Companies & Sectors
Hindalco eyes copper mine in Australia

The company is looking at acquiring a copper mine in Australia and has plans to revive the defunct company Mt Gordon Copper Operations

Asia's largest aluminium producer, Hindalco, is eyeing a copper mine in Australia. "Our objective is to get 40% of our need for copper concentrates from our own mines. We are falling short of that number," said Debu Bhattacharya, managing director, Hindalco Industries.

Mr Bhattacharya declined to divulge further details and said that the company is currently evaluating the options.

Aditya Birla Minerals Ltd, the Australian subsidiary of Hindalco, is also planning to re-open the Mt Gordon Copper Operations (BMGO). Mt Gordon was shut in January 2009 due to declining copper prices. MGO is currently under maintenance. It produced 57,093 metric tonnes of copper in FY10.

Meanwhile, Hindalco's net profit jumped 711% at Rs3,925 for the year ended March 2010 from Rs484 crore in FY09. The stock fell 5.81% in today's trading session at Rs132.20 from Rs140.35 (yesterday's close) on the Bombay Stock Exchange (BSE).

The BSE metal index has dropped 20% from 17,321.12 to 13,888.55 (as on 8 June 2010) since May 2010. Hindalco's stock has slipped 14% this year.

The company produced 3,32,000 kilo tonnes (KT) of copper in FY09 and plans to ramp up the production to 3,37,000KT next fiscal. The company's copper business revenue increased by 13% to Rs12,575 crore and earnings before interest, tax and depreciation (EBITD) jumped from Rs374 crore to Rs1,003 crore. Hindalco's copper sales stood at Rs12,575 crore in FY10 (up 13% from Rs11,098 crore in FY09).

The company's copper business, which benefited from higher contracted treatment charges and refining charges, lost Rs750 crore on lower by-product credit, such as sulphuric acid. The three-month copper contract prices have dropped 24% from $8 per pound in April 2010 to $6.10 per pound (as on 8 June 2010) on the LME.  Mr Bhattacharya said that he is not pessimistic about the future trend in aluminium prices and said that Europe should not be looked at as the only market. 

Hindalco reported net sales of Rs19,536 crore for the year ended March 2010. The company's aluminium revenue fell 11% at Rs48,091 crore due to prices and subdued demand in the first half of FY09. The three-month aluminium contract has dropped 24% since its peak in April 2010 of $2300/tonne to $1750/tonne as on 8 June 2010 on the LME.


FM confident of resolution of SEBI-IRDA spat on ULIPs soon

The government said today that the issue between the regulators will be resolved soon

The government today said it is confident of resolving the row between insurance regulator Insurance Regulatory Development Authority (IRDA) and market regulator Securities and Exchange Board of India (SEBI) over who should administer Unit-linked Insurance Plans (ULIPs).

"We will resolve this issue soon," finance minister Pranab Mukherjee said at the launch of the Insurance Institute of India in Mumbai today. The six-storeyed building is equipped with modern amenities and hostel facilities for residential programmes. The entity will be an educational service provider for all insurers in the country.

The spat between SEBI and IRDA broke out in early April when the capital market regulator banned 14 life insurance companies from issuing ULIPs, which invest heavily in stocks and bonds. A day after, IRDA asked life insurers to ignore the order.

As the impasse continued, the finance ministry directed the regulators to jointly seek a legally-binding order from an appropriate court over jurisdiction of ULIPs.

The standoff between the regulators became a subject of ridicule by Deepak Parekh, a key adviser to the government, who said that the row had made India a "laughing stock."

He had also hit out at the government for allowing the capital markets and insurance regulators to go to the courts, saying a rethink on their fight over jurisdiction on ULIPs would lead to a solution.

SEBI and IRDA are yet to see eye-to-eye on regulating ULIPs.

The market watchdog has filed a petition in the Supreme Court for transferring various petitions against ULIPs. The issue of jurisdiction is obliquely referred to in these petitions.

"I understand that IRDA has taken some very positive steps in respect of regulations of ULIPs which are in the interest of both the insurance industry as also the policyholders," Mr Mukherjee said.

Some of these measures like cap on charges, extending the minimum term of the policy to 5 years, bringing the concept of compulsory annuitisation in pension policies and the proposal of fixing the maximum limits of surrender charges have brought in the much-needed reforms in ULIP products, he said.

"I am sure that the insurance industry and IRDA would continue to bring in these reforms so that the interest of all the stakeholders is secured," he said.

In order to put more money in the hands of investors, IRDA recently said that insurers cannot charge fee on surrender of a unit-linked insurance policy after five years.

Insurance companies used to charge a nominal fee to customers to withdraw their unit-linked policies even after expiry of lock-in period. However, policies withdrawn during the lock-in compulsorily attract a high surrender charge.

Putting stress on spreading awareness about insurance, Mr Mukherjee said that one of the important challenges is to generate the required level of awareness about the benefits of insurance to people-particularly those living in semi-urban and rural areas.

"It should be our endeavour to take all necessary steps to ensure the reach of insurance to (the) masses," he said.

"I also take this opportunity to commend the role of the intermediaries specially the agents in the insurance industry who have contributed in ensuring that the insurance products reach every nook and corner of the country. With a force of around 30 lakh agents, it is a matter of pride that (the) insurance industry is perhaps the only financial services arm that reaches out to almost all the villages in this country. This is also borne out by the fact that 25% of the life policies i.e., approximately 1.5 crore policies every year are sold in the rural areas," Mr Mukherjee said.

When Moneylife asked IRDA chairman, J Hari Narayan if the ULIP issue would be resolved out of court, he said, "The finance minister has said that the matter will be resolved."


Daily Market View: A minor rally on the cards

The market ended lower, taking cues from European markets. The Sensex settled at 16,617, down 163 points (1%) while the Nifty ended at 4,987, down 47 points (1%). The indices were range-bound in the positive zone in the morning session.
However, a sell-off was triggered in the afternoon session after the European benchmarks pared their gains, dragging the domestic indices into the red.

Asian markets ended higher. Key benchmark indices in China, South Korea, Singapore, Japan, Indonesia and Hong Kong were up 0.09% to 0.83%. Taiwan's and Singapore's main indices fell 0.08% and 0.19%, respectively.

US stocks were down on Monday (7th June), taking the S&P 500 to its lowest close in seven months. The Dow was down 115 points (1.1%) to 9,816. The S&P 500 was down 14 points (1.3%) to 1,050. The Nasdaq tumbled 45.2 points (2%) to 2,174.

The Bank of Japan has kept interest rates near zero and had outlined last month a new loan programme aimed at encouraging commercial banks to lend more to industries with growth potential. 

Japanese bank lending marked its biggest annual fall in nearly five years in May, as companies were reluctant to increase capital spending. Bank lending fell 2% in May from a year earlier, dropping for the sixth straight month and marking the biggest annual decline since July 2005.

Back home, the government on Monday evening deferred the hike in fuel prices. The fuel subsidy is seen at $697 million this year, below last year's $3.4 billion.

The Reserve Bank of India (RBI) said that inflation is likely to ease with the monsoon; however, the central bank will tighten the monetary policy in its quarterly review next month. It has played down any concern regarding food prices.

Foreign institutional investors were net sellers, offloading stocks worth Rs242 crore. Domestic intuitional investors bought stocks worth Rs41 crore. 

The monsoon has advanced to some parts of the central Arabian Sea, most parts of coastal Karnataka and some parts of south interior Karnataka. It is expected to advance further in the next couple of days. 

The board of KIC Metaliks (up 1.7%) has accorded an approval for pursuing power and mining businesses and enhancing the borrowing limits of the company from Rs200 crore to Rs500 crore. 

Alstom and Schneider Electric today proceeded with the closing of the transaction with Areva for the acquisition of Areva T&D (up 1.5%), its transmission and distribution business, after obtaining the approvals of the French authorities. A consortium agreement was signed by the two partners in November 2009 for the purpose of this joint acquisition. The price paid for Areva T&D's shares amounted to €2.29 billion.

Neha International (up 4%) has acquired 10,000 acres of land in Ethiopia through its wholly-owned subsidiary. This is part of its diversification into agriculture. The company expects to cultivate this land in the current kharif season.

Kyushu Railway Company (JR Kyushu), a major railroad company in Japan and Patni Computer Systems (down 1.6%) have signed a joint venture pact between JR Kyushu System Solutions Inc, the IT systems arm of the Japanese company.

The new company christened JR Kyushu Patni Systems Inc, is aimed at providing high quality and cost effective IT and product engineering services to the Japanese enterprise market.


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