The uncertainty surrounding the large forex loans and the looming repayment has also dissipated with the one-shot repayment. This will also reduce the financial risk associated with Sterlite as well as the lower interest costs.It is true that the price rise in copper helps the company to improve its TCSR margins as the product price is more than the value of the ore. The closure of Magma Copper mines by Broken Hill, the world second largest producer of copper, removed 1,80,000 tonnes of copper from the world supply. According to analysts, this has removed tw-third of the excess supply from the globalmarket. With earlier announced closures of two other Arizona mines, Superior and Pinto valleys, the price of copper is likely to move up further from the present levels of $1,600 per tonne.

Importantly, Sterlite has moved into the aluminium conductor business in a big way after 1986. Although in the year ending June 1999, this would be a small proportion of total sales, the company expects to generate Rs 150 crore of additional sales from the supply of aluminum conductors. These aluminum conductors would be converted into ACSR (aluminum conductor steel reinforced) wires to be used by the Power Grid Corporation for the laying of transmission lines. Analysts claim that such business earns at least 6-8 per cent margins at the operating level and with no additional capex required for producing aluminum wires, the operating earnings can directly be added on to the bottomline.

In addition, the Rs 2,200 crore tenders for laying of the DOT network are being opened next week. Based on past data, the companyexpects to garner at least 18 per cent of the orders. This is in line with market expectations and any extra orders are bound to enhance valuations. Says Pratik Agarwal, assitant vice president SBI caps, "The company gets half the P/E compared to its peers in the optical fibre business and being the largest player in this business should alone help in the re-rating of the stock".

In other divisions too, the company expects a growth in the range of 15 to 90 per cent during the year 1999-2000. In jelly field cables, the volume growth expected by the company is in the range of 15 to 20 per cent, while in optical fibre and optical cables, it expects a growth of 90 per cent. This would be less than the earlier growth rates of more than 100 per cent seen in the last year. But higher volumes aid both topline and bottomline growth.

Now that the environmental problems at the Tuticorin smelter has been solved and the fact that it has obtained all environmental clearances, most of the negative factors affectingthe company have been set to rest. In addition, the company has switched from sulphuric acid as by-product to value-added phosphoric acid. Unlike sulphuric acid which gets low realisations due to supply overhang, phosphoric acid is in short supply. This is helping the company to achieve higher realisations from the by-product.

--Manish Saxena