Indian metals trader expands reach despite downturn

Ushdev International

11/12/2015 08:35

* Looking for counter-cyclical growth 
    * Offers strong balance sheet to companies 
    * Geographical diversification helps to cut China risk 
 
    By Melanie Burton 
    MELBOURNE, Dec 11 (Reuters) - As a global rout in 
commodities drives metals traders to close up shop or lay off 
staff, Indian-owned industrial metals firm UD Group is setting 
out expansion plans, boosting staff and moving into more 
countries. 
    The Singapore-based firm, which has a metals trading arm as 
well as mining, industrial and renewable units, recently opened 
an office in Beijing to grow in North Asia and is set to buy a 
small Swiss trading house, said Chairman Prateek Gupta. 
    He says a strong balance sheet is giving it the comfort to 
take a counter-cyclical bet, and grow as others contract. 
    "People ask us, 'Are you guys crazy, you want to step into 
China now when everyone is getting out?' I say, that's exactly 
why I want to get in," Gupta, a third-generation of the 
family-owned firm, told Reuters. 
    The Swiss purchase, which is in its final stages, will 
include 20 staff and seven senior traders, he said, helping to 
extend the group's reach into Europe, Russia and Africa, as it 
looks to grow from 250 people to 400 in the next two years. 
    "We get access to teams and other commodities, like 
aluminium, tin, lead and zinc and some ferro alloys," he said.   
 "That gives us growth in those commodities. They need 
additional depth of balance sheet." 
    UD's expansion comes as trading houses worldwide are facing 
the worst commodities downturn in a decade and as more banks 
ditch the sector. U.S. investment bank Morgan Stanley this week 
said it was closing its base metals trading business. 
 urn:newsml:reuters.com:*:nL8N13X3I9 
    Gupta said UD has avoided some of the pitfalls faced by 
rivals as it has maintained a large capital base and lower 
levels of borrowings, given the lower debt tolerance of banks in 
India where it has its roots. 
    At the same time, it has grown big enough to attract larger 
credit lines from banks elsewhere including in Asia, which are 
used primarily for working capital as it offers its balance 
sheet to customers.  
    "None of the metal market industry can survive without 
credit... That's where our model offers a better role. We offer 
credit back up." 
    UD also takes part in more downstream activities than 
traditional commodity trade houses, Gupta said, helping to 
manage risk as it offers an exit strategy in the event of 
default, where UD will buy its customers' products and sell 
them.  
    The firm's Bombay stock exchange-listed unit, Ushdev 
International  USTF.BO , is capitalised at $124 million and 
accounted for around a third of overall group business last 
year. Shares have fallen by more than a quarter this year, 
mirroring the downswing in metals.   
 
 (Editing by Richard Pullin and Ed Davies) 
 ((melanie.burton@thomsonreuters.com Twitter: @MelanieMetals; 
+613 9286 1421; Reuters Messaging: 
melanie.burton.thomsonreuters.com@reuters.net)) 
 
Keywords: METALS TRADER/ASIA