Sep 29 (Bloomberg) -- Email Sterlite Industries (India) Ltd., the nation’s largest copper producer, fell the most in 21 months in Mumbai trading after a court ordered it to shutter its only smelter for breaching environment standards.
The shares fell 8.4 percent, the most since Jan. 9, 2009, to 161.40 rupees at the 3:30 p.m. close of trading. The Sensitive Index of the Bombay Stock Exchange fell 0.7 percent. Sterlite is the worst performer on the key index this year.
India is tightening rules to protect environmentally sensitive regions, prevent illegal mining and protect the resources and livelihood of the people living around mines and factories. Closing the 400,000 metric ton smelter set up in 1996 will erode Sterlite’s earnings before interest, taxes, depreciation and amortization margin by 8 percent and the share price by 14 rupees, investor Deven Choksey said.
"If at all there was a requirement of better control you could have given a timeframe in which they could have done it,” said Choksey, chief executive officer at K.R. Choksey Shares & Securities Pvt., which manages about $123 million in equities. "It seems the government is bent on taking impulsive and knee- jerk decisions.”
Sterlite is waiting for the full text of the order before it decides on a future course of action, according to an e- mailed statement released after the order yesterday. Workers at the copper refinery at Tuticorin in the southern Indian state of Tamil Nadu will have to be compensated, according to the judgment of the Madras High Court.
Pavan Kaushik, a spokesman for parent Vedanta Resources Plc, could not be reached immediately on his mobile phone today.
"There has been gross violation of environmental norms in the Sterlite project and the High Court’s order today has vindicated our stand,” said Fatima Babu, head of a women’s group opposing the copper project at Tuticorin. "We now seek criminal proceeding against the officials involved in giving clearance to the project in the first place.”
The government last month rejected a proposal by Vedanta Resources to mine bauxite in the eastern state of Orissa and may scrap environment clearance for its existing aluminum refinery, hampering a planned $8 billion expansion.
Sterlite plans to double the Tuticorin smelter capacity to 800,000 tons by the middle of 2011, according to its annual report. The smelter uses concentrate produced from the company’s mines in Tasmania, Australia and other sources.
"The Tuticorin smelter has been operating for more than 12 years and has been in compliance with necessary rules and regulations,” the company said in the statement yesterday.
Sterlite’s copper business including rods, cathodes and chemicals generated sales of 125.4 billion rupees ($2.8 billion) last year, according to the annual report.