Sesa Sterlite halves capex plans for FY16; stock declines

MUMBAI: Shares of Sesa Sterlite opened in the red and declined over 1 per cent after the company halved its capex plans for FY16. Weaker crude and metal prices are a concern for Vedanta group company's expansion strategy.

The management of the Sesa Sterlite in a conference call said capex for 2015-16 is being reduced to $1 billion from the $2 billion.

According to brokerage Motilal Oswal, despite headwind of weaker prices of key commodities, management has emphasized the focus on free cash generation through capex optimization, primarily at Cairn India and Zinc International, opex reduction, asset sweating, 500 million of additional annual margin in marketing over four years, 800 million of efficiencies in procurement over four years and production ramp-up at stranded aluminum and power assets aided by the recently-acquired coal mines in the e-auction.

“We maintain a positive outlook on aluminum and zinc prices. Eventual merger of cash rich subsidiaries will de-stress the balance sheet and re-rate the stock. Maintain Buy on Sesa Sterlite,” the report said.

At 09:25 a.m.; the stock was at Rs 197.90, down 0.63 per cent, on the BSE. It fell 1.55 per cent to touch a low of Rs 196.05 in early trade.