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A COMPREHENSIVE PROJECT REPORT ON Analysis of Hindustan Copper Ltd.

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SHREE SHAJANAND INSTITUTE OF MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE OF MASTER OF BUSINESS ASMINISTRATION

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Gujarat Technological University


FACULTY INCHARGE Hardik Baxi (Asst. Prof.) Submitted by Pooja Narwani (107610592002) Zarana Shah (107610592054)

MBA SEMESTER III


SHREE SHAJANAND INSTITUTE OF MANAGEMENT

MBA PROGRAMME

Affiliated to Gujarat Technological University Ahmedabad

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PREFACE

ACKNOWLEDGEMENT

About the Industry in India:


Copper in India industry profile provides top-line qualitative and quantitative summary information including: market size (value and volume 2006-10, and forecast to 2015). The profile also contains descriptions of the leading players including key financial metrics and analysis of competitive pressures within the market. Essential resource for top-line data and analysis covering the India copper market. Includes market size data, textual and graphical analysis of market growth trends, leading companies and macroeconomic information.

Highlights:
- The copper industry, for this research purposes, consists of copper mine production only. Industry volume is defined as the quantity of copper produced at sites within each country or geographical region. Volumes are converted to values using constant annual average LME prices. All currency conversions in this profile were calculated using 2010 average exchange rate.

- The Indian copper production industry had total revenue of $264.4 million in 2010, representing a compound annual growth rate (CAGR) of 10% for the period spanning 2006-2010.

- Market production volumes increased with a CAGR of 7.1% between 2006 and 2010, to reach a total of 35.4 thousand metric tonnes in 2010.

- The performance of the industry is forecast to accelerate, with an anticipated CAGR of 14.1% for the five-year period 2010-2015, which is expected to drive the industry to a value of $510.7 million by the end of 2015.

Features

- Save time carrying out entry-level research by identifying the size, growth, and leading players in the copper market in India - Use the Five Forces analysis to determine the competitive intensity and therefore attractiveness of the copper market in India - Leading company profiles reveal details of key copper market players global operations and financial performance - Add weight to presentations and pitches by understanding the future growth prospects of the India copper market with five year forecasts by both value and volume - Macroeconomic indicators provide insight into general trends within the India economy.

Company Profile:
Hindustan Copper Limited (HCL), a public sector undertaking under the administrative control of the Ministry of Mines, was incorporated on 9th November 1967. It has the distinction of being the nations only vertically integrated copper producing company as it manufactures copper right from the stage of mining to beneficiation, smelting, refining and casting of refined copper metal into downstream saleable products.

The Company markets copper cathodes, copper wire bar, continuous cast copper rod and by-products, such as anode slime (containing gold, silver, etc.), copper sulphate and sulphuric acid. More than 90% of the sales revenue is from cathode and continuous cast copper rods. In concluded financial year 2006-07, as per provisional estimates, the Company has earned a all time highest net profit pf Rs 331 crore (~USD 75 million ) against a sales turnover of Rs 1800 crore (~ USD 420 million). HCLs mines and plants are spread across four operating Units, one each in the States of Rajasthan, Madhya Pradesh, Jharkhand and Maharashtra as named below: Khetri Copper Complex (KCC) at Khetrinagar, Rajasthan Indian Copper Complex (ICC) at Ghatsila, Jharkhand Malanjkhand Copper Project (MCP) at Malanjkhand, Madhya Pradesh Taloja Copper Project (TCP) at Taloja, Maharashtra

November 1967

Incorporated to take over from National Mineral Development Corporation Ltd.

March 1972 M/S Indian Copper Corporation Limited, Private Sector Company, located at Ghatsila, Jharkhand with Smelter and Refinery was Nationalized and made part of HCL. February 1975 Fully integrated Copper complex from mining to refining came on stream at Khetri ( capacity 31,000 tonnes of refined copper) The largest hard rock open pit mine in the country came into stream at Malanjkhand in Madhya Pradesh of capacity 2 million tonnes ore Continuous Cast Wire Rod plant of South Wire Technology of capacity 60,000 MT was commissioned at Taloja in Maharashtra.

November 1982

December 1989

Registered Address Tamra Bhavan, 1, Ashutosh Chowdhury Avenue, Kolkata West Bengal 700019

Registrars M C S Limited 77/2A Hazra Road 3rd & 5th Floor

Tel: 033-22832224 033-22832226 Fax: 033-22832478 033-22832640 Email: investors_cs@hindustancopper.com Website: http://www.hindustancopper.com Group: Public Sector

Tel: 033-24767350, 24767354, 24541892, 24541893 Fax: 033-24541961 Email: mcskol@rediffmail.com Website: http://www.mcsdel.com

Management: Shri Shakeel Ahmed Chairman-cum-Managing Director Hindustan Copper Limited Kolkata Shri Gudey Srinivas Joint Secretary, Ministry of Mines Government of India New Delhi Smt Anjali Anand Srivastava Joint Secretary & Financial Advisor, Ministry of Mines Government of India New Delhi Shri Anupam Anand Director (Personnel) Hindustan Copper Limited Kolkata Shri K.D.Diwan Director (Operations) Hindustan Copper Limited Kolkata Shri. Avijit Ghosh Director (Mining) Hindustan Copper Limited Kolkata Shri K K Saberwal Director (Finance) Hindustan Copper Limited Kolkata

History:
Hindustan Copper Ltd is the only company which has rights to mine copper ore. The company converts copper ore to cathodes, which is further upgraded to bars and rods.

New Office Complex at Calcutta : The company has constructed a new office complex, Tamra Bhavan at 1, Ashutosh Chowdary Avenue, Calcutta.

Progress of New projects\ Expansion schemes : Modernisation of concentrator plant at KCC : Installation of larger capacity flotation cells and online stream analyser has been completed.

Expansion of Khetri Smelter and Refinery : Company is preposing expansion of Khetri Smelter and Refinery capacity from present 31000 to 100000 TPA partly based on imported concentrate. Government approval has already been received for stage -I clearance. The project is expected to be commisioned by the end of 1998.

Banwas Mine : To replace the low grade blocks and worked out levels of Khetri Mine, Banwas will be mined through Khetri mine upto 60 Mtr level. Necessary mine development activities have been initiated.

Gas Cleaning plant Gas cleaning plant at both ICC and KCC have been completed. Alkali Scrubbing Plant Mechanical completion of Alkali Scrubbing Plant at both ICC and KCC is over.

DEVELOPMENT OF SSI AND ANCILLARY UNITS


HCL units at Khetri Copper Complex, Khetrinagar, Indian Copper Complex, Ghatsila and Malanjkhand Copper Project, Malanjkhand are extending necessary assistance to the SSI units for its development by placing orders on them. Plant level ancillary development committee meetings are held periodically. SSI and ancillary units are encouraged to develop import substitution items and all assistance are provided by the units.

Hindustan Copper Ltd. has incurred a loss of Rs. 99.32 crore during AprilNovember 1996 due to decline in world copper prices, hike in input costs of petroleum products, tail freight, power tariff and reduction in customs duty. It suffered a loss of over Rs. 73 crore in the first six months of the 1996-97.

Hindustan Copper Ltd has decided to close down its largest mine in the East Mosabani - in order to scale down the rising production cost. The HCL took decision at at its board of meeting in December 1996.

Hindustan Copper Ltd. and the Ministry of Mines have signed a memorandum of understanding (MoU) for 1997-98.

2002 -GOI has decided to divest its entire shareholding of 98.95% in the company since the company has incurred an accumulated loss of Rs.4484 million. -The Musabonni Mines and Labour Union (MMLU) has filed a writ petition against the closure of Surda mine of Hindustan Copper Ltd.

2003 -CRISIL has placed the outstanding AAA rating assigned to Hindustan Copper Ltd's 15cr Non-Convertible bond programme on rating watch and developing implications. -Hindustan Copper has touched a 52 week-high of Rs.51.10. The CCD has also cleared the way for the disinvestment of the company.

2004 -Inks target MoU with the government, fixing its parameters and targets for the fiscal year

2006 - Hindustan Copper Ltd (HCL) plans to maximise its copper ingot production and ore mining capacity, entailing an investment between Rs 1,500 crore and Rs 2,000 crore in phases.

2007 - Hindustan Copper plans to go for green filed exploration for copper and other mineral categories including gold.

2008 - Hindustan Copper received mini-ratna (category-I) status from the government that will give it a free hand in taking decisions on capital expenditure up to Rs 500 crore.

2009

- Hindustan Copper Ltd has informed that Sri. R C Sungla has been appointed as Director (Mining) with effect from February 18, 2009 in terms of the Ministry of Mines' order dated February 18, 2009.

Vision
To maximize shareholder value through sustainable mining and value added products.

Mission
More than three times increase in ore production in a decade.

Continuous improvement in productivity and energy efficiency to bring it at par with the best internationally.

Acquiring and developing new resources of copper domestically and internationally.

To rigidly follow framework for sustainable development of mine and ensure corporate social responsibility.

To be one of the most profitable Nav-Ratna Companies.

Competitors:
Hind. Zinc Alcobex metals Ltd. Baroda Extrusion Ltd. Ubex Tubing Ltd. Gujarat Intrux Ltd. Nissan Copper Ltd. Shalimar Wires Industries Ltd. N. D. Metar Industries Ltd. Bilpower Presidion Wires Sterlite Ind. Tinplate

Products:

Main Products:
o Continuous Cast Copper Rod o Copper Cathode o Copper Concentrate

By Products:
o Copper Sulphate o Sulphuric Acid o Reverts o Anode Slime

Market situation:
Share price of hind. Copper from 1/1/2011 to 31/12/2011

Being in news in last year:


Supply-demand mismatch to keep prices buoyant - Jan 07, 2011 Hindustan Copper Q3 net profit at Rs 80.7cr - 04 Feb 2011 Hind Copper expects to maintain profitability in Q4 - 04 Feb 2011 Hindustan Copper has reported a sales turnover of Rs 307.79 crore and a net profit of Rs 80.72 crore for the quarter ended Dec '10 - 07 Feb 2011 Chinese consumption leading to hike in prices: Hind Copper - 18 Feb 2011 Hindustan Copper aims to maintain 9-10% production growth next year - 24 Mar 2011 Eyeing JV with NALCO to fund mining projects: Hind Copper - May 30, 2011 SAIL up to $778m share sale delayed further - 01 Jun 2011 Hindustan Copper eyes QIP route to raise funds - 13 Jun 2011 Efforts being made to reach disinvestment target: FinMin - 30 Aug 2011 Will fund expansion via internal accrual alone: Hind Copper - 30 Sep 2011 Govt invites applications for new Hindustan Copper CMD - 05 Oct 2011 Weak Re reduced burden of falling copper price: Hind Copper - 21 Oct 2011

Literature Review:

Hindustan Copper: In its element Hindustan Copper is a debt-free company


By: Somnath Dasgupta Edition: August 21, 2011

Copper prices had melted, the new Central government was gung-ho about selling government-owned industrial undertakings, and unions were fighting a rearguard action. The word was out: Kolkata-based Hindustan Copper was to be sold. The company had made profits up to 1996, but a bloated workforce, lack of economies of scale, and low metal prices had pushed it into the red. For the Bharatiya Janata Party-led National Democratic Alliance government, the company was a potential candidate for sale. Hindustan Copper is a debt-free company with cash reserves of Rs 400 crore It is a relatively lean organisation, following voluntary retirement schemes, the last of which was in 2006 With the price of copper at nearly $10,000 a tonne, reopening the sealed Rakha mines in Jharkhand seems viable Then came a Supreme Court ruling in another case: a company nationalised by an Act of Parliament cannot be sold by administrative fiat. Someone remembered that the Ghatsila unit in Jharkhand, earlier the Indian Copper Complex, had been nationalised by an Act of Parliament in 1972. Besides, a new government replaced the BJP and scrapped the plan to privatise Hindustan Copper.

Shakeel Ahmed, who took over as chairman and managing director in October 2009, knows the company's woes well: surplus labour, locational disadvantages poor economies of scale, and low copper prices. He has a blueprint for success. "Our new focus is on mining, not smelting," he says.

Ahmed, who belongs to the Indian Railway Service Mechanical Engineering cadre, inherited a leaner organisation. At one time, Hindustan Copper had more than 26,000 employees, spread across the Ghatsila complex in Jharkhand, the Malanjkhand project in Madhya Pradesh, the now-closed Khetri complex in Rajasthan, and Taloja in Maharashtra. Now it has 6,000. The last voluntary retirement scheme was implemented in 2006.

Making copper, as Ahmed explains, is an enormously wasteful process. The copper content of Indian ore is one per cent. Even so, it is higher than the world average, as mining companies elsewhere have exhausted richer ore. The ore is treated to increase the copper concentration to 25 per cent, smelted to increase it to 90 per cent, and refined to raise it further to 99.99 per cent. But costs are high, and margins low, for smelting and refining. Privatesector majors such as the AV Birla group and Sterlite make money by smelting and refining imported ore at plants near the coast.

Hindustan Copper itself often has its ore processed by these companies. "Smelters are viable above capacities of one million tonnes," says Ahmed. Hindustan Copper can smelt just 50,000 tonnes a year, compared to five million tonnes at the Birla plant at Dahej, and four million at Sterlite's Tuticorin facility. "Smelting costs $80-100 per tonne, while copper sells for $9,650 per tonne," says Ahmed. "So 95 per cent of the value is in mining."

In 2002/03, when privatisation was in full swing, bureaucrats in Delhi ordered shafts at Rakha mines in the Ghatsila complex - one of the country's largest copper deposits - to be plugged with concrete. This is usually done only for mines that are exhausted. Today, the management is trying to reopen the shafts. At current prices, it makes sense.

To raise funds, the company has been planning to get 10 per cent fresh equity from the government, and offload 10 per cent in the market. "Now the thinking is, we may not go in for fresh equity, only divestment," says Ahmed. "But a final decision has not been taken." There will be no full sale though, he adds. Hindustan Copper is a debt-free company, with cash reserves of more than Rs 400 crore.

RESEARCH METHODOLOGY

Research Design:
The above project is the analysis of the company so it does not have a sample space. The analysis of company includes both fundamental analysis as well as technical analysis. The part of technical analysis is to be done in 4th sem to get up-todate information and its interpretation.

Bibliography:

Links:
http://www.hindustancopper.com/CompanyProfile.asp?lnk=1&plnk=1 http://www.moneycontrol.com/india/stockpricequote/metalsnonferrous/hindustancopper/HC0 7 http://economictimes.indiatimes.com/hindustan-copper-ltd/stocks/companyid-11733.cms https://sites.google.com/site/coppermining/hindustan-copper-limited