and Jharkhand. Their main product list includes copper concentrate, copper cathode and continuous cast copper rod. (Source: http://entrance-exam.net/top-copper-producing-companies-in-india/#ixzz21LUoFQMZ) Pricing of the primary product - Copper cathode price (rupees per metric ton) Hindustan copper - 450622 Sterlite Industries - 459911 Quality Hindustan copper – Process: They believe in “Customer Delight” which is visible by the ISO 9002 certification for their product line. They are the first copper producing company to be ISO 9002 accredited. They have systems equipped with modern controls, test and analysis for ensuring best quality. The final product of copper cathode are sampled batch wise and analysed by sophisticated instruments like direct reading Emission Spectrometer, Atomic Absorption Spectro Photometers and LECO Oxygen Analyser. At the “C C Rod plant” following checks are done:
• • • • •
Monitoring and control of metal temperature and oxygen content at the cast wheel Molten metal oxygen control by built in CO Analyser Control of alcohol content and pH of pickling solution and mill coolant Monitoring and control of hardness of cooling water. Monitoring and control of soundness of cast bar.
•
In line detection of flaws by eddy current flaw detector (Defectomat)
Final C C Rods are subjected to following tests:
• • • • • • • •
Diameter and ovality checks. Oxygen content analysis by LECO Analyser. Reverse twist to failure (RTF) tests. 10 x 10 surface twist test. Percentage Elongation and Tensile Strength tests. Conductivity tests. Depth of surface oxide tests. Spiral Elongation Number (SEN) tests.
Sterlite Industries – Awards and recognition for quality: • • Ramkrishna Bajaj National Quality Awards: Performance Excellence trophy – 2007 to 2010 "International Star Award for Quality 2009" under Gold category from Business Initiatives Directions, SPAIN. The award will be given to us during 34th International Star for Quality Convention to be held at Geneva during Oct 25-26, 2009.
Process: Copper cathodes - Latest Version of CS 3000 Distributed Control System of Yokogawa, Japan controls the entire Copper Smelter. Advance Process Control (APC) implementation methodology involves data collection, approximate candidate controller design, prototype controller design, simulation, testing, and final implementation. APC is implemented to control critical factors like Bath temperature and Lance height control. Continuous monitoring and analysis of refining process through an advanced DCS system ensures close process control. A well-equipped laboratory to test the cathodes for purity and structure of the deposit backs the production facility. A state-of-the-art electrolyte purification plant supplied by Ecotech helps in keeping electrolyte clean and within close limits to get superior quality product and to ensure high operational efficiencies. An acid purification plant contributes to the purification of the electrolyte, significantly enhancing the quality of the cathodes.
Continuous Cast Rods - Highly accurate measurement and control systems are used to maintain optimum level of molten metal. Online pickling, drying and waxing ensure that the rod is free of oxide scales. Online scanning with the highly sensitive Defectomat enables freedom from surface defects and ferrous contamination. Extensive process control, backed by computerized quality analysis of various data (process parameter data, online scanning data and results of a battery of off-line tests) ensures best quality of the rods. Distribution Hindustan copper – They have their regional offices in Bangalore, Kolkata, New Delhi and Mumbai. Sterlite Industries – Even they have their regional offices in Bangalore, Kolkata, New Delhi and Mumbai. Partnerships Hindustan copper – • Nalco (National Aluminium Co. Ltd.) is analyzing partnership with Hindustan Copper. The broad understanding between the two listed public sector miners is that a mutually agreed valuation of Malanjkhand assets would form the base of any joint venture proposal. It is also understood that HCL would have the majority stake in the JV. SAIL, Nalco & Hindustan Copper to jointly bid for Afghan gold, copper mines.
•
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the industry Strengths:
1.
Various concessions to investors engaged in mining by GOI. Concessions like-: • • • • Complete tax holiday for a period of 5years for backward districts. Environment protection equipment. Finished form of minerals exempt from excise duty Low customs duty on capital equipment used for minerals
Largest producer of mica in the world is also third largest producer of coal, top producers of iron ore, bauxite, manganese ore and aluminium. 3. Labor - cheap and easily available, hence low labor costs 4. Large quantity of reserves available 5. High demand in almost all parts of the world.
2.
Weakness:
1. 2. 3. 4. 5. 6. 7. 8. 9.
Poor productivity. Degradation of land and leading to environmental pollution because of opencast mining, which is favored over underground mining. Poor infrastructure facilities. Technology used in mining is outdated. Low innovation. Highly un-skilled and inexperienced labor. High rate of accidents. Limited capital and mines are costly. Corruption.
Opportunities•
• • •
•
Estimation says that there is a scope for exploitation of 85 billion tons of mineral reserves in India. The investment and expenditure is very less in the industry when compared to the emerging markets. This can be covered by the private sector. Joint ventures and FDI in order to mobilize finance and make a position in the global market. Development and exploration in surplus commodities like iron ore and bauxite is a great opportunity. There is potential for setting up manufacturing units for value added products. Also further research and discoveries can be made in direction of technological advancement which will improve the overall productivity and efficiency.
Threats:
•
• • •
• •
Competitors and FDI. Expansion plans of POSCO, Mittal Steel and Alcan can pose a serious threat. Takeover form foreign companies. Heavy tax burden. Stricter environment rules restricting mining activities. Drop in global commodity demand due to rising interest rates, inflation and slow down in global economies. Volatile market leading to volatile earnings and commodity prices.
Company Analysis
1. Company description (a brief introduction regarding what businesses the company is
into). • Sterlite Industries India Limited (SIIL) is the principal subsidiary of Vedanta Resources plc, a diversified metals and mining company, with principal operations located in India and Australia. Sterlite’s principal operating companies comprise Hindustan Zinc Limited (HZL) for its fully integrated zinc and lead operations; Sterlite Industries India Limited (Sterlite) and Copper Mines of Tasmania Pty Limited (CMT) for its copper operations in India/Australia; and Bharat Aluminium Company (BALCO), for its aluminium and alumina operations and Sterlite Energy for its commercial power generation business. Sterlite is India's largest non-ferrous metals and mining company and is one of the fastest growing private sector companies. It is listed on BSE, NSE and NYSE. It was the first Indian Metals & Mining Company to list on the New York Stock Exchange. Sterlite develops and manages a diverse portfolio of mining and metals businesses whilst carrying out its activities in a socially and environmentally responsible manner and creating value for the communities where it operates. The management of environment, employees, health and safety and community issues, in respect of its operations is central to the success of company’s business. Sterlite Industries specialize in the following:
o
•
•
•
•
High quality assets and resources making them a low-cost producer of copper and zinc.
o Substantial market shares across the copper, zinc and Aluminium metals markets in India. o Extensive experience in operating and expanding business in India to capitalize on growth opportunities and resource potential in the country.
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Numerous new projects in the pipeline that will enable them to expand our production. Experience for entry into commercial power generation business in India with operations of captive power plants since 1997..
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(Source: http://www.sterlite-industries.com)
2. General information about the company: location of the headquarters, year of founding,shareholding pattern, number of employees, top management, etc.
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Headquarters Serlite Industries (I) Ltd. Vedanta 75 Nehru Road, Vile Parle (East) , Mumbai : 400099. Founded in 1975 (as Rainbow Investment Limited in Kolkata) and named Sterlite Industries in 1986
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Management: o Mr. Anil Agarwal - Chairman Mr. Agarwal, who founded the Vedanta/Sterlite group in 1976, is the Chairman and was appointed to the Board of Directors in 1978. Based in the United Kingdom, he is also the Executive Chairman of Vedanta Resources Plc. He has over 30 years of experience as an industrialist and has been instrumental in growth and development of the company since its inception. o Mr. Navin Agarwal - Executive Vice-Chairman Mr. Agarwal was appointed to the Board of Directors in August 2003. His responsibilities include executing business strategy and monitoring the overall performance and growth of the organisation. He has over 20 years of experience in strategic management.
o Mr. Berjis Minoo Desai - Non - Executive Director Mr. Desai, is a Non-executive Director and was appointed to the Board of Directors in January 2003. His expertise lies in laws relating to mergers and acquisitions, securities, international commercial arbitration and in financial and international business law.
o Mr. Gautam Bhailal Doshi - Non Executive Director Mr. Doshi, is an Independent Nonexecutive Director and was appointed to the Board of Directors in December 2001. He has 24 years of experience in audit, finance and accounting. He is a Fellow Member of the Institute of Chartered Accountants of India and was a member of the Central Council and the Western India Regional Council of the Institute of Chartered Accountants of India.
o Mr. Sandeep H. Junnarkar - Non Executive Director Mr. Junnarkar, Non-executive Director, was appointed to the Board of Directors in June 2001. He is a solicitor and a partner of Messrs Junnarkar & Associates. Mr Junnarkar specializes in banking and corporate law.
o Mr.Mahendra Singh Mehta-Chief Executive Officer Mr. Mahendra Singh Mehta is currently Chief Executive Officer of Vedanta Resources Plc. He is also designated as the Group CEO. Mr. Mehta joined the Vedanta Group in April 2000 and held various leadership positions within the group. He has over 30 years of experience with companies in the steel, mining and nonferrous metal sectors.
o Mr. Din Dayal Jalan – Whole Time Director & Chief Financial Officer Mr Jalan joined Sterlite in 2001 as President – Australian Operations, responsible for TCM and CMT mines. He has over 27 years of experience with various companies in the engineering, mining and non-ferrous metal sectors.
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Shareholding pattern: (http://economictimes.indiatimes.com/sterlite-industries-(india)ltd/shareholding/companyid-12977.cms) Shareholding pattern - Sterlite Industries (India) Ltd. Holder's Name Promoters No of Shares 120787719
Foreign Promoters Foreign Institutions Financial Institutions Other Companies General Public Banks Mutual Funds Others Foreign Others Foreign NRI Directors Foreign Industries Foreign OCB Central Government Share price:
1671144924 400729628 189830026 189235932 145843357 128469661 82606255 7965692 6087219 72000 10113 3000 2800
BSE: 52 week high – 176.45; 52 week low – 86.10 NSE: 52 week high – 176.40; 52 week low – 86.15
Employee Strength: Around 13400 employees
3. Financial performance of the company: Sales, net profit, segment wise performance of the past 1 year (Source: http://www.moneycontrol.com/financials/sterliteindustriesindia/results/yearly/SII#SII) Sales Turnover Other Income Total Income Total Expenses Operating Profit Total Extraordinary Income/Expenses Tax On Extraordinary Items Net Extra Ordinary Income/Expenses Gross Profit Interest PBDT Depreciation PBT Tax Net Profit Note: All figures are in Rs. Cr. 18,092.06 2,247.68 20,339.74 17,148.66 943.40 -423.32 --3,191.08 597.46 2,170.30 162.46 2,007.84 350.36 1,657.48
4. SWOT Analysis: Strengths, weakness, opportunities and threats faced by the company Strengths:
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Has a diversified business model with presence in various products like copper, zinc and aluminium. Lowest cost producers. High market share.
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Weaknesses: • • • Heavy dependence on its zinc business for operating profit (~68%) Low operating profit of its primary product line, i.e., copper (~15%) Lack of backward integration for copper and aluminium business due to which LME price variation benefits cannot be obtained by the company.
Opportunities: • Entering in the commercial power generation would further diversify the business model. This would also allow the management to use their experience of operating thermal coal based captive power plants. Emerging Markets Call option to acquire government’s stake of 29.5% in HZL and 49% in BALCO along with acquisition of ASARCO which is pending due to legal complications.
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Threats: • • • Drop in global commodity demand due to rising interest rates, inflation and slow down in global economies. Inability to complete commercial power generation project on time may lead to losses and penalties. Volatile environment and currencies leading to volatile commodity prices and profits.
5. Various strategies employed by the company in the course of conducting business (in the form of alliances, joint ventures, product innovation/ expansion strategies, acquisitions/ divestitures and any such strategies that you think may affect the business of the company) in past 2 years. (Make intelligent use of above points while trying to understand the strategies used by the company) a) Hierarchical: At the corporate level, business unit level and functional or department level of the firm b) Business Division: According to various products, divisions, markets, etc. c) Regional: Strategies devised as per regions, geographies, etc.
Sterlite Industries Strategies Company’s goal is to generate strong financial returns and create a world-class metals and mining company. To achieve this they intend to take full advantage of their competitive strengths. Key elements of strategy:
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Increasing capacities through greenfield and brownfield projects. They intend to continue the construction of new facilities to capitalize upon the growing demand for metals in India and abroad, particularly in China, Southeast Asia and the Middle East. Leveraging project execution and operating skills and experience in building and operating captive power plants to develop a commercial power generation business. The commercial power generation business represents an attractive growth opportunity in India and their experience in building and operating captive power plants positions them to develop this as a stand-alone business. Continuing to focus on asset optimization and reducing the cost of production. Focus on reducing cost of production, including maximizing throughput and plant availability, reducing energy costs and consumption, increasing automation, improving recovery ratios, reducing our raw material costs and seeking better utilization of by-products. Seeking further growth and acquisition opportunities that leverage transactional, project execution and operational skills. They continually seek new growth and acquisition opportunities in the metals and mining and related businesses, primarily in India, including government privatization programs.
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A major step towards this is taken by initiating the “Sesa-Sterlite” merger. It is seen as one of the major events for the success of Vedanta, which would ease out many operational, functional and management decisions and activities.
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Consolidating corporate structure and increasing direct ownership of their underlying businesses to derive additional synergies as an integrated group. They have exercised options to acquire the Government of India’s remaining 49.0% ownership interest in BALCO and are seeking to complete this acquisition.
(Source: http://www.sterlite-industries.com)
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