All eyes on power sector

Written by Indronil Roychowdhury | Updated: May 21 2014, 14:00pm hrs
Hindustan Copper Ltd, the mini ratna company, has drawn its business plan for FY15, largely banking on the 12th Plan targets for infrastructures development, especially in the power sector. The company feels power sector development will drive demand for copper. The company foresees that increasing electrification will create demand for copper sheets, foils, enamelled copper strips, fibre-glass coated strips, flats, tubes and pipes. But HCL, as the countrys only copper producing PSU, would lose out the opportunity if it is not into making value added products.

HCLs principal activities now include mining of copper ore, turning copper ore into copper concentrate through a beneficiation process and smelting, refining and extruding of the copper concentrate into refined copper in downstream saleable products. But going a few steps ahead with forward integration could change the companys fortunes, feels its chairman and managing director, KD Diwan.

Massive electrification of the railway tracks covering 64,015 km is under way. Further, replacement of existing overhead wires and trolley wires are required, which would raise demand for hard drawn grooved copper contact wire, which can earn substantially higher margins than what HCL earns from its conventional conversion of cathodes into CC rods, a company official said.

The government has plans to start metro services in 12 tier-2 cities having more than 20 lakh population and this would create further demand for copper products like copper foils used in cable ropes, heat exchangers, radiators and solar panels. Demand for copper tubes (used in induction furnace, cable lugs, refrigeration and air conditioning), enamelled copper conductors (used in transformers), copper bars (used for control panel and switch gears), copper sheets (used for earthing), fibre glass covered copper conductors (used in winding of traction motors) will increase manifold, which if HCL manufactures will give a major boost to its top line and bottom line, the official said.

Copper foils for cable wrap are currently fully imported and copper sheets have also to be imported.

According to Diwan, the company is poised to set up a joint venture company for manufacturing such products and has invited expressions of interest to rope in a JV partner. The company has also signed a memorandum of understanding with the government of India wherein it has committed to manufacture value added products. The MOU signed with the government has also set a target of producing 35,000 tonnes of copper concentrate, for enhanced production of copper ore from its mines is required. However, in FY13 the company produced 35,200 tonnes of concentrates, higher than the target it has kept for FY 15.

For the current year HCL has set a capex of R522.16 crore, which according to a company official, is a part of the R3,435-crore capex set for increasing copper ore production from 3.4 million tonne to 12.4 mt by 2017.

HCL, besides getting into manufacturing value added products, is starting zero waste mining,which would enhance its profitability. The company has planned to take up greenfield mine exploration with the Madhya Pradesh government, which has granted reconnaissance permit (RP) of 580.73 sq. km in the Balaghat district. HCL has also made some progress in getting reconnaissance permit for exploration of copper in Rajasthan where RP for over 1,860.69 sq. km in Ajmer, Bhilwada, Pali Nagur and Jaipur is recommended.

New initiatives are expected to make HCL a more vibrant company, which never faced any demand side problem. The markets have always been in its favour. The country has 9 lakh tonne of copper capacity meeting only 3% of the copper industrys total metal in concentrate needs and the demand has been going up by 7-8% in the last three-four years. HCLs sales went up by 17% in the same period, giving it a 5% market share in the countrys copper market. There is enough room for HCL to grow and become more profitable.