Dubai Aluminium together with Larsen & Tubro to invest in alumina plant in Orissa, India

Larsen & Toubro, the country’s biggest engineering firm, will invest around Rs 400 crore in its proposed three million ton alumina refinery joint venture with Dubai Aluminium Company (Dubal) in Orissa. The first phase of the plant at Rayagada with 1.5 million tons capacity is scheduled to be operational by 2010. “We will be investing around Rs 400 crore in the venture in which we will have 26 per cent equity stake. The rest will be with Dubal,” L&T chairman Mr AM Naik said. The total project cost is estimated at Rs 15,000 crore. L&T would do the engineering, procurement and construction job for the project, which would cost around Rs 5,000 crore. An EPC job usually yields 10 per cent margin. Hence, L&T would virtually have nothing to dole out from its internal accruals to take the 26 per cent equity stake. This would be a portfolio investment for the engineering major. Mr Naik also made it clear that L&T had no intention to be a long-term partner in the proposed refinery. It will get out of the project at an appropriate time with better returns, just as in the case of cement. “Cement was never our core business. We are not keen on running alumina business as well. We will sell our stake in the venture at the right time, at right price,” Mr Naik said. “The proposed investment in the alumina business is a strategic investment and it is good in the long-term,” he added. The proposed joint venture, Raykal Aluminum Company, has Bauxite mines located at Kutrumali and Sijimali hills.