Sharp fall in revenues awaits Indian aluminium companies in Sept quarter

The partial write-back of the provision made for the District Mineral Fund and increase in volumes are expected to save the day for Indian non-ferrous metal companies in the second quarter of this fiscal.

However, both ferrous and non-ferrous companies are expected to report a sharp fall in revenue due to lower metal prices.

Most of the metal companies have assumed that they have to contribute 50 per cent of the royalty for DMF and made provisions accordingly. However, the Indian government recently notified that the companies have to set aside only 30 per cent of the royalty for DMF. This had come as a major relief for metal companies, which have won mines after paying huge amounts in the recent auction.

It is conjectured, non-ferrous companies (producing aluminium, zinc, lead and copper) may register higher production but would suffer from lower London Metal Exchange prices and dip in regional premiums.

Hindalco may benefit from higher volumes due to ramp-up of production from the recently commissioned smelters, while Nalco may benefit from higher volumes as the company restarted production from the smelter that was shut in the first quarter of this fiscal.

In the near-term, the ramp up of aluminium capacity by China is expected to put pressure on both LME prices and regional premiums. Aluminium prices on LME were down 20 per cent to $1,591 a tonne in the September quarter.