Companies

Plant closure unlikely to impact Vedanta’s profitability much

Satya Sontanam BL Research Bureau | Updated on August 18, 2020

Despite Vedanta’s large presence in the domestic market, the company’s copper segment in India contributed just 4.2 per cent to the total operating profit of the group in FY18, just before the closure

The Madras High Court’s judgment to keep the copper plant shut is not expected to have a major impact on the profitability of Vedanta.

Sterlite Copper plant of Vedanta significantly derives its revenue from selling copper cathode, copper rod and by-products, including sulphuric acid and phosphoric acid.

This copper smelter plant in Tuticorin has halted operations since April 2018 when the Tamil Nadu Pollution Control Board (TNPCB) rejected the Consent to Operate (CTO) of the Tuticorin Plant and issued a direction for the closure and disconnection of the power supply at the plant.

The smelter has a design capacity of 4 lakh tonnes and held 33 per cent market share of the country’s refined copper market of around 675,000 tonnes in FY2018.

Despite Vedanta’s large presence in the domestic market, the company’s copper segment in India – which essentially constitutes Tuticorin’s smelter plant — contributed just 4.2 per cent to the total operating profit of the group in FY18, just before the closure.

In FY18, the operating profit contribution from copper segment in India was ₹1,055 crore. In FY20, the same segment recorded operating profit of negative ₹300 crore (operating profit of the group in FY20 was ₹21,060 crore). The loss was from the copper refining business at Tuticorin (which continued to operate) and Silvassa in Western India.

Loss of capex

However, the investment in expanding the installed capacity at Thoothukudi plant could go in vain.

The company was awaiting clearance from the government to increase its installed capacity to 8 lakh tonnes, for which it planned a capex of around $717 million. But it had already spent $189 million up to March 2018 towards this.

Published on August 18, 2020

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor