Madras Aluminium Company Ltd (Malco), in which Vedanta Group holds 80% stake through its subsidiary Twinstar Holdings Ltd, has decided to shut its plant located in Tamil Nadu citing sagging demand for metals and softening of global aluminium prices as reasons.

The company, on November 20, cut aluminium production by 60% on similar grounds. It had also decided to put a management restructuring plan on the backburner recently following the meltdown in the global metals market.

Malco has a production capacity of 25,000 tonne per annum (tpa) and an equal capacity in its alumina refinery. The alumina refinery, however, would continue production to meet the industrial demand, the company said in a regulatory filing on Wednesday.

Sources in the know told FE on Wednesday that, with no commercial activities in sight in the near future, Malco would sell its surplus power from its captive power plant on a commercial basis to third party users. Malco has invested nearly Rs 100 crore to expand its captive power capacity to 130 mw from 75 mw recently.

Though the company announced its decision to shut production only on Wednesday, sources said it had closed unofficialy since December 1.

The company, however, has decided to retain all its 700-odd staff. They would be redeployed in its other plants including the alumina refinery. Wages for November have already been paid, sources said.

Apart from dwindling aluminium prices in the global markets, the other reason which forced the company to shut is lack of mineral availability in the state. The company has made several petitions to the Tamil Nadu government over a decade, seeking more mineral resources. However, the state had not taken a decision on the company?s request. The other reason cited is the galloping production costs which is much higher than the current selling prices, sources said.

?Right now, the company is struggling to come out of the current crisis. The only option before it is to minimise losses by selling surplus power to third parties,? a company official said.

Last month, Malco sold its entire stake in its sick subsidiary India Foils Ltd (IFL) to EssDee Aluminium. IFL is engaged in manufacturing, processing and selling of aluminium foil and foil-based products. The company has three plants in West Bengal.

Incorporated in 1960, Malco manufactures aluminium ingots, alloys and rolled products in Tamil Naud plant. The company became sick in the early 1990s and was taken over by Sterlite Industries of the Vedanata Group in 1995 under a BIFR sanctioned rehabilitation scheme. Malco is a small player compared to Hindalco of the Aditya Birla group and the public sector Nalco. For the quarter ended September 30, this year, Malco clocked a net profit of Rs 2.75 crore from Rs 28.78 crore during the same period in the previous year. The turnover of the company stood at Rs 126.45 crore, up from Rs 124.21 crore during the same period. Hindalco, for the September quarter reported a net profit of Rs 720 crore (Rs 642.57) over a net sales of Rs 5,636.56 crore (Rs 4,900.70 crore). Nalco reported a turnover of Rs 1,675.91 crore (Rs 1,432.12 crore) and netted a profit of Rs 444.46 crore (Rs 440 crore).

Tough times

•Malco will retain all its 700-odd staff

•They would be reldeployed in other plants including in its alumina refinery