Description
This document talks about Industry Trends of metal and mining industry, PEST Analysis of metal and mining Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about sterlite industry, it's Finance performance, SWOT analysis of sterlite industry and Various Strategies employed.
INDUSTRY ANALYSIS: Metal and Mining Industry Indian perspectiveThe Mining industry contributes significantly to the economy of India and is a major economic activity in India. It consists of the aluminium, iron and steel, and other precious metals and minerals. The GDP contribution of the mining industry is from 2.2% to 2.5% However, GDP of the total industrial sector is around 10% to 11%. Indian mining industry employs around 700,000 individuals. India being the largest producer of sheets of mica, the 3rd largest producer of iron ore and the 5th largest producer of bauxite in the world. India's metal and mining industry was estimated to be $106.4bn (£68.5bn) in 2010. The mining industry in India is infamous because of human right violations and environmental pollution. There are many mining scandals associated with the industry. Global perspectiveMining industry is widespread throughout the world but its future lies in the developing world and not in Europe, nor the US, nor Australia. Over the past 20 years growth in China, India, South East Asia, Africa and Latin America has far outpaced growth in the west. Even with some slowdown expected in China – from double to still sturdy single-digit growth – the International Monetary Fund forecasts the emerging world will average about 6 per cent growth or more through to 2016. The main reason for this is that these economies are growing. These economies need cities and infra-structure to be built to cater for their growing populations. The global mining industry is focused on future growth through expanded production, but the biggest challenge it faces is of maintaining the social license for operations and meeting government revenue expectations. Also despite record profits for the world’s 40 biggest miners in 2011 high commodity prices, investors proved fickle, demanding greater capital and increased shareholder returns. Challenges faced by Metal and mining industry? ? ? ? ?
Changing fiscal regimes and rising resource nationalism Decreasing grades and quality Rising input costs Involve higher capital costs to bring supply to market. Disruption in production due to labour strikes
Points to 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
Global Economy and the industry- 2011-12 was a year of significant changes because of volatility in the global economy. The Euro-Zone crisis deteriorated the sovereign credit ratings of various Euro-zone countries leading to sluggish growth in many industrialised countries including USA. Political unrest in the Africa and the resulting increment in crude oil prices had all 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. The global developments constrained the Indian growth story, with India's GDP expected to grow by 6.9% during FY 2011-12.
PEST analysisPolitical 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 The contribution of iron ore to inflation Government’s approach of giving priority to the domestic players.
I. II. III. IV. V. VI. VII. VIII. ? ?
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 of iron ore, it is the key driver of the global iron ore industry. Its economic scenario impacts the entire industry. Change in the scale of steel production.
Social Factors
? ? ? ?
Major risk to societal sustainability as the problem created by mining is mininginduced 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 effect the exports and trust.
Technological Factors
?
?
In India, there are no exploration programmes 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. Less Research and development in the industry.
Competitor analysisCompetitor - 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. There are copper plants in the states like Maharashtra, Rajasthan, MP and Jharkhand. Their main product includes copper cathode, copper concentrate and continuous cast copper rod. 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 analysed by sophisticated instruments like direct reading Emission Spectrometer, LECO Oxygen Analyser and Atomic Absorption Spectro Photometers.
At the “C C Rod plant” following checks are done:
?
Monitoring and controlling 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 also the 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.
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. Continuous monitoring and analysing of the process through an advanced DCS system ensures close process control. A well-equipped laboratory to test the cathodes for purity as
well as structure of the deposit backs the production facility. A state-of-the-art electrolyte purification plant which is supplied by Ecotech helps in keeping electrolyte clean and within close limits to get superior quality product and to ensure high operational efficiencies. Continuous Cast Rods - Highly accurate measurement and control systems are used to maintain optimum level of molten metal. Online drying, pickling and waxing ensure that the rod is free of oxide. 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.
? ?
SWOT Analysis 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 2. Largest producer of mica in the world also third largest producer of coal; top producers of iron ore, bauxite, manganese ore and aluminium.
3. Labours is cheap and easily available 4. Low labour costs 5. Large quantity of reserves available 6. Large scale exports of iron-ore to China and Japan 7. Location advantage Weakness: • Poor employee productivity. Degradation of land and environmental pollution because of opencast mining which is favoured over underground mining. • Poor infrastructure facilities • Technology used in mining is outdated • Innovation capabilities are low • Highly un-skilled and inexperienced Labour force • Rate of accidents is high • Lack of R&D and training • Limited capital and mines are costly and difficult to find. • Out-dated approach to mining education • Organizational reform and improvement in the operational efficiency is required. • Not environment friendly. • Illegal mining and corruption OpportunitiesAn estimation says that there is a scope for exploitation of 85 billion tonnes 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 to use modern techniques. 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
Company analysis- Vedanta Group’s Sterlite Industries. Description- Vedanta Resource plc is a public limited company founded by Anil Agarwal in year 1976 in Bombay, India. It is headquartered in London, UK. The industry coverage of Vedanta group is of Metals and mining. It is the largest mining and non-ferrous metal company in India. Vedanta was first listed on LSE (London Stock Exchange). The company has a wide range of interest in Aluminium, copper, zinc, lead, silver, iron ore, gold and oil and gas and power with the main products as copper, zinc, lead aluminium and iron ore. It has mining operations in India, Zambia, Namibia, South Africa, Liberia, Ireland and Australia. The total number of employees according to 2011 data is 31,171. The total revenue of the company is of US$ 11.42 billion according to 2011 data. When the company was first listed in 2003 it raised $876 million through an Initial Public Offering. It acquired Sterlite Gold which is a gold mining business in 2006 and raised an additional $2bn through an ADR issue in 2007. In December 2011 it acquired Cairn's Indian unit for US$8.67 billion. The key people in the top management of Vedanta Resource plc are1) Anil Agarwal-(Executive Chairman) 2) Navin Agarwal-(Deputy Executive Chairman) 3) M. S. Mehta-(Chief Executive) Vedanta group has several subsidiaries which are1) 2) 3) 4) 5) 6) 7) 8) 9) Sterlite Industries Hindustan Zinc Limited Sesa Goa Bharat Aluminium Company MALCO Vedanta Aluminium Sterlite Energy Australian Copper Mines Konkola Copper Mines
Some facts and details about the subsidiariesA) Copper subsidiaries-
1) Sterlite Industries or Sterlite Industries India Ltd. is a public company founded in 1975 and a subsidiary of Vedanta Resources plc. Vedanta has 58.0% share in Sterlite Industries India Ltd. The company basically produces copper with main products as copper cathodes and cast copper rods, having specification as 11 mm and 12 mm rods which are used in the transformer industry, and the 8 mm rods which are used by the wires and cables industry to be further used in housing wires, electrical cables, and telecom cables. Since 2007 it is traded under the ticker SLT at the NYSE in the form of ADS (American Depositary Shares) and has revenue of Rs12,658 crore. 2) Konkola Copper Mines- KCM is another subsidiary of Vedanata group. Vedanta has a 79.4% shareholding in KCM and rest is with ZCCM whic is a Zambian Government investment vehicle. KCM is a copper mining and smelting company located in Zambia. It produces around 2million tons of copper ore per year. It operates with several mines at Konkola and Nchanga, and a refinery at Nkana. 3) Copper Mines of Tasmania Pty Ltd.- The acquisition history can be underlined asPredecessor company Mount Lyell Mining and Railway Company then acquired in 1999 by Monte Cello BV, then acquired by Sterlite Industries (India) Limited and a subsidiary of Vedanta Resources. Its 7% mine output goes to its parent company Sterlite’s copper smelter in Tuticorin, India. Approximate production per annum 30,000 tonnes. B) Zinc subsidiaries1) Hindustan Zinc Limited- On 10 January 1966, HZL was incorporated from the erstwhile Metal Corporation of India as a Public Sector Undertaking. It is a leading zinc producer in India with more than 80% domestic market share and is listed on BSE and NSE. Sterlite has 64.9% shareholding in HZL. It has integrated zinc-lead-silver operations in India and four of its zinc-lead mines are spread in the state of Rajasthan. 2) Zinc International- Sterlite Industries owns the Skorpion mine in Namibia (100%), Lisheen mine in Ireland (100%) and 74% of Black Mountain Mining in South Africa, which includes the Black Mountain mine and Gamsberg project. These assets were acquired from Anglo American’s Zinc business during FY 2010–11. C) Aluminium subsidiaries1) Bharat Aluminium Company Ltd. -It is often called as BALCO and is one of the leading Aluminium producer, located in Chhattisgarh .Sterlite owns 51.0% of BALCO. Smelting capacity-245ktpa, power generation facility- 810MW. It also has capabilities to produce ingots and other value-added products. 2) Vedanta Aluminium Ltd.-Vedanta has 70.5% shareholding of VAL, and Sterlite holds the remaining 29.5%, which in total results in an effective stake of 87.5%. VAL operates a 1mtpa alumina refinery at Lanjigarh and is based in Eastern India. VAL is also operational at other locations like, at Jharsuguda as 500ktpa aluminium smelter and an associated 1,215MW captive power plant. D) Iron ore subsidiaries-
1) Sesa Goa Ltd.- India’s largest private sector producer and exporter of iron ore located in Goa and Karnataka. Reserves of about 306mt of iron ore in march 2011. Also in manufacturing of pig iron and metallurgical coke. Vedanta has 55.1% of shareholding in Sesa Goa. Sesa Goa is listed on the Bombay and National stock exchanges of India. Sesa Goa owns 100% of Sesa Resources Ltd. an iron ore mining and processing company based at Goa. E) POWER BUSINESS 1) Sterlite Energy Ltd. Sterlite Energy is 100% completely owned by Sterlite Industries. 2) Madras Aluminium Company (MALCO)- Power generation company in Southern India with a 100MW power plant. Vedanta has 94.8% shareholding in MALCO. 3) Hindustan Zinc Limited.- It is the largest wind power provider in India and has 273MW of wind power generational capacity. Sterlite Industries- Financial performance of the Company The below given data is the financial performance of Sterlite Industries for the financial year 2011-12? ? ? ? ? ? ? ? The Revenues were of Rs. 40,967 crore in 2011-12 which was up 35% when compared to 2010-11 EBITDA was up by 26% at Rs. 10,169 crore Profit After Taxes (PAT) was up by 6% at Rs. 7,761 crore, after exceptional items of Rs. 473 crore. with the value of cash and liquid investments totalling to Rs. 23,403 crore the company showed a strong balance sheet Highest ever dividend at Rs. 2/share was offered for FY2012, including interim dividend Re.1/share Merger with Sesa Goa Limited and Vedanta Group Consolidation announced. FY 2011-12, Sterlite's consolidated net profit declined by 4.26% to Rs 4,827.92 crore, although its net sales were up 35.44% to Rs 40,966.77 crore. Net sales of the company were up 7.62 percent to Rs 10,762.75 crore during the quarter against Rs 10,000 crore in the fourth quarter of FY'11.
Shareholding pattern of Sterlite Industries- The Shareholding Pattern page of Sterlite Industries (India) Ltd. presents the Promoter's holding, FII's holding, DII's Holding, and Share holding by general public etc. Shareholding pattern - Sterlite Industries (India) Ltd. Holder's Name Promoters Foreign Promoters No of Shares 120787719 1671144924
Foreign Institutions Financial Institutions Other Companies General Public Banks Mutual Funds Others Foreign Others Foreign NRI Directors Foreign Industries Foreign OCB Central Government
400729628 189830026 189235932 145843357 128469661 82606255 7965692 6087219 72000 10113 3000 2800
Share price: BSE: 52 week high – 176.45; 52 week low – 86.10 NSE: 52 week high – 176.40; 52 week low – 86.15
Business highlights about copper segment in 2011-12 includes1) Cathode production of 326 kt up by 7.2% 2) Achieved highest ever copper recovery of 98.28% 3) Achieved zero cost of production Segment contribution 2011-12 1) Revenue generated in copper segment was 49%. Revenue for this segment increased by 58.1% yoy to Rs.5,575cr due to higher metal prices. 2) Revenue contribution by HZL was 27% 3) Revenue contribution by BALCO was7% 4) Revenue contribution by Power was 6% 5) Revenue contribution by ZI was 11% Strategic developments-
In terms of growth- the company continued to grow assets and resources and invest in projects that expand the already high quality base and increase in production. In year 2011-12 Rs, 7439 cr was invested in the growth programme. Successful integration of various assets acquired was attained like the Anglo American in 2010-11 and the Zinc Intl in 2011-12. One of the other asset acquired by the company is of Gamsberg deposit in South Africa, which is one of the largest undeveloped zinc deposits in the world. Corporate structure change- Sterlite industry was merged with Sesa Goa Ltd to create Sesa Sterlite Ltd. In 2011-12. In order to simplify the group structure, Vedanta’s stake in Cairn India and Vedanta Aluminium will move under Sesa Sterlite. Sesa Sterlite Ltd is expected to be the world’s seventh largest global diversified natural resources major, ranked by EBITDA. With the simplification and consolidation of the Group it is expected to give benefits through an efficient capital structure, and broader access to capital markets. The merger is also expected to generate significant synergies for the shareholders of Sterlite. The company’s capital investment programme is expected to deliver near-term production growth across the portfolio which in turn may result in strong cash flow growth. Sterlite Industries-SWOT analysis Strengths1) 2) 3) 4) 5) The company has a very strong management which helps it to grow. The key to the mining operations of the company is its Real Estate Ownership. Excellent Supply Chain helps Sterlite to get resources anywhere needed. Economies of Scale are vital for all mining companies Excellent technology and infrastructure helps Sterlite to mine materials more efficiently 6) Sterlite industry is the country market leader. 7) Knowledge Management Cell called 'Development Cell', which drives various initiatives to bring improvements in operational performance. Weakness1) More scaling is required in order to be at par and compete with larger Competitors 2) There is a need to improve Cost Structure at Sterlite Opportunities1) Sterlite has very tight regulations and hence loosening them could be of an advantage as it could help in lowering Sterlite's Costs 2) Emerging Markets 3) Expansion of mining revenue by introduction of new markets and products. Threats1) Bad Economy has a possibility to hurt revenue growth 2) With volatile currencies the earnings become volatile 3) Political Risk
4) 5) 6) 7)
New taxes and rules Volatile profits Profitability can be limited as commodities by nature are substitutes Volatile commodity prices
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 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. The power generation business represents a growth opportunity in India and their experience in building and operating captive power plants positions them to develop this as a stand-alone business.
?
? ?
Focus on asset optimization and reduce the cost of production. 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, primarily in India, including government privatization programs.
?
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.
doc_581883601.docx
This document talks about Industry Trends of metal and mining industry, PEST Analysis of metal and mining Industry, Competitor Analysis, SWOT analysis, Company Description, General Information about sterlite industry, it's Finance performance, SWOT analysis of sterlite industry and Various Strategies employed.
INDUSTRY ANALYSIS: Metal and Mining Industry Indian perspectiveThe Mining industry contributes significantly to the economy of India and is a major economic activity in India. It consists of the aluminium, iron and steel, and other precious metals and minerals. The GDP contribution of the mining industry is from 2.2% to 2.5% However, GDP of the total industrial sector is around 10% to 11%. Indian mining industry employs around 700,000 individuals. India being the largest producer of sheets of mica, the 3rd largest producer of iron ore and the 5th largest producer of bauxite in the world. India's metal and mining industry was estimated to be $106.4bn (£68.5bn) in 2010. The mining industry in India is infamous because of human right violations and environmental pollution. There are many mining scandals associated with the industry. Global perspectiveMining industry is widespread throughout the world but its future lies in the developing world and not in Europe, nor the US, nor Australia. Over the past 20 years growth in China, India, South East Asia, Africa and Latin America has far outpaced growth in the west. Even with some slowdown expected in China – from double to still sturdy single-digit growth – the International Monetary Fund forecasts the emerging world will average about 6 per cent growth or more through to 2016. The main reason for this is that these economies are growing. These economies need cities and infra-structure to be built to cater for their growing populations. The global mining industry is focused on future growth through expanded production, but the biggest challenge it faces is of maintaining the social license for operations and meeting government revenue expectations. Also despite record profits for the world’s 40 biggest miners in 2011 high commodity prices, investors proved fickle, demanding greater capital and increased shareholder returns. Challenges faced by Metal and mining industry? ? ? ? ?
Changing fiscal regimes and rising resource nationalism Decreasing grades and quality Rising input costs Involve higher capital costs to bring supply to market. Disruption in production due to labour strikes
Points to 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
Global Economy and the industry- 2011-12 was a year of significant changes because of volatility in the global economy. The Euro-Zone crisis deteriorated the sovereign credit ratings of various Euro-zone countries leading to sluggish growth in many industrialised countries including USA. Political unrest in the Africa and the resulting increment in crude oil prices had all 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. The global developments constrained the Indian growth story, with India's GDP expected to grow by 6.9% during FY 2011-12.
PEST analysisPolitical 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 The contribution of iron ore to inflation Government’s approach of giving priority to the domestic players.
I. II. III. IV. V. VI. VII. VIII. ? ?
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 of iron ore, it is the key driver of the global iron ore industry. Its economic scenario impacts the entire industry. Change in the scale of steel production.
Social Factors
? ? ? ?
Major risk to societal sustainability as the problem created by mining is mininginduced 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 effect the exports and trust.
Technological Factors
?
?
In India, there are no exploration programmes 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. Less Research and development in the industry.
Competitor analysisCompetitor - 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. There are copper plants in the states like Maharashtra, Rajasthan, MP and Jharkhand. Their main product includes copper cathode, copper concentrate and continuous cast copper rod. 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 analysed by sophisticated instruments like direct reading Emission Spectrometer, LECO Oxygen Analyser and Atomic Absorption Spectro Photometers.
At the “C C Rod plant” following checks are done:
?
Monitoring and controlling 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 also the 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.
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. Continuous monitoring and analysing of the process through an advanced DCS system ensures close process control. A well-equipped laboratory to test the cathodes for purity as
well as structure of the deposit backs the production facility. A state-of-the-art electrolyte purification plant which is supplied by Ecotech helps in keeping electrolyte clean and within close limits to get superior quality product and to ensure high operational efficiencies. Continuous Cast Rods - Highly accurate measurement and control systems are used to maintain optimum level of molten metal. Online drying, pickling and waxing ensure that the rod is free of oxide. 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.
? ?
SWOT Analysis 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 2. Largest producer of mica in the world also third largest producer of coal; top producers of iron ore, bauxite, manganese ore and aluminium.
3. Labours is cheap and easily available 4. Low labour costs 5. Large quantity of reserves available 6. Large scale exports of iron-ore to China and Japan 7. Location advantage Weakness: • Poor employee productivity. Degradation of land and environmental pollution because of opencast mining which is favoured over underground mining. • Poor infrastructure facilities • Technology used in mining is outdated • Innovation capabilities are low • Highly un-skilled and inexperienced Labour force • Rate of accidents is high • Lack of R&D and training • Limited capital and mines are costly and difficult to find. • Out-dated approach to mining education • Organizational reform and improvement in the operational efficiency is required. • Not environment friendly. • Illegal mining and corruption OpportunitiesAn estimation says that there is a scope for exploitation of 85 billion tonnes 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 to use modern techniques. 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
Company analysis- Vedanta Group’s Sterlite Industries. Description- Vedanta Resource plc is a public limited company founded by Anil Agarwal in year 1976 in Bombay, India. It is headquartered in London, UK. The industry coverage of Vedanta group is of Metals and mining. It is the largest mining and non-ferrous metal company in India. Vedanta was first listed on LSE (London Stock Exchange). The company has a wide range of interest in Aluminium, copper, zinc, lead, silver, iron ore, gold and oil and gas and power with the main products as copper, zinc, lead aluminium and iron ore. It has mining operations in India, Zambia, Namibia, South Africa, Liberia, Ireland and Australia. The total number of employees according to 2011 data is 31,171. The total revenue of the company is of US$ 11.42 billion according to 2011 data. When the company was first listed in 2003 it raised $876 million through an Initial Public Offering. It acquired Sterlite Gold which is a gold mining business in 2006 and raised an additional $2bn through an ADR issue in 2007. In December 2011 it acquired Cairn's Indian unit for US$8.67 billion. The key people in the top management of Vedanta Resource plc are1) Anil Agarwal-(Executive Chairman) 2) Navin Agarwal-(Deputy Executive Chairman) 3) M. S. Mehta-(Chief Executive) Vedanta group has several subsidiaries which are1) 2) 3) 4) 5) 6) 7) 8) 9) Sterlite Industries Hindustan Zinc Limited Sesa Goa Bharat Aluminium Company MALCO Vedanta Aluminium Sterlite Energy Australian Copper Mines Konkola Copper Mines
Some facts and details about the subsidiariesA) Copper subsidiaries-
1) Sterlite Industries or Sterlite Industries India Ltd. is a public company founded in 1975 and a subsidiary of Vedanta Resources plc. Vedanta has 58.0% share in Sterlite Industries India Ltd. The company basically produces copper with main products as copper cathodes and cast copper rods, having specification as 11 mm and 12 mm rods which are used in the transformer industry, and the 8 mm rods which are used by the wires and cables industry to be further used in housing wires, electrical cables, and telecom cables. Since 2007 it is traded under the ticker SLT at the NYSE in the form of ADS (American Depositary Shares) and has revenue of Rs12,658 crore. 2) Konkola Copper Mines- KCM is another subsidiary of Vedanata group. Vedanta has a 79.4% shareholding in KCM and rest is with ZCCM whic is a Zambian Government investment vehicle. KCM is a copper mining and smelting company located in Zambia. It produces around 2million tons of copper ore per year. It operates with several mines at Konkola and Nchanga, and a refinery at Nkana. 3) Copper Mines of Tasmania Pty Ltd.- The acquisition history can be underlined asPredecessor company Mount Lyell Mining and Railway Company then acquired in 1999 by Monte Cello BV, then acquired by Sterlite Industries (India) Limited and a subsidiary of Vedanta Resources. Its 7% mine output goes to its parent company Sterlite’s copper smelter in Tuticorin, India. Approximate production per annum 30,000 tonnes. B) Zinc subsidiaries1) Hindustan Zinc Limited- On 10 January 1966, HZL was incorporated from the erstwhile Metal Corporation of India as a Public Sector Undertaking. It is a leading zinc producer in India with more than 80% domestic market share and is listed on BSE and NSE. Sterlite has 64.9% shareholding in HZL. It has integrated zinc-lead-silver operations in India and four of its zinc-lead mines are spread in the state of Rajasthan. 2) Zinc International- Sterlite Industries owns the Skorpion mine in Namibia (100%), Lisheen mine in Ireland (100%) and 74% of Black Mountain Mining in South Africa, which includes the Black Mountain mine and Gamsberg project. These assets were acquired from Anglo American’s Zinc business during FY 2010–11. C) Aluminium subsidiaries1) Bharat Aluminium Company Ltd. -It is often called as BALCO and is one of the leading Aluminium producer, located in Chhattisgarh .Sterlite owns 51.0% of BALCO. Smelting capacity-245ktpa, power generation facility- 810MW. It also has capabilities to produce ingots and other value-added products. 2) Vedanta Aluminium Ltd.-Vedanta has 70.5% shareholding of VAL, and Sterlite holds the remaining 29.5%, which in total results in an effective stake of 87.5%. VAL operates a 1mtpa alumina refinery at Lanjigarh and is based in Eastern India. VAL is also operational at other locations like, at Jharsuguda as 500ktpa aluminium smelter and an associated 1,215MW captive power plant. D) Iron ore subsidiaries-
1) Sesa Goa Ltd.- India’s largest private sector producer and exporter of iron ore located in Goa and Karnataka. Reserves of about 306mt of iron ore in march 2011. Also in manufacturing of pig iron and metallurgical coke. Vedanta has 55.1% of shareholding in Sesa Goa. Sesa Goa is listed on the Bombay and National stock exchanges of India. Sesa Goa owns 100% of Sesa Resources Ltd. an iron ore mining and processing company based at Goa. E) POWER BUSINESS 1) Sterlite Energy Ltd. Sterlite Energy is 100% completely owned by Sterlite Industries. 2) Madras Aluminium Company (MALCO)- Power generation company in Southern India with a 100MW power plant. Vedanta has 94.8% shareholding in MALCO. 3) Hindustan Zinc Limited.- It is the largest wind power provider in India and has 273MW of wind power generational capacity. Sterlite Industries- Financial performance of the Company The below given data is the financial performance of Sterlite Industries for the financial year 2011-12? ? ? ? ? ? ? ? The Revenues were of Rs. 40,967 crore in 2011-12 which was up 35% when compared to 2010-11 EBITDA was up by 26% at Rs. 10,169 crore Profit After Taxes (PAT) was up by 6% at Rs. 7,761 crore, after exceptional items of Rs. 473 crore. with the value of cash and liquid investments totalling to Rs. 23,403 crore the company showed a strong balance sheet Highest ever dividend at Rs. 2/share was offered for FY2012, including interim dividend Re.1/share Merger with Sesa Goa Limited and Vedanta Group Consolidation announced. FY 2011-12, Sterlite's consolidated net profit declined by 4.26% to Rs 4,827.92 crore, although its net sales were up 35.44% to Rs 40,966.77 crore. Net sales of the company were up 7.62 percent to Rs 10,762.75 crore during the quarter against Rs 10,000 crore in the fourth quarter of FY'11.
Shareholding pattern of Sterlite Industries- The Shareholding Pattern page of Sterlite Industries (India) Ltd. presents the Promoter's holding, FII's holding, DII's Holding, and Share holding by general public etc. Shareholding pattern - Sterlite Industries (India) Ltd. Holder's Name Promoters Foreign Promoters No of Shares 120787719 1671144924
Foreign Institutions Financial Institutions Other Companies General Public Banks Mutual Funds Others Foreign Others Foreign NRI Directors Foreign Industries Foreign OCB Central Government
400729628 189830026 189235932 145843357 128469661 82606255 7965692 6087219 72000 10113 3000 2800
Share price: BSE: 52 week high – 176.45; 52 week low – 86.10 NSE: 52 week high – 176.40; 52 week low – 86.15
Business highlights about copper segment in 2011-12 includes1) Cathode production of 326 kt up by 7.2% 2) Achieved highest ever copper recovery of 98.28% 3) Achieved zero cost of production Segment contribution 2011-12 1) Revenue generated in copper segment was 49%. Revenue for this segment increased by 58.1% yoy to Rs.5,575cr due to higher metal prices. 2) Revenue contribution by HZL was 27% 3) Revenue contribution by BALCO was7% 4) Revenue contribution by Power was 6% 5) Revenue contribution by ZI was 11% Strategic developments-
In terms of growth- the company continued to grow assets and resources and invest in projects that expand the already high quality base and increase in production. In year 2011-12 Rs, 7439 cr was invested in the growth programme. Successful integration of various assets acquired was attained like the Anglo American in 2010-11 and the Zinc Intl in 2011-12. One of the other asset acquired by the company is of Gamsberg deposit in South Africa, which is one of the largest undeveloped zinc deposits in the world. Corporate structure change- Sterlite industry was merged with Sesa Goa Ltd to create Sesa Sterlite Ltd. In 2011-12. In order to simplify the group structure, Vedanta’s stake in Cairn India and Vedanta Aluminium will move under Sesa Sterlite. Sesa Sterlite Ltd is expected to be the world’s seventh largest global diversified natural resources major, ranked by EBITDA. With the simplification and consolidation of the Group it is expected to give benefits through an efficient capital structure, and broader access to capital markets. The merger is also expected to generate significant synergies for the shareholders of Sterlite. The company’s capital investment programme is expected to deliver near-term production growth across the portfolio which in turn may result in strong cash flow growth. Sterlite Industries-SWOT analysis Strengths1) 2) 3) 4) 5) The company has a very strong management which helps it to grow. The key to the mining operations of the company is its Real Estate Ownership. Excellent Supply Chain helps Sterlite to get resources anywhere needed. Economies of Scale are vital for all mining companies Excellent technology and infrastructure helps Sterlite to mine materials more efficiently 6) Sterlite industry is the country market leader. 7) Knowledge Management Cell called 'Development Cell', which drives various initiatives to bring improvements in operational performance. Weakness1) More scaling is required in order to be at par and compete with larger Competitors 2) There is a need to improve Cost Structure at Sterlite Opportunities1) Sterlite has very tight regulations and hence loosening them could be of an advantage as it could help in lowering Sterlite's Costs 2) Emerging Markets 3) Expansion of mining revenue by introduction of new markets and products. Threats1) Bad Economy has a possibility to hurt revenue growth 2) With volatile currencies the earnings become volatile 3) Political Risk
4) 5) 6) 7)
New taxes and rules Volatile profits Profitability can be limited as commodities by nature are substitutes Volatile commodity prices
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 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. The power generation business represents a growth opportunity in India and their experience in building and operating captive power plants positions them to develop this as a stand-alone business.
?
? ?
Focus on asset optimization and reduce the cost of production. 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, primarily in India, including government privatization programs.
?
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.
doc_581883601.docx