Hindalco to raise Rs 7,000 cr in 2 months for Orissa plant

After investing Rs 6,000-7,000 crore for its Aditya Alumina and Aluminium project in Orissa, a greenfield integrated aluminium complex, Aditya Birla group flagship Hindalco Industries is planning to raise around Rs 7,000 crore for the same project within the next couple of months.

“We plan to raise that amount, but are yet to decide the funding route. We are awaiting RBI’s decision on interest rate cuts and will decide accordingly. If interest rates come down, we may go for bank borrowings, or else, we will raise the required resources through bonds,” a senior official close to the development told Financial Chronicle without wanting to be named in this report.

The project includes 4.2 million-tonnes per annum bauxite mine, 1.5 million-tonnes per annum alumina refinery at Kansariguda and 359-ktpa smelter at Lapanga. The refinery is expected to scale up to two million tonnes per annum within three years of commencement in 2013-14.

The official further maintained that the project cost had not been impacted due to depreciating rupee as 95 per cent of the project had already been committed and most imported components of the project had already been sourced. There was no exposure to dollar-rupee fluctuations.

Analysts are sceptical on Hindalco’s projects as the company has been unable to secure coal linkages. Sanjay Jain, analyst with Motilal Oswal Securities said the Aditya alumina and aluminium project is on for quite some time and the company has to raise funds at different stages.

Bhavesh Chauhan, analyst at Angel Broking said the project's viability depended on whether the company was able to access captive coal mines or secure coal linkage from Coal India.

“Aluminium prices are at the moment depressed at around $2,000 per tonne in the London Metal Exchange due to oversupplies and low global demand. Hindalco plans to import coal that will certainly escalate their cost of production. But the company is not in a position to pass on the increase in coal prices to consumers,” said Chauhan.

Hindalco Industries is also planning to import coal for its green-field aluminium smelter and 900 mw captive power project at Mahan in Madhya Pradesh, as the company has failed to get environment clearance for its captive coal mine. The company needs around five million tonnes of coal per annum for its Mahan project.

Hindalco also plans to invest Rs 10,500 crore in the Mahan smelter project. The company has further earmarked capital expenditure of Rs 8,000-9,000 crore in 2012-13 for its ongoing projects.