Is West Coast Paper Mill an attractive buy for International Paper

Speculations about US-based International Paper interested in buying West Coast Paper Mills have led to 25% gains in the stock of the Bangalore-based paper company. If the deal indeed goes through, it will mean re-rating of the stock of West Coast Paper Mills on similar lines as that of Andhra Pradesh Paper Mills.



The news of International Paper acquiring Andhra Pradesh Paper Mills led to re-rating of the stock and in the last one and half years, the stock almost doubled on the bourses.



Rs 1300 crore West Coast Paper Mills has been under strain operationally since last five quarters. Increase in raw material cost on account of higher prices of coal and wood pulp, high interest and depreciation have hit the company's bottomline. The rupee depreciation has further been an adverse factor for the company having dollar denominated debt.



The company has Rs 721.34 crore of debt on its books with its debt equity and interest coverage ratios each standing at 1.2. A stake sale by the promoters at attractive valuations in such a scenario at this juncture may not be surprising.



For International Paper, West Coast Paper Mills seems to be a good acquisition target - being larger in size than its earlier acquired company Andhra Pradesh Paper Mills and earning similar revenues like other large players JK Paper and Tamil Nadu Newsprint. Through it, International Paper can also command control on another Gujarat-based paper company Rama Newsprint since West Coast Paper Mills owns 36.3% stake in the Gujarat based firm.



In case of an acquisition deal materializing, investors should brace themselves for a re-rating of the stocks of West Coast Paper and Rama Newsprint.

Indian Specialty Chemical Industry to grow to $100 billion by Yr 2020

India's specialty chemicals industry which has been growing at a steady rate over the years, has further potential to grow from the present $22 billion to $80-100 billion by 2020 as even the Indian Government is putting into place, the plans and regulations to support this growth.



Jim Buckley, UBM Live's Informex Brand Director, who is in Mumbai for the InormexIndia, opening from Wednesday by UBM, said, "According to a recent study by global consulting firm McKinsey, India's specialty chemicals industry has the potential to grow from the present $22 billion to $80-100 billion by 2020. The Indian Government is putting in place plans and regulations to support this growth."



There is a need for a long term policy and strategy to boost the industry and which shall be the focus of discussion when the global industry players meet here this week. Mr. Buckley further said that the global industry is excited to be returning to India with a specialty focused event. "Our discussions during the conference will cover the latest developments in this fertile market while acting as an international networking platform designed to cater for those involved in sourcing, R&D and top-level management."



The three-day conference and exhibition will be held from September 12th to 14th at Nehru Centre, Mumbai.

Hindalco lines up Rs 10,000 Cr Capex

Aluminium major Hindalco has lined up a capital expenditure of Rs 10,000 crore for its green field as well as brown field projects in the current fiscal, Chairman of the company Kumar Mangalam Birla said today.



"We have a capex Rs 10,000 crore for all our projects, both green field as well as brown field, for the current financial year," Birla told shareholders at the company's 53rd annual general meeting here.



All of the company's major strategic expansions in Brazil, South Korea and the US are on track, he said, adding that it has ventured into China with a plant that will initially focus on automotive sheet finishing capabilities.



"This will further solidify our global automotive leadership position. All through the year, at Novelis, strategic investments were made in global recycling facilities in South America, Europe and Germany. These facilities will ensure metal supply and optimisation of overall cost base," he said.



Novelis' investments have been strategically geared to leverage growth opportunities in the emerging markets, to capture the increasing emphasis on light weighting in the automobile industry and recycling in all the four operating regions, he said.



He also informed the shareholders that the Mahan Aluminium Project, Aditya Aluminium Project and Utkal Alumina Refinery were all at an advanced stage of implementation.



He further said the company's balanced portfolio, value added products, operational excellence and aggressive growth strategy has helped it in its positive performance.



"Our performance has been outstanding, both at standalone and consolidated level," he said.



The aluminium business in the country recorded the highest production and the cost pressures were largely neutralised through greater efficiencies, he said.



The copper business attained the highest profitability led by improvement in recovery, better product mix and maximising value from by-products, he pointed out.



Novelis, he said, too reported strong operating results braving global economic headwinds.



The company had reported consolidated net profit of Rs 3,397 crore last fiscal compared to Rs 2,456 crore the year before, while the consolidated revenue stood at Rs 80,821 crore compared to Rs 72,202 crore in the previous year.

Sesa Goa Mining Ops Shut down

With the Goa government putting a blanket ban on mining, Vedanta group firm Sesa Goa today said it has stopped extraction of iron ore from all its mines in the state, leading to 6 per cent fall in its stock price. Following the suspension of works, all the mining operations of Sesa Goa -- the largest private sector iron ore producer of the country -- have come to a standstill. Sesa Goa's operations in Karnataka have been closed for more than a year due to a Supreme Court imposed mining ban in the southern state. In December, 2010, it had discontinued operations in Odisha. After the announcement, the company's scrip has tumbled over 6 per cent from its previous close on the BSE. At 1415 hrs, it was trading at Rs 159.95, down 5.72 per cent. "The Director of Mines, Government of Goa, on September 10, 2012, issued orders for temporary suspension of mining operations of all the mining leases in Goa, with effect from September 11, 2012, until further orders. Consequently, Sesa Goa has stopped ore extraction from all its mines in Goa," the company said in a statement. It added, "Sesa will submit all relevant documents to the government authorities for scrutiny at the earliest in order to ensure early restart of operations." The company, however, did not comment on how much impact the suspension of mining in Goa will have on the revenues as all its iron ore extraction activities have come to a close. Goa has been the mainstay of Sesa Goa since its inception and the company currently has a mining capacity of 14.5 million tonnes per annum (MTPA) in the state. It has been hoping to increase it little bit to 15 MTPA in FY13. Yesterday, the Goa government had issued a notification asking all the 90 mines to suspend operations in the state in the wake of Justice M B Shah Commission report which had pegged state's iron ore mining scam at nearly Rs 35,000 crore. The Shah Commission had also claimed that all the 90 mines operating in the state were illegal as they did not have the permission from National Board for Wildlife. The NBW permission is required as a part of Environment Clearance. However, the ban is limited to mining operations only and pending verification of documents, the state government has allowed transportation and trade of iron ore already mined and existing either in lease hold area, in transit or stored at jetties. The lease holders or traders have also been asked to report the exact location of their ore within 7 days. Goa is the second largest iron-ore producer in India with about 50 MT production last year.

Regards,

Anup Shah

Adroitt Flow Control

Cell +91 9820501463

anup@adroitt.net

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