National Aluminium Company NALCO will soon send an official team to Iran to explore setting up a smelter complex worth about $2 billion, its boss said, as world powers lift sanctions on Iran that had made negotiations difficult.
NALCO Chairman Tapan Kumar Chand told Reuters on Monday that the ending of sanctions on Iran in return for the country's curbs on its nuclear programme could help the company finally move ahead with its long-held goal to set up a smelter there to make use of cheap gas resources.
"It's a major bottleneck which has been cleared," Chand said. "As far as Iran is concerned they have already informed us that they are ready to receive the team."
Cash-rich NALCO will also visit Oman and Qatar in the next two months to work out the best place to set up a 500,000-tonnes-per-year smelter and an associated power plant in the Middle East.
Balvinder Kumar, the secretary of the mines ministry that controls NALCO, said the company's interest was at a preliminary stage though it should invest aggressively to expand wherever possible.
NALCO is trying to push back on a finance ministry request to buy back 25 percent of its shares from the government, part of Prime Minister Narendra Modi's asset sales plan which looks set to fall well short of its goal this fiscal year.
The company has agreed to repurchase 10 percent but says it also needs money for expansion - including the Middle East project - and to diversify into sectors such as nuclear energy.
NALCO is a rare Indian aluminium company managing to make money despite a sharp drop in the metal's prices and rising imports from China that have badly hurt private competitors such as Vedanta Ltd (VDAN.NS) and Hindalco (HALC.NS).
One factor is its easy access to raw materials such as bauxite, an aluminium ore. As a result, NALCO enjoys total liquid reserves of about 120 billion rupees ($1.77 billion), around half of that in cash, Kumar said.
The finance ministry, which has managed to raise less then a fifth of the roughly $10 billion it had projected in divestments for 2015-2016, now wants NALCO to shell out about 32.5 billion rupees ($481 million) to buy back shares out of the 89 percent holding the government has in the company.
"We're working on the 10 percent but a call on the rest will be taken by the board," Chairman Chand said, adding the buyback demand comes amid the fall in aluminium prices, eroding profitability and the need to have funds to grow.