Nalco found favour with the market on Thursday after reports suggested that it may be the subject of a 10% divestment as early as September 2003.

As a result, by 10:35 IST, the scrip of India's largest aluminium manufacturer advanced 2.08% to Rs 91, recording volumes of 11,169 shares on BSE by then.

Thursday's rise in the scrip is purely on reports that the government is all set to de-link the public issue of National Aluminium (Nalco) shares from the strategic sale, the latter being still mired in controversy. The government hopes to get on with the proposed sale of shares in the domestic market and the ADR placement at least.

While the domestic offering could materialise in September 2003, the ADRs (for another 20%) could be issued in November 2003, the news reports suggest. Both offerings would be conducted through the book-building route. The book-building route becomes imperative as the current market price, the tiny float and the small trading volumes in the scrip at present offer no real indication to the share's real value.

The prospectus for the domestic offering, comprising some 6.4 crore equity shares, is expected to be filed with Sebi by July 2003. The offer document for the ADR issue will also be finalised and filed with Securities and Exchange Commission of the US around the same time.

The government proposes to divest as much as 60% stake in the company through a combination of strategic sale, American Depository Receipt and domestic issues. A 29% stake was proposed to be offloaded to a strategic partner earlier. The government had initially proposed to complete all three processes (the strategic sale, the ADR float and the domestic issue) together to ensure maximum realisation for the government holding. But the political and labour opposition to the company's strategic sale has forced the government to go ahead with the domestic as well as ADR issue, only.

For Q4 ended 31 March 2003, the company's net profit grew 29% to Rs 176.68 crore (Rs 1.76 billion) compared to Rs 137.06 crore (Rs 1.37 billion) in the corresponding period of the previous year. Net sales increased by 11% to Rs 721.47 crore (Rs 7.21 billion) from Rs 649.76 crore (Rs 6.49 billion) in MQ 2002. A healthy indicator came in the form of the company's operating profit rising 25.6% to Rs 355.54 crore (Rs 3.55 billion).

For the full year, the company scored a 27.5% jump in net profit to Rs 522.07 crore (Rs 5.22 billion) on a 17.5% increase in total income to Rs 2,789.87 crore (Rs 27.89 billion).

As for volumes, Nalco reported a 5.6% rise in aluminium output to 2,44,708 tonnes in FY 2002-03 . Bauxite production spurted 35.6% to 47.77 lakh tonnes while alumina production surged 33.0% to 1.48 million tonnes in FY 2002-03. During the period under review, alumina sales zoomed by 54.8% to 1.03 million tonnes and aluminium sales expanded 7.0% to 229,000 tonnes.

Analysts expect the company's performance to improve in the current quarter following a steady trend in aluminium prices, considering that inventories at the London Metal Exchange have decreased. Also, global demand seems to be looking up. With consumption in East Asian economic power China continuing to be strong and the end to the war in Iraq, demand for aluminium looks poised to grow in the short term.

The company's profitability indices should improve in 2003-04 and 2004-05 in view of increased volumes from enhanced capacity additions. Nalco is one of the least cost producers of aluminium in the world. But increased profits should arise from aggressive marketing and hike in volumes rather than from steady prices.