The Hindu : Business : Hindalco to raise Rs. 5,000 cr. through rights issue

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Hindalco to raise Rs. 5,000 cr. through rights issue

Special Correspondent

Funds will be utilised to part finance Novelis acquisition

Company board approves 1:3 ratio
Issue price will be announced later

— PHOTO: PAUL NORONHA

MOVING ACROSS VALUE CHAIN: D. Bhattacharya (right), Vice-Chairman, Novelis, and Managing Director, Hindalco Industries, with Martha Brooks, COO, Novelis at a press conference in Mumbai on Friday.

MUMBAI: Aluminium producer Hindalco will be going in for a rights issue in the ratio of one share for every three shares held to raise up to Rs. 5,000 crore. The board of the company has approved the same. The price of the issue will be fixed at a later date.

Addressing the media here on Friday, Managing Director Debu Bhattacharya said the company was going in for a rights issue as part of a comprehensive financing plan for taking out of the existing bridge financing for the acquisition of Novelis.

Last year, the Aditya Birla group company bought Canadian aluminium giant Novelis for $6 billion and Hindalco had taken a bridge loan of $3.03 billion for this. The bridge loan has to be paid at the end of 18 months — a date that comes up on November 10. “To pay for the remainder of the bridge loan, we will be sourcing domestic debt, international debt and liquidation of treasury. We have not yet decided on which option,” Mr. Bhattacharya said.

Hindalco, for the first time announced the consolidated results (including that of Novelis) for the year ended March 2008. The company’s total revenue was up 211 per cent at Rs. 60,013 crore and the profit before interest and tax was up 22 per cent at Rs. 4,835 crore. The net profit was marginally lower at Rs. 2,387.30 crore (Rs. 2,685.80 crore) largely due to a massive interest component of Rs. 1,849 crore (Rs. 313.40 crore).

According to Mr. Bhattacharya, Hindalco’s subsidiaries have gone up from 18 in 2006-07 to 57 in 2007-08.

“While India has been the major focus area for Hindalco by 2015, we will have global operations and would have ventured into high value products. Growth will come from a de-risked portfolio spanning multiple geographies, costs and revenues in different currencies and across the value chain. Going forward, recycled aluminium will be an important feature in our business model as it is already so for Novelis.” Mr. Bhattacharya said.

He said that the next big thing for aluminium was the automotive sector. In North America, the light vehicle aluminium content would be 355 pounds per car by 2010 and it was estimated that 16 million cars would be sold annually in the U.S. by then. Novelis was already the preferred partner for large auto makers and supplies metal for 4.5 million vehicles. The company proposes to enter the Asian market soon.

“This year, with the rupee not appreciating further and the LME holding firm and our Hirakud production coming on stream, Hindalco could deliver good figures. However, aluminium prices are likely to be impacted as energy costs are rising all over the world and aluminium production being a highly energy intensive activity, there will be an impact on prices,” he said.

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