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Hindalco Industries, Shrenuj and Company, Clariant India

HINDALCO INDUSTRIES Mixed Results Hindalco Industries, the flagship company of the Aditya Birla Group, is one of the lowest cost producers of aluminium in the world. The company is structured as two strategic businesses, namely, aluminium and copper. Hindalco is India

Companias

HINDALCO INDUSTRIES

Mixed Results

H
indalco Industries, the flagship company of the Aditya Birla Group, is one of the lowest cost producers of aluminium in the world. The company is structured as two strategic businesses, namely, aluminium and copper. Hindalco is India’s largest aluminium producer with a market share of around 48 per cent. It produces aluminium ingots, alumina, aluminium foils, rolled products, conductor redraw rods, aluminium wheels, etc. Its manufacturing factories are located across the country. The company also enjoys a leadership position in its copper business with a market share of 45 per cent. Hindalco’s copper smelting and refining plant at Dahej, Gujarat, is India’s largest copper plant. The copper segment comprises, primarily, production and sale of copper, copper cathodes, continuous cast rods (CC rods), sulphuric acid, etc.

Hindalco posted a splendid financial performance during 2004-05. Its net sales surged by 53 per cent to Rs 9,523 crore and net profit rose by 58 per cent to Rs 1,329 crore as compared to 2003-04. The aluminium business accounted for 55 per cent of the total revenues and the copper business contributed 45 per cent. The company recorded its highest production across all products of aluminium and its foreign exchange earnings rose by 101 per cent to Rs 2,607 crore during the year under review.

The Abu Dhabi National Foodstuff Company has signed an agreement with Hindalco to produce the Wrap ‘n’ Roll brand of aluminium foil rolls for distribution with the UAE. Hindalco recently acquired the assets of Hyderabad-based Pennar Aluminium Company (Palco) for an undisclosed amount from the Asset Reconstruction Company. Palco has its factory in Nagpur, with an installed capacity of 30,000 tonne per annum (TPA) of aluminium rolled products and 14,000 TPA of conductor rods. Hindalco has undertaken various expansion plans. It is expanding the refinery capacity at Muri from 1,10,000 TPA to 4,50,000 TPA. The work has already been initiated and is likely to be commissioned by 2007. The company has entered into a memorandum of understanding with the government of Orissa and Jharkhand to set up an aluminium complex with captive power plants as well.

Hindalco has raised its basic selling price of aluminium by Rs 6,000 per tonne (about 6 per cent), its second revision from January 2006 due to volatile metal prices at the London Metal Exchange. A rise in the price of alumina, one of the key elements in the production of aluminium, and the surge in demand for aluminium have forced aluminium companies to raise their prices.

Hindalco experienced mixed financial results for the first three quarters of 2005-06. For the quarter ended June 2005, its net sales went up by 7 per cent to Rs 2,207 crore over the corresponding period a year ago and net profit rose by 38 per cent to Rs 325 crore. Aluminium production rose considerably but copper production suffered due to shutdown of the Dahej plant on account of heavy rainfall in Gujarat. During July-September 2005, the company’s net sales increased by 8 per cent to Rs 2,661 crore over the same period of the previous year. However, net profit declined by 7 per cent to Rs 276 crore. Despite, a 15 per cent rise in net sales to Rs 2,873 crore for the quarter ended December 2005, the company’s net profit dipped by 13 per cent to Rs 300 crore over the corresponding period of the previous year.

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SHRENUJ AND COMPANY

Glittering Performance

S
hrenuj and Company is one of India’s leading diamond and jewellery manufacturers and exporters. The company exports diamonds and precious stones to overseas markets, mainly Japan, the US, France, Belgium, Hong Kong, New Zealand and Germany. The company derives more than 80 per cent of its revenues by exporting polished diamonds while the rest is contributed by studded jewellery. The jewellery division of the company is located at Santacruz Electronics Export Processing Zone (SEEPZ), Mumbai.

During 2004-05, Shrenuj registered a healthy financial performance. Net sales rose by 19.5 per cent to Rs 489 crore and net profit increased by 27 per cent to Rs 11 crore over 2003-04. The company’s foreign exchange earnings jumped by 12 per cent to Rs 450 crore over the same period of the previous year. On a consolidated basis, Shrenuj Group recorded a sales revenue of Rs 558.3 crore during 2004-05, showing a growth of 20.7 per cent while net profit grew by 55 per cent to Rs 12.1 crore over 2003-04.

Shrenuj is widening its horizon with a focus on regions such as China and west Asia that are showing signs of faster growth. The company has decided to invest in shares of Shrenuj UK; a subsidiary company registered in UK, worth up to 2.5 million euro, for business development and to explore the overseas market. It has also decided to form overseas subsidiaries in US, Mauritius and Dubai for business expansion and development purposes. In the domestic market, it has launched the diamond brand, Sveni, with a focus on young middle and upper middle class women. The company has launched ‘Fiana’, a new branded jewellery collection in France with a local partner, under the promotional programme of Diamond Trading Corporation (DTC).

Shrenuj posted healthy results for the first three quarters of 2005-06. During April-June 2005, despite a decline in net sales of 0.8 per cent to Rs 104.5 crore, the company’s net profit went up by 0.9 per cent to Rs 2.1 crore. For the quarter ended September 2005, its sales revenues increased by 6.8 per cent to Rs 142 crore and net profit jumped up by 58 per cent to Rs 3.2 crore, over the same period a year ago. During October-December 2005, the company’s sales revenues posted a 15 per cent rise at Rs 140.8 crore and net profit grew by 33 per cent to Rs 4.3 crore, over the corresponding period of the previous year.

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CLARIANT INDIA

Market Leader

C
lariant India (CIL), a subsidiary of Clariant AG, Switzerland, is the leader in speciality chemicals in India. The company has two business segments,

Economic and Political Weekly February 18, 2006

The Week’s Companies namely, chemicals and dyes and (Rs lakh) masterbatches, which cater to the require-

Hindalco Shrenuj and Clariant India Company Financial Indicators 2004-05 2003-04 2004-05 2003-04 2004-05 2003-04

Income/Appropriations
1 Net sales 952325 620835 48945 40974 33210 31676
2 Value of production 977890 631029 49065 40633 33319 31696
3 Other income 20781 16039 0 10 655 1138
4 Total income 998671 647068 49065 40644 33974 32834
5 Raw materials/stores and spares/
power and fuel consumed 643524 421815 40064 33268 8074 6548
6 Other manufacturing expenses 10194 2487 2490 2140 16865 17382
7 Remuneration to employees 41263 23706 727 552 2296 2146
8 Other expenses 57169 33469 2186 1579 3416 3292
9 Depreciation 46326 31745 259 206 594 526
10 Gross profit 200195 133846 3340 2898 2728 2940
11 Interest 16996 17715 1608 1678 -18 -103
12 Operating profit 183199 116131 1732 1220 2746 3043
13 Non-operating surplus/deficit 7219 8436 0 7 78 11
14 Profit before tax 190418 124567 1732 1227 2825 3054
15 Tax provisions 57483 40674 616 351 973 970
16 Profit after tax 132936 83893 1117 876 1852 2085
17 Dividends (includes tax on dist profit) 18556 15258 327 273 1312 1312
18 Retained profits 114380 68634 790 603 540 773
Liabilities/assets
19 Paid-up capital 9278 9248 1091 1091 1193 1193
20 Reserves and surplus 757380 676542 10306 9567 8846 8484
21 Long-term loan 242142 207374 134 23 0 0
22 Short-term loan 137858 49085 25593 22823 747 885
(i) of which, bank borrowings 133781 33380 25459 22256 747 885
23 Gross fixed assets 1009577 712616 6313 4992 6615 6409
24 Accumulated depreciation 306934 191828 872 678 4340 3925
25 Inventories 237452 119134 20226 15990 3996 3648
26 Total assets/liabilities 1510508 1147134 42942 37448 17962 17243
Miscellaneous items
27 Excise duty 95717 61151 0 0 2826 2325
28 Gross value added 268714 174210 4348 3662 5194 4832
29 Total foreign exchange earnings 260738 129510 45018 40223 6969 9736
30 Total foreign exchange outgo 390930 251213 34389 30671 5337 4052
Key financial and performance ratios
31 Turnover ratio (sales to total assets) 0.8 0.6 1.2 1.2 2.0 2.0
32 Gross value added to gross
fixed assets (%) 31.2 25.6 76.9 75.7 79.8 81.8
33 Return on investment (gross profit
to total assets) (%) 15.1 12.3 8.3 8.6 15.5 17.4
34 Gross profit to sales
(gross margin) (%) 21.0 21.6 6.8 7.1 8.2 9.3
35 Operating profit to sales (%) 19.2 18.7 3.5 3.0 8.3 9.6
36 Profit before tax to sales (%) 20.0 20.1 3.5 3.0 8.5 9.6
37 Tax provisions to profit before tax (%) 30.2 32.7 35.5 28.6 34.4 31.7
38 Profit after tax to net worth
(return on equity) (%) 18.3 12.9 10.1 8.7 18.8 22.2
39 Dividend (%) 171.5 143.9 25.8 21.8 95.1 95.9
40 Earnings per share (Rs) 143.3 90.7 10.2 8.0 15.5 17.5
41 Book value per share (Rs) 826.3 741.5 104.5 97.7 84.2 81.1
42 P/E ratio (multiple) 12.7 17.6 6.5 5.7 16.5 9.4
43 Debt-equity ratio (adjusted for
revaluation) 0.50 0.37 2.26 2.14 0.07 0.09
44 Short-term bank borrowings
to inventories (%) 56.3 28.0 125.9 139.2 18.7 24.3
45 Sundry creditors to sundry
debtors (%) 185.1 135.4 30.3 23.4 123.8 111.2
46 Total remuneration to employees
to value added (%) 15.4 13.6 16.7 15.1 44.2 44.4
47 Total remunerations to employees
to value of production (%) 4.2 3.8 1.5 1.4 6.9 6.8
48 Gross fixed assets formation
(% growth) 41.7 10.1 26.5 6.6 3.2 18.5
49 Growth in inventories (%) 99.3 18.9 26.5 8.9 9.5 -0.6

ments of the textile, paper and leather industries. In fact, it is the market leader in textile chemicals and leather dyes. The masterbatches segment deals with colour and additive concentrates and special mixtures of these compounds for use in automobiles, textiles and technical fibres, electronic and electrical devices, home appliances, toys, medical devices sporting goods, etc.

During 2004-05, despite a 4.8 per cent rise over 2003-04 in net sales to Rs 332 crore, CIL suffered in profitability by 11 per cent with profits at Rs 18 crore. Of total net sales, domestic sales contributed 79 per cent and export share stood at 21 per cent. The dyes and chemical segment recorded a 3.9 per cent rise in sales to Rs 319 crore and the masterbatches segment registered a growth of 38 per cent to Rs 12.7 crore, over the corresponding period a year ago. The dyes and chemicals segment contributed 96 per cent to net sales and the remaining 4 per cent was added by masterbatches segment.

Clariant India has decided to merge five of its group companies in India, becoming thereby a single entity, subject to all the requisite statutory and regulatory approvals by RBI, SEBI, the individual boards and shareholders. BTP India and the two subsidiaries of Colour-Chemicals, namely, Vanavil Dyes and Chemicals and Kundalika Investments will also be merged with Clariant India.

For the first three quarters of 2005-06, Clariant India reported a satisfactory financial performance. For the first six months, April-September 2005, its net sales increasedby 13.3 per cent to Rs 182.8 crore over the same period a year ago and net profit rose by 28 per cent to Rs 12.9 crore. The dyes and chemical segment’s sales revenue increased by 12 per cent to Rs 175 crore and masterbatches revenue grew by 41 per cent to Rs 7.6 crore for the first six months of 2005-06. For the quarter ended December 2005, the company’s net sales stood at Rs 100 crore, up by 7.7 per cent over the corresponding period of the previous year and net profit recorded a rise of 61.3 per cent to Rs 6.6 crore. The sales revenue of the dyes and chemicals segment has moved up by 6.8 per cent to Rs 95 crore over the same period of the previous year and masterbatches revenue grew by 28.6 per cent

Note: P/E multiples are the latest with corresponding last year’s figures.

to Rs 4.8 crore.

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Economic and Political Weekly February 18, 2006

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