Sterlite Industries - possibly branching out to banking
December 18, 2007
By: 
Arohan
Category: SLT
We have previously written about Sterlite Industries as a possible triple play on Indian growth, Commodities and fair valuation. Over the last 2 days the stock has declined, possibly in response to its bid to acquire stake in Industrial Finance Corporation of India in partnership with Morgan Stanley.
This is a curious turn of events for Sterlite and one has to wonder what is behind this move. As with most miners, Sterlite does generate significant amounts of cash flow that has to be put to use somewhere. The story posits that a possibility is for Sterlite to apply for a banking license if the deal consummates. Does the Sterlite board intends to move into new sectors/industries and turn the company into a mini-conglomerate? This remains to be seen. Also unknown is their capabilities in the banking/finance industries (and hence a partnership with Morgan Stanley)
If this is a positive project with a good ROI, I say go for it
Related posts:
- Sterlite Industries - banking deal is off
- Sterlite Industries - commodities and emerging markets play
December 24th, 2007 at 6:18 am
I can’t understand why they would be considering a move into banking when there is going to be serious consolidation in mining stocks over the next 18-24 months. Seems like the company will be worth more to a possible suitor if it stays a mining pure play in India.
December 26th, 2007 at 6:18 pm
Point taken. Indian businesses are generally run a bit different and there is a definite tendency to own a diverse set of businesses. Case in point: Reliance, Tata, Birla Group, etc