Sterlite sale of shares in U.S. sets India record

Sterlite Industries (India), the copper and zinc producer controlled by the billionaire Anil Agarwal, sold $1.75 billion worth of stock in the United States, the biggest overseas share sale by an Indian company.

Sterlite, which is based in Mumbai and is a unit of Vedanta Resources, said Tuesday it had sold 130.44 million American depositary receipts at $13.44 each. One ADR is equal to one local share.

The company's share price has more than quadrupled in the past two years as prices of copper, aluminium and zinc have reached record highs. Demand for Indian shares lifted the Indian stock market value past $1 trillion last month.

"Foreign investors want to invest in India because they believe in the growth story," said Sandip Sabharwal, chief investment officer at J.M. Financial Mutual Fund in Mumbai. "There is enough appetite overseas for Indian offerings."

The benchmark Sensitive Index in India has gained 43 percent in the past year as the fastest pace of economic growth in almost two decades has lured overseas investors. Sterlite's sale may be eclipsed this week if ICICI Bank, the biggest lender to consumers in India, completes a $4.3 billion offer in India and the United States.

DLF, a property developer, raised $2.4 billion last week in the biggest Indian initial offering. Lenders including State Bank of India, HDFC Bank and UTI Bank plan to raise $3.5 billion selling stock. The dates have yet to be set.

Sterlite shares trade at 8 times estimated future profit, compared with 12 times for BHP Billiton and 13 times for Rio Tinto, the world's biggest mining companies.

"Outlook on metal and mining companies in emerging markets is positive because of the region's growth prospects," said A. Balasubramaniam, chief investment officer at Birla Sun Life Asset Management in Mumbai.

"Sterlite's valuation is cheaper than its global peers."

Vedanta's 79.25 percent stake in Sterlite has limited the shares available to foreign investors, which own 7.4 percent of the company. The stake of Vedanta, which is based in London, would drop to 63 percent after the sale.

The offering would "increase visibility and lead to better price discovery," Rakesh Arora, an analyst with Macquarie Securities, said in a note to clients last week. The stock is "under-discovered." Macquarie is the only overseas broker tracking the company, he said.

Sterlite shares rose 15.50 rupees, or 2.9 percent, to close at 559.90 rupees, or $13.73, on the Bombay Stock Exchange.