Sterlite Industries Faces Court Cases, Protests and Allegations

Sterlite Industries - Latest Results

(in Cr.)
Sep-11
Jun-11
FY10-11
Revenue
4,801.75
4,172.63
15,310.29
Net Profit
257.17
342.86
1,419.71
EPS
0.77
1.02
4.22
Cash EPS
0.88
1.13
4.68
OPM %
14.63
15.76
15.05
NPM %
5.36
8.22
9.27
 
 
 
 
Sterlite Industries - Latest Results

Sterlite Industries - Share Price Movement

 
 
 
Weekly H/L
94.35
88.7
Monthly H/L
111
86.1
52 Weeks H/L
195.9
86.1
 
( 4 Jan 11 )
( 19 Dec 11 )
Delivery / Var+ELM %
37.81
15.63
 
 
 
Sterlite Industries - Share Price Movement

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Sterlite Industries Faces Court Cases, Protests and Allegations

Sterlite Industries Faces Court Cases, Protests and Allegations
Sterlite Industries Faces Court Cases, Protests and Allegations | Source

Sterlite Industries Faces Court Cases, Protests and Allegations


Margins squeezed

Sterlite Industries saw its net profit coming down and revenue going up in the quarter ended 30.09.11. A contract worker was killed in an accident at the company’s plant in Tuticorin in Tamil Nadu. In the coming quarters, weak metal prices may hit the company hard. The company is a producer of copper. It belongs to the Vedanta group of companies. Rupee depreciation against the dollar also affected the company which resulted in a loss of Rs.173 crore. Sterlite Industries is India’s largest non-ferrous producer. The company also produces zinc, lead and silver apart from copper. Hindustan Zinc is the company’s customer and contributes a quarter of the company’s revenue.

Court cases galore

The Madras High Court Bench has dismissed a writ petition filed by Sterlite Industries, challenging a fine of Rs.5000 imposed on it by the Central Excise Department for violating certain trade conditions. For a big company like Sterlite Industries, an amount of Rs.5000 is peanuts. The company could have quietly paid the fine and walked away without any damage. Supreme Court has asked Sterlite Industries to comply with emission norms in its factory. But the Supreme Court has allowed the company to continue its operations. The Tamil Nadu Pollution Control Board has been asked to issue notice to the company for carrying our remedial measures. The company has allocated funds to address the deficiencies pointed out by the Supreme Court. The company is confident of rectifying all the deficiencies in 2012.

Silver by-product fetches a fancy price

Sterlite Copper has commissioned the first railway siding at Tuticorin. The shares of Sterlite Industries are traded in the Indian stock market at Rs.93 (BSE 26.12.11). The shares are available in both BSE and NSE. The company receives half of its revenues through copper smelting and refining activities. Sterlite Industries has two important subsidiaries Hindustan Zinc and BALCO. The company acquired the zinc assets of Anglo American Company in the beginning of this year. This acquisition catapulted Sterlite Industries as the world’s largest zinc-lead player. The deal raised the company’s zinc-lead capacity to 1.5 million tonnes per annum. The company’s cost of production of lead is zero as silver is obtained as the by-product which fetches a fancy price in the market as silver is a noble and ornamental metal.

Aluminium is a power intensive industry

Sterlite Industries recently commissioned its 100000 tonnes per annum lead smelter plant at Dariba in Rajasthan State. This will also feed the company’s 350 tonnes per annum silver refinery. Sterlite Industries also has a power subsidiary namely Sterlite Energy. But this subsidiary is not operating well due to high cost of the fuel coal. The company’s margins are squeezed in aluminium business which saw its profits plunge inspite of revenue increasing. Also aluminium is a power intensive industry. The associate company in the Vedanta group Vedanta Aluminium has not still secured permission to operate its mining in Orissa.

Potential in copper slag

Commodity prices are on a downtrend now as the world economy is slowing down. Also the commodity prices are dictated at the world level by the Chinese demand which is slack at present. But any time the picture may change in 2012 and the company’s prospects then will brighten up. Sterlite Industries finds huge potential in the application of copper slag in concrete applications. The product is obtained from copper concentrate, which is a raw material for copper smelter. Worldwide, 33 million tonnes of slag is produced every year with India contributing around 6.5 million tonnes. Sterlite Industries is producing around 2 million tonnes. Sterlite Industries supports about fifty ancillary industries in and around Tuticorin.

Acquisition of a South African mining company

But some political parties like the MDMK headed by Vaiko are up against the company for causing environmental damage to the area in which it operates. The company denies the allegations as baseless. Sterlite Industries has acquired a 74% stake in a mining company in South Africa for $348 million. The company’s call option to acquire the remaining 49% stake in BALCO has been struck down by an arbitration panel.

Avoid investment now

Investors should avoid investing in the company for the time being as it is involved in court cases, has been accused of polluting the environment and is facing hostile protests from political parties and their cadres. After everything settles down amicably, one can contemplate in investing in the company’s shares.

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