VAL

Presented by Bobina Garima Jyoti Priyanka Sutapa Preeti

INTRODUCTION TO METAL INDUSTRYtwo main segments: The Indian metals industry has

The industry is highly fragmented:

Group Structure as of March 2010

ABOUT THE COMPANY

Vedanta Aluminium Ltd (VAL) is an Associate Company of the globally diversified, London Stock Exchange listed, FTSE 100 metals and mining group Vedanta Resources PLC. Originally incorporated in 2001, VAL is a leading producer of metallurgical grade alumina and other aluminium products, which cater to a wide spectrum of industries. VAL has carved out a niche for itself in the aluminium industry with its superior product quality based on state-of-the-art technology. The firm operates a 1 mtpa Greenfield alumina refinery and an associated 75 MW captive power plant at Lanjigarh in the state of Orissa. Plans are afoot to increase the capacity of the Lanjigarh refinery significantly to 5 mtpa by mid-2012. This is in line with VALs strategy to promote Lanjigarh as a self-sustained manufacturing unit in terms of cost advantage and resource availability. VAL has invested in a 0.5 mtpa aluminum smelter and 1215 MW captive power plant supported by highly modern infrastructure at Jharsuguda, Orissa. In addition to this, VAL is in advance stage of commissioning of 1.1 mtpa aluminium smelter expansion project at Jharsuguda has also commissioned 2X600 MW power plant out of the 2400 MW independent power plant being set up by group company Sterlite Energy Ltd to meet the growing demand for power from both urban and rural consumers. The firm intends to expand the fully integrated aluminium smelting capacity to around 2.6 mtpa in near future.

VISION:Vedantas vision is clear and committed: achieving and sustaining a global leadership position. To be a world class, diversified resources company providing superior returns to their shareholders with high quality assets, low cost operations, and sustainable development.

MISSION:Vedantas mission is to become 2.6 million ton per annum aluminium producer at the lowest decile costs.

Pricing Strategy For Aluminium

Price of Aluminium Ingots based on LME

Add: Premium according to the current market premium

Multiply: SBI exchange rate

CIF Value

Multiply: Duty Factor

Add: C&F Charges

Add: Education Cess charges

Add: VAT/CST charges Final Price

PORTERS FIVE FORCE MODEL

Bargaining Power of Customers

Metal industry is experiencing strong growth.They have highly demanding customers.Wide range of products and specifications to meet different needs.

Bargaining Power of VEDANTAs Customers: Price Sensitivity: The Bulk buyers sign a MOU with Vedanta at cost lower than listed price. There are quantity discounts and also loyalty bonus. Degree of dependency over existing channels of distribution: Vedanta has 2 smelting plants and 11 depots from where buyer can get the required product. Imports: Buyers with capability to import the products can bargain at the current import prices whereas others who cant import have Vedanta as the only suppliers and it restricts their bargaining power. Premium: Buyers bargain at the current premium in the market for the particular product. Buyer Information Availability: Buyer with proper information about the current market (local and foreign) bargains more.

Bargaining Power of Supplier The country has rich reserves of minerals, ores Growing, skilled manpower base Largest manufacturing capacity Volume advantage Own Bauxite mines and captive power plants Centrally located in Chhattisgarh and eastern India in Orissa Close vicinity to RM sources Bargaining Power of Vedantas Supplier : Vedanta is an integrated producer of primary Aluminium and largest in the country. It has its own Bauxite mines and Coal blocks. The capacity is largest in the country. Vedanta produces Primary Aluminium at Balco and VAL. The quality is pure metal of 99.5% pure and above. The metal produced is sold at premium over London Metal Exchange prices.

Competitive Rivalry There are three main domestic producers Vedanta, NALCO and Hindalco. Apart from this there are many secondary producers,first kind are those who produce out of scrap and the second who produce Aluminium out of imported RM. This is a very large threat because there is no Import duty on Aluminium scrap. Since there is always possibility of imports, the prices are maintained in parity with import pricing. So, there exists a highly competitive secondary market. Vedantas Competitive Rivalry Vedanta is largest integrated Aluminium producer of the country. It competes globally with integrated players, mines and smelters. Some of its important competitors are mentioned below. Global Competitors are : United Company RUSAL, Alcoa, lcan, Chalco, Hydro Aluminium, BHP Billiton, Dubal, Rio Tinto Group, Aluminium Bahrain B.S.C, Century Aluminum.

Threat of Substitute Products Copper can replace aluminium in electrical applications; magnesium, titanium, and steel can substitute for aluminium in structural and ground transportation uses. Composites, wood, and steel can substitute for aluminium in construction. Glass, plastics, paper, and steel can substitute for aluminium in packaging. But there has been no viable substitute in a majority of usage areas. In fact Aluminium is used as substitute to all wood applications and hence it is known as green metal.

Threat of New Entrants There are constant threats from International and domestic new entrants in Aluminium sector. International threats are basically from China has increased their manufacturing capacity to 10 folds in past 10 years and are today completely self-sufficient. Many of the Australian companies such as BHP are expanding their capacities too. Domestic threats Many new projects are under implementation and some are in very advanced stage Aditya Aluminium Limited Utkal Aluminium Limited Jindal Aluminium Limited Enrack Aluminium Limited There are many other companies who have signed MOUs with govt. for setting up of projects and are waiting for favourable international market. Threat from global meltdown: There a tremendous negative impact on the global demand due to meltdown and there is always pressure on pricing and demand. The prices keep on fluctuating very adversely and this leads to exposure to risk.

SWOT ANALYSIS
STRENGTHS Strong brand name, image and reputation. Large market share. Strong global presence. Specialized training. Highly skilled and competitive workforce. Large financial source. Aggressive decision making. Fast-track project implementation. Lowest cost of project and quick ramp up. Lowest cost producer. Charity and CSR. Focus towards core sector business.

WEAKNESS Lack of Research and development facility. Failed to convey the message of development. Very large project commitments without assured raw material. Lack of strategic planning. Limited markets segment.

OPPORTUNITIES

Can aggressively enter international market with huge installed capacities. Huge growth perspective in aluminium consumption due to replacement of wood. Huge demand supply gap in power sector. Demand for the power is increasing around the country so this serves as a opportunity of industrial gas turbines.

Threats International competitor is a major threat. Non availability of adequate raw material in domestic market. Domestic competitors are expanding capacities. Limited product range, no focus on development of special grade products. Government interference and change in policies. Political instability. Pollution and environment restrictions. Global economic slowdown and the corresponding lower spending by construction and transportation Industries, the biggest consumers of zinc.

BCG Matrix

NALCO

National Aluminium Company Limited, abbreviated as 'NALCO', (incorporated 1981) (BSE: 532234, NSE: NATIONALUM) has units all over India at places like Angul and Damanjodi. It was incorporated as a public sector enterprise of the Ministry of Mines, Government of India in 1981. Today, it is Asia's largest one of the world's leading and the sixth largest, integrated aluminium complex, encompassing bauxite mining, alumina refining, aluminium smelting and casting, power generation, rail and port operations. It boasts of some of the world's latest and finest technology in the Aluminium manufacturing industry.

Hindalco

Domestic Sales Share

Vedanta is currently the market leader in wire rods and by increasing its capacity for the same there are plans to take up market share of the secondary wire rod producers H1 Figures, Reference Industry data