When the battle for Indal's take over is settled, most probably Alcan getting the majority stake, both Alcan and Indal will have to thank Sterlite for forcing them to see the immense value of their own assets and taking quick action to increase their rate of profit.

Indal has taken action to hike the power generating and smelting capacity at Hirakud. It is taking action to buy outside power for the Beiusum smelter and revive it. The company is almost doubling the capacity for alumina and modernising, refurbishing, expanding its finishing facilities and also adding to its scrap recycling facility. All these decisions have been taken at break neck speed and will add immensely to the salesas also the profit of Indal during the coming years.

The steps initiated to start Utkal Alumina is rather dramatic. Most of the clearances have been obtained for this Rs-4000 crore venture. Four equity partners have made their financial commitments, the entire production of one million tonnes of alumina is also committed for sale. The promoters are talking of adding another 1.5 million tonnes capacity as soon as the first million tonne refinery is started.

The capital cost of the first phase is $1000 per tonne, which will fall to $750 in the expansion. The cost of alumina production would be $87 per tonne leaving a large surplus over the market price. This cost per tonne may be also reduced to $80 per tonne which are all positive factors.

Indal set up its Alwaye smelter, with a capacity of 6000 tonnes, as power was cheap and abundant in Kerala. Later on it put up a 70,000 tpy smelter at Belgaum because power was cheap and abundant in Karnataka too. Conditions changed later and supply of power becameshort and costly.

At Hirakud, Indal took steps to put up a captive power plant and is expanding it. It is not a practice of aluminum producers all over the world to put up captive power plants. Recently in South Africa a 4/5,000 tpy aluminum smelter was set up and the power utility there agreed to supply power at around two cents per kwh for 10 years. The power rate is also linked with LME metal rate and power rate may increase or fall depending on the metal price. Dubai Aluminum is expanding but does not have to put up any power plant.

In India, because of power shortage and unreliability of the grid supply, power-intensive industries have to go in for captive power. This is a costly affair for metal producers and can strain their resources as also take a longer time to complete the projects. Today there is a view that green-field smelters for aluminum may not be viable in India.

The real test for Sterlite will come when the copper smelter starts producing at full capacity during the current year whenthe copper outlook is gloomy and likely to remain so for some years.

Sandvik and Kanthal

Recently Sandvik had opted to buy the shares of its subsidiary Kanthal Metals at Rs 30 per share form the Indian shareholders but public response to the offer rightly has been poor. Kanthal is a potential gold mine for Sandvik and therefore deserves a much better offer.

According to Metal Bulletin Monthly Sandvik Steel is the world leader in adding value to steel.

Kanthal is another steel producer in Sweden of whom Sandvik wants to take complete control. The added value of its product is three times the value of Sandvik's other products. So the Kanthal shareholders deserve a better deal from Sandvik just as the Indal shareholders deserve more than the Rs 120 offered by Alcan.