Aluminium (commodity) space in India

Main players in the Indian aluminium industry

BALCO
• (BALCO) was incorporated in the year 1965 as a Public Sector Undertaking
(PSU).

• It is the first public sector enterprise in the country which started producing
aluminium in 1975.

• In 1987-88, a captive power plant of 270 MW was added to cater to the power
requirement of the unit. BALCO has been the first in the Indian Aluminium
Industry to produce the Alloy Rods, which is a Feedstock for all Aluminium
Alloy Conductors, needed for today’s power transmission lines.

• Till 2001, BALCO was a public sector enterprise owned 100% by Government of
India (GoI). In the year 2001, GoI divested 51% equity and management control
in favour of Sterlite Industries (I) Limited.

• In the last 41 years, BALCO has built up a production capacity of 200,000 tonnes
per annum of alumina production capacity, 350,000 tonnes per annum of smelting
capacity and expanded its fabrication facility to include three Properzi Rod Mills,
three pig casting machines, integrated hot and cold rolling mills, and captive
power plants of 810MW capacity.

• Net Profit margin: 16.74 % (FY2009)

NALCO

• Incorporated in 1981, as a public sector enterprise of the Government of India,

National Aluminium Company Limited (Nalco) is Asia's largest integrated
aluminium complex.

• It encompassing bauxite mining, alumina refining, aluminium smelting and

casting, power generation, rail and port operations.

• Commissioned during 1985-87, Nalco has emerged to be a star performer in

production, export of alumina and aluminium, and more significantly, in
propelling a self-sustained growth.
• Its export turnover during 2008-09 was Rs 2085 cr, gross sales Rs 5531 cr and
the profit (after tax) was Rs 1272 cr.

• Net Profit margin of 24.9% in 2008-09

HINDALCO

• Hindalco Industries is India's largest Aluminium manufacturing Company

and is a subsidiary of the Aditya Birla Group. It is run by one of the
world's youngest billionaires, Mr. K.M. Birla

• The company has annual sales of $ 5 billion and employs 13,675 people
and is listed on Forbes 2000. A metals powerhouse with a turnover of US$
14 billion, Hindalco is the world's largest aluminium rolling company and
one of the biggest producers of primary aluminium in Asia.
• Established in 1958, it commissioned their aluminium facility at
Renukoot in eastern Uttar Pradesh, India in 1962. Later acquisitions and
mergers, with Indal, Birla Copper and the Nifty and Mt. Gordon copper
mines in Australia, strengthened its position in value-added alumina,
aluminium and copper products.
• The acquisition of Novelis Inc. in 2007 positioned it among the top five
aluminium majors worldwide and the largest vertically integrated
aluminium company in India. Their consolidated turnover of USD 15
billion (Rs. 600,128 million) places them in the Fortune 500 league
leaving their footprints in 12 countries.
• In July 2007, Hindalco announced it is acquiring the stake of Alcan Inc.'s
in the Utkal Alumina Project located in Orissa.In June 2000, acquisition of
controlling stake in Indian Aluminium Company Limited (Indal) with 74.6
per cent equity holding

• Revenue – 14.87 Billion USD (2008) from copper and aluminum

• Production capacity: Alumina : 12.3 lakh tones per annum , Aluminium:

5.2 lakh tones per annum

• Net Profit margin of 12.35% in FY2009

MALCO
 • The Madras Aluminium Company Ltd. (MALCO) is part of
Vedanta Resources, a London listed metals and mining major with
Aluminium, Copper and Zinc operations in UK, India and Australia.
MALCO is a primary Aluminium producer in South India with operations
encompassing mining, refining, smelting and power generation.
• MALCO was taken over by the Sterlite group in 1995 and the new
management has re-written the success story of MALCO.MALCO has a
state-of-the-art, coal-based Captive Power Plant at the same location. Its
captive Bauxite Mines are located within the nearby ranges of Yercaud,
Kolli and Palani in Tamil Nadu.

Who is setting up plants?

NALCO

• India’s National Aluminium Company Limited (Nalco) will set up mines and
refinery project in Andhra Pradesh and an aluminium smelter in Orissa.

Nalco plans to spend $1.2 billion in the Andhra Pradesh project that would be
located in Visakhapatnam district and Rs 16,350 crore in Orissa that would be
located in Brajarajnagar in Jharsuguda distrct for the smelter and a captive power
plant. The proposed aluminium smelter will have five lakh tonnes a year capacity
and will be completed in two phases.

• Nalco has also signed a memorandum of understanding (MoU) with the Orissa
government for setting up an aluminium park at Angul in a 50:50 joint venture
with the state’s Industrial Infrastructure Development Corporation (IDCO) at an
investment of Rs. 75 crore.

The plan involves expansion of Nalco’s bauxite mining capacity to 42,00,000

tonnes per year and raising its aluminium smelter capacity to 5,00,000 tonnes per
year.

• Nalco has recently been given bauxite mines in Andhra Pradesh with a capacity of
42 lakh tonnes per year. Nalco’s alumina plant capacity is expected to rise to
14,00,000 tonnes per year post expansion.

• Besides, the company is setting up a captive power plant of 1260 mega Watt
capacity, in two phases.
 • National Aluminium Company (NALCO) plans to form three subsidiaries

1. The subsidiaries may be formed depending upon the progress of the

various projects such as metals and power generation the company has
planned. This may happen earliest within two years or can take five years.

2. The new subsidiaries will be named Nalco Metal to deal with metals and
mines business other than aluminium, Nalco Power to deal with power
projects and Nalco International for its foreign projects.

3. NALCO has also planned to build an aluminium manufacturing project in

Indonesia. Construction of the plant, conceived to produce 500,000 tonnes
of aluminium using about 250 MW each from five power plants each, was
expected to commence this year.

HINDALCO

• Hindalco Industries, part of Aditya Birla group, initiated the

process of raising up to Rs 2,900 crore by selling shares to institutional investors
in order to part-finance three greenfield projects.

• The Aditya Birla group is building three greenfield aluminium

projects — Utkal, Aditya (at Orissa) and Mahan (at Madhya Pradesh). Hindalco
had recently said it has drawn up Rs 16,000-crore capex plan for the next two
years — about Rs 4,560 crore is for greenfield projects and Rs 1,063 crore for
other projects in FY10. In fiscal year 2011, Hindalco said it would invest Rs
10,458 crore, of which Rs 8,406 crore will be for greenfield projects and Rs 2,052
crore into other projects.

• At Utkal, the Aditya Birla group is setting up a 1.5-million tonne

alumina refinery at Rayagada, while the Mahan aluminium project includes an
aluminium smelter of 359,000 tonnes and a captive power plant of 900 mw at
Bargwan in MP..

• Aditya Aluminium is an integrated project where the company

plans to have a 1.5 million tonnes alumina refinery, 359,000 tonnes of aluminium
smelter and a 900 mw captive power plant. The QIP proceeds would be invested
 into these projects as Hindalco’s equity contribution, as part of its total
commitment of Rs 7,000 crore.

Vedanta aluminium project

• Vedanta Resources — the mining major owned by London-based tycoon Anil

Agarwal — is likely to demerge a large aluminium project in Orissa into a
separate entity to help the conglomerate get a better valuationfor the aluminium
business.London-listed Vedanta has hired Morgan Stanley, Credit Suisse and JP
Morgan Cazenove to put together a plan that would result — if approved by
shareholders and creditors — in Vedanta Aluminium, the subsidiary which has
operations in Orissa, being listed on NSE and BSE. Bharat Aluminium, or Balco,
another aluminium company in the Vedanta fold, is not part of this plan, since the
government owns 49% of it, said people familiar with the development. Any
consolidation of Balco into the new aluminium business would happen only if the
government sells its stake. Sterlite and the government have so far not been able
to agree on a price.
• If the plan is approved by shareholders and regulators, Sterlite will end up as
primarily a maker of copper, zinc and lead while the bulk of the aluminium
business will be with the new listed company, Vedanta Aluminium.

• Both entities, Sterlite and Vedanta Aluminium, will be majority owned by the
London-based parent, Vedanta Resources.Vedanta Aluminium currently is 70%
owned by Vedanta Resources and the rest is with Sterlite Industries.The demerger
proposal for Vedanta Aluminium doesn’t include Bharat Aluminium, or Balco, as
the Indian government owns 49% in it. Sterlite acquired a 51% stake in Balco
through a divestment programme in 2001. Any consolidation of Balco into the
new aluminium business would happen only if the government sells its stake.
Sterlite and the government have so far not been able to agree on a price.

• While Balco makes about 350,000 tonne of aluminium at its smelter in Korba,
Vedanta Aluminium plans to put together an integrated aluminium operation in
Orissa which would consist of a 1.75-million-tonne aluminium smelter at
Jharsuguda, 5-million-tonne alumina refinery that will convert the bauxite
proposed to be mined at Niyamgiri into alumina and a captive power plant of
1,215 megawatts, as the entire conversion process is done through electricity.

On completion, Vedanta Aluminium, along with Balco, will catapult the Vedanta
Group into the world’s fourth-largest aluminium player, behind Rusal of Russia,
Alcoa of US and Chalco of China.
 The valuations for Vedanta Aluminium, once the Orissa project is complete,
could touch $20 billion, based on the low cost of production, said analysts.
Currently, since Vedanta Aluminium buys alumina — the main raw material for
making aluminium — from outside, its cost of production is $1,400 per tonne,
which could fall to about $1,000 per tonne, once the Niyamgiri mining project
takes off.

The Aluminium Industry: A few Facts

• The Indian aluminium sector is characterised by large integrated players like

Hindalco and National Aluminium Company (Nalco). The other producers of
primary aluminium include Indian Aluminium (Indal), now merged with
Hindalco, Bharat Aluminium (Balco) and Madras Aluminium (Malco) the
erstwhile PSUs, which have been acquired by Sterlite Industries. Consequently,
there are only three main primary metal producers in the sector.

• The key aluminium consumer industries in India are power, transportation,

consumer durables, packaging and construction. Of this, power is the biggest
consumer (about 44% of total) followed by infrastructure (17%) and
transportation (about 10% to 12%).

• The Indian aluminium industry registered a growth of around 9% in FY09. Strong

growth in industrial, infrastructure, automobile, transportation and power sectors
during the first half of the fiscal were the key drivers for the demand. However,
realizations for the fiscal fell significantly on account of fall in LME prices due to
the global credit crisis, thus causing a dent in margins. On the other hand, the
steep depreciation of Indian rupee against the US dollar impacted the industry
positively. The total aluminium production in the country stood at around 1.35 m
tonnes in FY09.

• The revival in the demand for the metal is expected to start from 2010 globally.
As per Alcoa, world’s largest aluminium producer, the demand for aluminium is
projected to grow at around 6% CAGR till 2018 on account of newer packaging
applications and increased usage in automobiles, consumer durables, construction
and defense