Nalco eyes 51% stake in Tajikistan’s Talco

Thursday , July 03, 2008--India's second largest aluminium maker, National Aluminium Company Ltd (Nalco) is set to acquire 51% in Tajik Aluminium Company (Talco), a primary aluminium producer owned by the Tajikistan government - a deal that will see the combine emerging as one of the world's top-three aluminium producer with an output of 8,00,000 metric tonne (MT). According to sources, Nalco has approached the government with the proposal and is awaiting its approval. Located in Tursunzoda, a city in western Tajikistan, Talco runs the largest aluminium manufacturing plant in central Asia, and is one of Tajikistan's largest enterprises. In 2006 Talco produced 416,000 MT of aluminium. In 2007-08 Nalco produced 4,684,684 MT of bauxite and 359,213 MT of aluminium. According to sources Talco wanted to buy aluminium without going for the global tendering process being adopted by Nalco. Talco relies entirely on imports to run its smelters and the acquisition will now provide it the necessary raw materials by virtue of access to bauxite mines of Nalco. However, Nalco now feels that instead of supplying alumina, it would like to acquire 51% stake in the equity and management control of Talco. Sources added that the matter was under consideration of the Tajik government and Nalco would approach the Cabinet for approval if the signs are positive. "The cost per unit of production will come down and Nalco will benefit from the existing smelters of Talco. However, Talco is not technologically advanced and an acquisition of an aluminium company in South Korea could have been a better choice," said KPMG director, tax and regulatory Nabin Ballodia. Acquiring Talco -- 100%-owned by the Tajikistan government can face some roadblocks. The Tajikistan authorities had shown its willingness to privatise Talco but wanted to retain the majority stake and an acquisition by Nalco can prove to be a tricky issue. This, however, will not be the fist Indian acquisition in the aluminium space. Last year Aditya Birla-owned Hindalco too acquired Novelis in an all-cash transaction which valued Novelis at about $6 billion, including about $2.40 billion of debt. For Nalco, which has rolled out significant outbound plans, the benefits will be in the form of acquiring smelter plants which are world leader in production. Also the cost of power generation is significantly cheaper in Tajikistan and will benefit the company since production of aluminium is high power consuming. Nalco, which is in the midst of a $1.2 billion expansion plan to be completed in December, has already signed a MoU with the Indonesian government to set up a five-lakh tonne smelter and a 1,250 MW captive power plant with investment to the tune of Rs 14,000 crore. Source: financialexpress