04 September 2010

Birlas get 'green' signal for expansion in Orissa

MUMBAI: The Aditya Birla group will double capacity at its alumina unit in Orissa after receiving environmental clearance, stealing a march over rival Vedanta Resources that was recently forced by the government to halt a similar expansion.

Aditya Birla group company Utkal Alumina currently has the capacity to make 1.5 million tonnes of alumina, a key raw material for making aluminium. “We went to the environment ministry for an approval for the expansion and we have got it,” Debu Bhattacharya, managing director of group flagship Hindalco Industries, told ET.

Expansion of alumina refineries is integral to metal companies such as Utkal Alumina and Vedanta Aluminium as it not only gives a higher capacity for conversion into aluminium metal, but also offers opportunities to boost profitability by selling it in the open market. State-run National Aluminium is Asia’s largest producer of alumina.

Bauxite for Utkal Alumina comes from the group’s own mines located at the Baphlimali hills in Raygada district of Orissa.

The move by the Birlas will likely push Utkal Alumina ahead of Vedanta Aluminium in the alumina league table, as the Anil Agarwal-controlled company currently has a capacity of 1 million tonnes at Lanjigarh. Vedanta had started work to take the capacity to 6 million tonnes, but stopped last month after the central government said it had not sought prior approval for the expansion.

Alumina from Utkal will feed the Aditya Birla group’s aluminium smelters in Mahan in Madhya Pradesh and Aditya Aluminium in Orissa.

Novelis looking up, says Birla

Hindalco had recently tied up $1.05 billion in loans for the Utkal Alumina project, which is scheduled to start production in the second quarter of 2012.

Hindalco has also earmarked a spending of about Rs 40,000 crore for its greenfield and expansion projects in the metals space. Speaking to shareholders at an annual general meeting on Friday, Kumar Mangalam Birla, the group's chairman, said smelter expansion at Hirakud from 155,000 tonnes to 161,000 tonnes was progressing and was slated for completion in the second quarter.

Mr Birla also said overseas subsidiary Novelis, which had made large losses soon after acquisition, is now "looking up". Novelis, which was bought by Hindalco for $6 billion in 2007, reported record results in terms of adjusted EBITDA, liquidity and free cash flow, he added. This was despite a 2% decrease in shipments from Novelis, where sales fell due to a contraction in average LME prices. Referring to Hindalco's financing plans, Mr Birla said the company had raised $600 million through a qualified institutional placement issuance, one of the largest such issues in 2009.