Madhucon plans to buy 2nd coal mine in Indonesia

Madhucon plans to buy 2nd coal mine in Indonesia
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First Published: Thu, Jun 07 2007. 01 49 AM IST
Updated: Thu, Jun 07 2007. 01 49 AM IST
After acquiring a coal mine in Indonesia, the Hyderabad-based Madhucon Projects Ltd with interests in highway, irrigation and railway projects is looking to buy another coal mine in the island nation with around 50 million tonne (mt) of reserves.
It also plans to set up a multi-product special economic zone (SEZ) on the east coast in India, together with a 1000MW thermal power project, at an initial estimated investment of Rs5,000 crore.
“We are looking at setting up a multi-product SEZ with port connectivity on the eastern coast. We have already submitted the proposal to the state government. Since we have already acquired a coal mine in Indonesia we are looking at developing a 1000MW power project in the SEZ having two units of 500MW each,” said N. Nageswar Rao, chairman and managing director, Madhucon Projects Ltd. He declined to provide further details.
The company had earlier acquired a 50mt coal block in the East Kaliyamandin region of Indonesia on a 30-year lease. The move is part of the company’s strategy to aggressively foray into power generation in India using imported coal as feedstock. “Our overall turnover for 2006-07 was Rs1,000 crore and we are looking at a Rs1,500 crore turnover in 2007-08,” added Rao. Madhucon plans to develop the power project on its own and not collaborate with any other company for the same. “While the project details are being worked upon, we estimate both the projects to initial infrastructure will cost around Rs5,000 crore,” Rao said.
For its coal mine acquisition plans in Indonesia, the company is looking at a mine with proven reserves of 50mt. “Logistics is the main issue in Indonesia. Coal is there but there is difficulty in bringing it to the port. As there is no network, no infrastructure we will have to build our own infrastructure,” Rao said.
Not everyone agrees. “These plans would involve raising of huge funds. Shareholder wealth has been eroded, as the company had made a preferential allotment two years ago at Rs390 per share and the current price is at a discount of 46% to that price. Whether these plans can result in shareholder wealth creation needs to be seen,” said an analyst with a Mumbai-based research firm who did not wish to be identified.
On Wednesday, the Madhucon stock declined by 0.38% on the Bombay Stock Exchange to close at Rs207.45.
(utpal.b@livemint.com)
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First Published: Thu, Jun 07 2007. 01 49 AM IST
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