It has just been over seven months since Indo Gulf Corporation commissioned its 1 lakh tpa copper smelter project, and the company is already a leader in the country's copper business.

Indo Gulf is selling over 4,500-5,000 mt of copper cathode (CC) rods per month, which reflects a market share of over 30 per cent in the industry where other players include Sterlite and Hindustan Copper. The existing capacities of other players are 60,000 tpa (4,000 tonne per month) from Sterlite and 47,000 tpa from Hindustan Copper. Swil is also planning a capacity of 50,000 tpa which is yet to go onstream. Among these, Birla Copper's plant has the largest capacity.

Former Indo Gulf Corporation managing director BN Puranmalka had earlierestimated that the company would eventually increase its dominance in the copper industry with a market share of as much as 50 per cent.

Birla Copper, a division of Indo Gulf, commissioned the copper smelter plant within 27 months from its ground break in January 1996. Commercial production of CC rods and cathodes had commenced in mid-March last year.The plant ranks among the top 30 plants world over with a capacity of 150,000 tpa and above. The operating profit margins in the copper business are pegged at around 25-27 per cent.

At present, the demand-supply gap in India is a huge two lakh tonnes per annum. A large part of the demand is being met through imports. The industry growth at around 6 per cent has slowed down from previous year's 7 per cent growth per annum. The copper cast rods manufactured by Birla Copper are of the order of 8 mm, 11.5 mm, 12.5 mm and 16 mm. The company was importing 19 mm rods to cater to a specific demand.

Indo Gulf Corporation Ltd is aiming at a turnover of Rs 3,000 croreby the year 2001, propelled by an estimated Rs 2,000 crore turnover from its copper business. The company has projected a turnover of Rs 1,625 crore for the current financial year, against Rs 638 crore in 1997-98.

The company is likely to achieve a production mark of one million tonnes of urea in the current fiscal. While profitability will continue to be driven by the fertiliser business, revenue will be higher in copper. At present, the company's Jagdishpur (Uttar Pradesh) urea plant running at over 120 per cent capacity produces 9.33 lakh tonnes of urea. Indo Gulf is looking at further upgrading its capacity this year by deploying a better technology for urea. Indo Gulf's 1 lakh tpa copper smelter unit, under the Birla Copper division, was commissioned in May 1998. The capacity utilisation is slated to touch of around 85-90 per cent by March 1999. The total production by the end of August was around 10,000 tonnes of CC rods.

The company has entered into five-year contracts for copper concentrate fromcountries like Indonesia, Malaysia and Chile. The contracts would also insulate its working from fluctuating spot TCRC. While the company plans to manufacture phosphoric acid from sulphuric acid, a by-product, other by-products like phospho gypsum would be marketed to cement companies and for agri-use. The company has already tied up the required finances for the project. The debt-equity ratio for the project is 1.7:1. The capacity of the plant will be enhanced further to 1.5 lakh tpa by 2000. The company will fund the enhanced capacity through debt and internal accruals. It has no plans to come out with a public issue, said a senior director. The company hopes to maintain the debt-equity ratio at 1.7:1.

"We will be insulated from fluctuating world copper prices because the prices of both the raw material and the finished goods are linked to the price on the London Metal Exchange (LME)," said Puranmalka. He said that the government's decision to allow hedging operations shortly will benefit Indo Gulf andthe company is all set to get into that mould. Pricing mechanism of raw material will thus have a built-in hedge.

The margin drivers for the company were conversion charges on raw material, good premia on finished goods over LME prices, duty differential between raw material and finished copper, and revenue from conversion of smelter acid to phosphoric acid. Conversion charges contribute nearly 40 per cent to the earnings.