Hindustan Copper scales over 8-year high, surges 25% in 3 days

Shares of Hindustan Copper (HCL) hit an over eight-year high and were locked in the upper circuit of 10 per cent at Rs 189.20 on the BSE in Monday's session on expectations of improved demand outlook. The stock of the state-owned copper company has rallied 25 per cent in the past three trading days. It was quoting at its highest level since November 2012.

Till 10:28 am, a combined 4.84 million equity shares had changed hands on the counter and there were pending buy orders for 1.6 million shares on the NSE and BSE. At the same time, the S&P BSE Sensex was up 0.67 per cent at 49,536 points.

Copper demand is expected to grow at 7-8 per cent in India. Growing demand from the power sector in view of the government laying thrust on renewable energy and increasing demand from the households for consumer durables will boost demand for copper in India. The manufacturing of electric vehicles (EV) will also augment the consumption of copper as EVs use four times more copper than traditional internal combustion engines.

Copper is essential to EV technology and its supporting infrastructure and the evolving market will have a substantial impact on copper demand. The government initiatives will further increase the growth of copper consuming industries.

HCL expects that copper concentrate, rather than refined copper products, will be its primary product in the future. The company is in the process of expanding its mining capacities from approximately 3.97 MTPA as of March 31, 2020, to 12.20 MTPA in Phase-I and subsequently to 20.20 MTPA in Phase-II. This expansion plan includes the development of an underground mine under the existing open cast mine at Malanjkhand; expanding existing mines, namely Khetri, Kolihan and Surda; reopening some of the mines that were closed in the past, namely Kendadih and Rakha; and establishing new mines or mining blocks, namely Banwas, Chapri, Sideshwar and Dhobani mine. In addition, for the long term growth prospects, the company has applied for area reservation under Section 17A of MMDR Act 2015 in the States of Jharkhand, Madhya Pradesh and Rajasthan.

With the past three days' rally, the market price of HCL appreciated by 58 per cent over its qualified institutional placement (QIP) issue price of Rs 119.60 per share. In April, the company had raised Rs 500 crore through the issuance of shares to institutional investors. The funds from the QIP are proposed to be used to fund the ongoing capex or expansion plan of the company.