Sterlite Declines 8%, Tata Motors Drop 4%

123jump.com Staff
09 Sep, 2008
New York City

Stocks in Mumbai trading declined with weak trading in metals and commodities related stocks. Sterlite Industries dropped 8% after the parent Vedanta separated its copper and zinc, iron ore and aluminium and power businesses in three separate entities. The company also announced plans to invest as much as $10 billion in the next three years and increase alumina mining and aluminium refining capacity in Orissa.

[R]10:00AM New York, 7:30 PM Mumbai – Sterlite led the decliners in Mumbai trading after the parent company separated assets in three commodities groups.[/R]

Market Sentiment

In Mumbai, the 30-share Sensex fell 0.3% or 44.21 to 14,900.76, and the CNX Nifty declined 0.3% or 13.6 to 4468.70. Of the stocks traded on BSE 1,181 rose, 1,464 declined, and 69 remained unchanged.

Trading Statistics

Trading turnover on the BSE was recorded at 4,550 crore rupees compared with 4,505.75 crore rupees yesterday. Tata Motors fell 4% on news that the more protests loom over the Nano factory. Sterlite dropped 8% after it announced a three way split plan of the company.

Sterlite Drops, Madras Aluminium Rises

Sterlite Industries dropped nearly 8% after it restructured the company in to three business groups that separates copper and zinc; aluminum and power; and iron ore businesses. Vedanta, the parent company said that it plans to increase alumina output to 5 million tons by 2012 from its current output of 0.6 million tons and aluminum capacity to 2.6 million tons in the period. The bauxite mining company plans to add 1.4 million ton capacity in plant in Orissa and add three additional plants each of 1 million tons capacity in the next three years.

Madras Aluminium will receive the aluminum mining and power business of Sterlite. Copper mining business, Kokola Copper will be merged with Sterlite’s copper mining business. Shareholders of Sterlite will receive seven shares in Madras Aluminium (Malco) for every four shares of Sterlite. Malco will be renamed as Sterlite Alumimium Ltd.

Vedanta Group, the parent of both listed companies Malco and Sterlite holds 80% and 60.6% respectively in each company. Minority shareholders in Sterlite appear to be unhappy with the swap ratio and were hoping for a higher number of shares in Malco. Shareholders of Malco will get 1 share of Sterlite for every 51 Malco stocks held.

The company also plans to invest $600 million to increase its iron ore mining capacity to 25 million tons “in the short term” at its unit Sesa Goa, which mined 12.4 million tons of iron ore in 2007.

Copper and zinc prices have declined sharply this year. Zinc has fallen nearly 60% and copper has declined 30% in the year, however aluminum prices have increased 9% for the year so far. Investors sold Sterlite and bid up Malco stock after the restructuring announcement.

The company anticipated the corporate restructuring to be complete by March 2009. Sterlite agreed to acquire operating assets of Asarco LLC for $2.6 billion in cash subject to approval by the U.S. Bankruptcy Court for the Southern District of Texas. Asarco produced 235,000 tons of refined copper in 2007 and Asarco mines currently have estimated reserves of approximately 5 million tons of contained copper. For the year ended 31 December 2007, Asarco had total revenue of approximately $1.9 billion.

Sterlite will assume operating liabilities but not legacy liabilities for asbestos and environmental claims for ceased operations.

Separately, Vendanta chairman Anil Agrawal said the company plans to invest $9.8 billion to increase the alumina capacity to 2.6 million tons by 2012.

Gainers & Losers

Commodity stocks fell as a rising dollar led to a retreat in metal prices. Sterlite Industries fell 8.07% to 572.15 rupees after parent Vedanta resources divided the company into three separate business. However, Madras Aluminium rose 20% to 219 rupees.

Refinery stocks dipped as crude oil for October delivery declined to $105.16 per barrel. Hindustan Petroleum Corporation increased 5.70% to 245.55 rupees, Bharat Petroleum Corporation gained 2.26% to 353 rupees, and Indian Oil Corporation added 0.10% to 432.90 rupees.

Realty stocks fell. DLF dropped 1.36% to 505.10 rupees after the company got approval from the Securities and Exchange Board of India to proceed with a buyback plan, and Unitech slipped 0.46% to 162.50 rupees.

Financial stocks extended their losses on speculation that conditions will continue to deteriorate in the sector. ICICI Bank fell 0.74% to 715.45 rupees, State Bank of India dropped 2.16% to 1557.10 rupees, and HDFC Bank climbed down 0.67% to 1292 rupees.

Sugar stocks rose after the Supreme Court in an interim order urged sugar mills in Uttar Pradesh to pay all outstanding cane arrears to growers for the fiscal 2008 crushing season at the rate of 110 rupees for a quintal within the next four weeks.

Telecommunication stocks closed higher. Reliance Communications increased 1.57% to 404.80 rupees and Bharti Airtel gained 2.15% to 837 rupees.

Infosys Technologies fell 0.08% to 1,747.10 rupees on reports that HCL Technologies may counter bid Infosys for acquiring the UK-based software service provider Axon.

Tata Power Company declined 1.7% to 1,082.30 rupees and Mahindra & Mahindra shed 1.42% to 582 rupees. Maruti Suzuki India gained 2.36% to 710 rupees. Oil and Natural Gas Corporation advanced 0.25% to 1102 rupees.

Reliance Infrastructure soared 1.24% to 1,071.50 rupees, Grasim edged up 0.41% to 2,020 rupees and TCS gained 1.40% to 866.90 rupees.

Balrampur Chini Mills surged 3.31% to 95.10 rupees, Shree Renuka Sugars increased 1.33% to 121.75 rupees and Bajaj Hindustan edged up 0.91% to 172.30 rupees.

Tech Mahindra gained 2.84% to 796.10 rupees on news that the company signed a seven year contract worth $250 million with a company in North America.

Idea Cellular rose 2.72% to 85.10 rupees. Tata Motors slid 3.80% on uncertainty over the resumption of work at the Nano manufacturing plant in Singur.

Ranbaxy fell 2.91% to 450.90 rupees.