Ratio of stability in prices of aluminium & favourable rupee-dollar make it a good purchase: Nalco

Nalco’s third quarter numbers for the period 2013-14 were more or less expected except a small fall in production of alumina. The production has fallen on a quarterly basis due to the delay in the export shipment. But there has been a significant rise in alumina production on a year-on-year (y-oy) basis. Nalco has cut down the unviable aluminium production and worked on increasing sales in alumina over the past one year.

It is expected that Nalco will follow a similar strategy in the coming quarters. The inability of Nalco to meet the capex target was disappointing news for the market. Now it is expected that Nalco will spend Rs.543 crore in the year 2013-14 compared to their actual estimate of a total of Rs. 1,737 crore, a drop of 69%. They have also pruned down their 2014-15 capex plans by 32% and limited to Rs 1,181 crore.

However, analysts are of the view that the capex plans of Nalco would have reduced the cash hoarding of the company of Rs 5,200 crore as on 2013, Dec 31st. It is about the two-third of the market capitalisation.

The company had earmarked most of the capex for the joint venture with Nuclear Power Corp. After the prices fell by 18% on LME in the last year there has been stability in aluminium industry and this will be good news for Nalco and other Indian producers.