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Hindalco Industries Ltd.

BSE: 500440 | NSE: HINDALCO |

Represents Equity.Intra - day transactions are permissible and normal trading is done in this category
Series: EQ | ISIN: INE038A01020 | SECTOR: Aluminium

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Jun 25, 11:51
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Jun 25, 11:51
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  • Bid Price (Qty.)

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  • Offer Price (Qty.)

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Annual Report

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Director’s Report

The Directors are pleased to present the 49th Annual Report along with the audited annual accounts for the year ended 31st March, 2008. Your company has taken various strategic initiatives during the year to strengthen the financials. Some of the key initiatives are : 1. Completion of acquisition of Novelis Inc., the worlds leading producer of aluminium rolled products, on 15th May 2007. 2. Completion of merger of Indian Aluminium Company with your company. 3. Acquition of entire shareholding of Alcan Inc in Utkal Alumina International Ltd. (Utkal). Consequently, Utkal is now a wholly owned subsidiary of the company. 4. Execution of Integration process with Novelis with your company. We began with cultural integration, followed by finance and technology, and marketing is under progress. Financial Performance Your companys consolidated revenues crossed 15 USD billion mark during the year registering a year-on- year growth of 211% to Rs. 60,013 crores from Rs. 19,316 Crores. The consolidated EBIDTA was at Rs. 7,291 Crores. The Chairmans letter to shareholders and the Managements Discussion & Analysis, which form a part of this Annual Report, provide the strategic direction and a more detailed analysis on the performance of individual businesses and their outlook. Rs. in Million Financial Results for the year ended Standalone Consolidated 31.03.08 31.03.07 31.03.08 31.03.07 Net Sales & Operating Revenue 192,010 183,130 600,128 193,161 Profit Before Tax 30,256 35,046 29,855 36,616 Provision for Current Tax 6,063 9,841 9,713 9,942 Provision for Deferred Tax 876 (551) (738) (478) Provision for Fringe Benefits Tax 114 113 123 121 Tax Adjustment for earlier years (Net) (5,407) - (5,481) - Profit before Minority Interest 28,609 25,643 26,238 27,031 Minority Interest - - 2,206 161 Share in (Profit)/ Loss of Associates - - 159 12 Net profit 28,609 25,643 23,873 26,858 Appropriations Debenture Redemption Reserve 50 187 50 187 Special Reserve - - 9 13 Dividend on Preference Shares (Current Year Rs. 0.24 Mio, Previous Year Nil) Dividend Tax on Preference Shares (Current Year Rs. 0.04 Mio, Previous Year Nil) Interim Dividend on Equity Shares - 1,773 - 1,773 Tax on Interim Dividend - 249 - 249 Proposed Dividend on Equity Shares 2,269 - 2,285 16 Tax on Proposed Dividend 386 - 392 6 Transfer to General Reserve 25,611 24,434 25,629 25,496 Post the acquisition of Novelis effective May 15, 2007, Hindalco is now a global player with a strong presence in five continents and with a product portfolio which is a natural hedge against the volatility of aluminium prices. The improved results came on the back of strong operational focus and increase in capacities in fast growing markets of Asia and South America. Total shipments increased from 3113 kt to 3150 kt. Novelis countered inflation and challenging market conditions in certain geographies with portfolio optimisation, price increases, working capital improvements and reduction in corporate costs. The Companys exposure to contracts with metal price ceilings reduced during the year. The benefits can be seen in increased revenues and stronger cash flows. The integration activities are proceeding smoothly and the acquisition is expected to significantly enhance shareholder value. Dividend The Directors have recommended a dividend of Rs. 1.85 per share (Last Year Rs.1.70 per share). This will be paid in line with the applicable regulations. The total outgo including tax on dividend would be Rs. 2654.8 million (Last Year: Rs. 2022.2 million). Growth plans underway in Aluminium Your Company is aggressively pursuing various brownfield and greenfield growth opportunities in Aluminium as described below: Brownfield Expansions Muri The expansion of the Muri Alumina refinery from 110,000 tpa to 450,000 tpa is under commissioning in a phased manner. The production from the expanded facility is being ramped up progressively and has reached 180,000 tpa now. It will reach its full capacity during FY09. Hirakud Phase II of the expansion of the smelting capacity from 100,000 tpa to 143,000 tpa is on track. Its capacity has touched 110,000 tpa in Q4FY08 and will scale upto 143,000 tpa by August 2008. Greenfield Projects Aditya Aluminium, the integrated aluminium project, encompassing 1 to 1.5 million tpa alumina refinery, 260,000 to 359,000 tpa aluminium smelter and 750 to 900 MW captive power plant is progressing as planned. The smelter is expected to be commissioned by October 2011 and the refinery by January 2013. Mahan Aluminum project with a smelter capacity of 359 ktpa and CPP of 900 mw is on schedule. The smelter is expected to roll on by July 2011. Jharkhand project with a smelter capacity of 359 ktpa and CPP of 900 mw, tubed coal mine has been allotted jointly with Tata Power. The approximate date of commissioning is June 2012. Utkal Alumina Refinery with a capacity of 1.5 mtpa construction is currently underway. Bauxite mining activities will start by March 2009. The commissioning of the plant is expected by January 2011. Finance Utilisation of Right issue proceeds The Company has issued equity shares of Re. 1/- each on rights basis at a price of Rs 96 per share in the ratio of 1:4 in February, 2006 aggregating to 231,882,222 shares (including 361,191 shares allotted by the Company during the year, earlier kept in abeyance at the time of Companys rights issue due to court cases.) against a total amount receivable of Rs 22,261 million (spreading over a two year period with two call notices), the Company has received Rs 22,195 million till 31st March, 2008. Out of this, an amount of Rs 366 million has been spent on associated expenses of the rights issue and Rs 3,935 million has been utilized towards subscription to shares of a subsidiary of the Company. The balance amount has been invested temporarily in liquid funds. Preferential Issue As per approval of shareholders in the Extra Ordinary General Meeting held on 28 March 2007, the Company has allotted 67,500,000 equity shares of face value of Re 1/- each on a preferential basis to Promoters / Promoter Group at a price of Rs 173.87 each, fully paid on 11th April, 2007. Further 80,000,000 warrants were also allotted on a preferential basis to the Promoters / Promoter Group entitling them to apply for and obtain allotment of one equity share at a price of Rs 173.87 per share against each such warrant at any time after the date of allotment but on or before the expiry of 18 months from the date of allotment in one or more trenches. The Company has received 10% amount against each such warrant. Financing The Company met all its obligation on payment of interest and repayment of principal. The acquisition of Novelis was funded by a temporary loan of USD 3.1 Billion repayable on November 10, 2008 from consortium of banks. This loan was drawn by a subsidiary of the company secured by Hindalcos corporate guarantee. The company is evaluating various option including an equity rights issuance for take out financing. Consolidated Financial Statements In accordance with Accounting Standards 21 , 23 and 27 issued by the Institute of Chartered Accountants of India, your Company is presenting its consolidated financial statements. These Consolidated Financial Statements form part of the Annual Report. Corporate Governance The Securities and Exchange Board of India (SEBI) has prescribed corporate governance standards. Your Directors reaffirm their commitment to these standards and this annual report carries a section on Corporate Governance. Directors Responsibility Statement Your Directors affirm that the audited accounts containing financial statements for the financial year 2007-08 are in full conformity with the requirements of the Companies Act, 1956. They believe that the financial statements reflect fairly, the form and substance of transactions carried out during the year and reasonably present the Companys financial condition and results of operations. These statements are audited by the statutory auditors M/s. Singhi & Co. Your Directors further confirm that: 1) In the presentation of the Annual Accounts, applicable Accounting Standards have been followed. 2) That the accounting policies are consistently applied and reasonable, prudent judgment and estimates are made so as to give a true and fair view of the state of affairs of the Company at the end of the Financial Year. 3) The Directors have taken proper and sufficient care for the maintenance of adequate accounting records in accordance with the provisions of the Act for safeguarding the assets of the Company and for preventing and detecting fraud and other irregularities. 4) The Directors have prepared the Annual Accounts on a going concern basis. Your Companys internal Auditors have conducted periodic audits to provide reasonable assurance that established policies and procedures have been followed. Subsidary Companies A wholly owned subsidiary company namely A V Minerals (Netherlands) B.V. has been incorporated in Netherlands in April 2007. The entire holding in A V Metals Inc., a subsidiary of the Company in Canada has been transferred in May 2007 to A V Minerals (Netherlands) B.V. On 15th May, 2007, the Company acquired Novelis Inc., the worlds largest aluminium rolled product manufacturer through its indirect wholly-owned subsidiary A V Metals Inc. (Acquisition Sub) pursuant to a plan of arrangement (Arrangement) entered into on 10th February, 2007 and approved by the Ontario Superior Court of Justice, Canada on 14th May, 2007. A V Aluminum Inc is a wholly owned subsidiary of A V Metals Inc which in turn is a wholly owned subsidiary of A V Minerals (Netherlands) B.V. Indian Aluminium Company, Limited ceased to be a susbsidary of your company as it merged with your company. The amalgamation was made effective on 25th March, 2008 with appointed date as 1st April, 2007. The Company has acquired the shareholding of Alcan Inc. consisting of 78,564,384 equity shares of Rs 10/- each in Utkal Alumina International Limited (Utkal). Consequently, Utkal is now a wholly owned subsidiary of the Company. The Company has entered into a joint venture partnership with Almex USA Inc. (Almex), for the manufacture of high strength aluminium alloys for applications in the aerospace, sporting goods and surface transport industries. The joint venture has been named Hindalco-Almex Aerospace Limited. The Company has 70 per cent equity participation, with Almex holding the balance 30 per cent in the JV. The Company has formed a joint venture company namely Tubed Coal Mines Ltd with The Tata Power Company Ltd as per the condition of allotment letter of Ministry of Coal for the purpose of exploration of the Coal block allotted by the Government in the State of Jharkhand. Hindalco holds 60% stake in the Joint venture and balance 40% is held by The Tata Power Company Ltd. The Company has formed a joint venture company namely East Coast Bauxite Mining Company Private Limited with Orissa Mining Corporation Limited to mine bauxite in the State of Orissa. Hindalco holds 74% stake in the Joint venture and balance 26% is held by Orissa Mining Corporation Limited. The performance of the subsidiaries is covered elsewhere in this annual report. Your company has applied to the Central Government for grant of an exemption to your Company under Section 212(8) of the Companies Act, 1956, from attaching a copy of the Balance Sheet, Profit and Loss Account, Report of the Board of Directors and the Report of the Auditors to all the Subsidiary Companies. Subject to receipt of the approval, aforesaid documents are not being attached with the financial statements of your company. These documents can be requested by any member, investor of the company / subsidiary company. Further, in line with the Listing Agreement and in accordance with the Accounting Standard 21 (AS-21), Consolidated Financial Statements prepared by the Company include financial information of its subsidiaries. Employee Stock Option Scheme As mentioned last year, to share value created by the employees and to promote the culture of employee ownership in your company, the Employee Stock Option Scheme - 2006 (ESOS-2006), was introduced in the last year. In terms of ESOS-2006, the ESOS Compensation Committee has on 23rd August 2007 and 25, January 2008 granted 29,73,390 Stock Options to the Employees of the Company, including Managing Director in two tranches. The options will vest in 4 equal annual installments after one year of the grant and shall be exercisable within a period of 5 years from the date of vesting. Details of the options issued during ESOS-2006, as also disclosure in compliance with Clause 12 of Securities and Exchange Board of India (Employees Stock Option Scheme) Guidelines 1999, are set out in Annexure A to this report. Particulars as per Section 217 of the Companies Act, 1956 The information relating to the conservation of Energy, Technology Abosorption and Foreign Exchange Earnings and Outgo required under section 217 (1)(e) of The Companies Act, 1956, is set out in a separate statement attached to this report (Annexure B). In accordance with the provisions of sections 217 (2A), read with the Companies (Particulars of Employees) Rules, 1975, the names and other particulars of employees are to be set out in the directors report, as an addendum thereto. However, as per the provisions of section 219 (1) (b)(iv) of the Companies Act, 1956, the report and accounts, as therein set out, are being sent to all members of the company excluding the aforesaid information about employees. Any member, who is interested in obtaining such particulars about employees, may write to the Company Secretary at the Registered Office of the company. Directors In accordance with Article 146 of the Articles of Association of the Company, Mr. M. M. Bhagat, Mr. C. M. Maniar and Mr. S. S. Kothari retire from office by rotation, and being eligible, offer themselves for reappointment. Awards & Recognitions Several accolades have been conferred upon your Company, in recognition of its contribution in diverse fields. A selective list: Hirakud Hirakud Smelter - National Energy Conservation Award - First Prize 2007. Hirakud Smelter - National Safety Award for performance year 2005 (presented in Oct 07) by Ministry of Labour & Employment, Govt of India. Hirakud Power - CII - Orissa Award for Best Practices in Environment, Safety, Health for the year 2007. Hirakud Smelter was awarded the State level Safety Award for Best Occupational Healthcare 2006 - presented in February 2008 at Bhubaneswar. Muri Muri Alumina Plant selected for CIIs National Award for Excellence in Water Management 2007 for both Within & Beyond the Fence 2007. Belur Belur Plant was selected for the National Safety Award for outstanding performance in Industrial Safety as Runners Up for the performance year 2005 in achieving the Lowest Average Frequency Rate (presented in October 2007, by the Ministry for Labour & Employment, Govt of India. Belur Plant was a winner of the GreenTech Environmental Gold Award in the Metals & Mining Sector for its outstanding achievement in Environment Management during 2007 - 2008. Belur Sheet Plant was adjudged the Winner of the CII Eastern Region Energy Conservation Award for 2007 2008 . Alupuram Alupuram Complex awarded the Outstanding Safety Performance Award 2007 in the small scale Engineering Industrial category. Talabira Talabira Coal Mines won a host of Safety Awards, namely, First in Working Face and Maintenance of Dozer & Payloader and Second in Dust Suppression at the Annual Coal Mines Safety Fortnight 2008 organised by Directorate of Mines Safety, Bhubaneswar and Chaibasa Region. Durgmanwadi & Kasarsada Mines Durgmanwandi and Kasarsada Bauxite Mines have earned a host of awards during the Mines Environment & Mineral Conservation Week programmes, including Special Prize for being ranked First for 3 consecutive years in Overall Performance along with other prizes for Safety and other mining operations. Renukoot World Environment Foundation awarded Golden Peacock Award-2007 to Renukoot unit for remarkable achievements in the field of occupational health and safety. Renukoot unit won the Safety Innovation Award-2007 for excellence in the field of occupational health. The award was given by The Institute of Engineers India. Renukoot unit has been awarded Second Prize of National Energy Conservation Award 2007 by Government of India, Ministry of Power and Energy. Chief Commissioner, Central Excise, Lucknow Zone awarded Renukoot unit with commendation certificate for revenue performance in large scale manufacturing category and service tax category. Renukoot unit has been awarded Silver Trophy of Rajiv Gandhi National Quality Award-2007 by Bureau of Indian Standard in large scale manufacturing industries-metallurgy category. CIIs National Award for Excellence in Water Management, (Beyond the fence), 2007 was awarded for Rural Development work. Environmental Protection and Pollution Control Your Company is committed to sustainable development. Your company is a signatory to the Global Compact and subscribes to the principle of triple-bottom line accountability. A separate chapter in this report deals at length with your Companys initiatives and commitment to environment conservation. Auditors The observations made in the Auditors Report are self-explanatory and do not call for any further comments under Section 217 (3) of the Companies Act, 1956. M/s. Singhi & Company, Chartered Accountants and Auditors of the Company, retire, and being eligible, offer themselves for appointment. Appreciation Your Directors place on record their sincere appreciation for the assistance and guidance provided by the Honourable Ministers, Secretaries and other officials of the Ministry of Mines, Ministry of Coal, the Ministry of Chemicals and Fertilizers and various State Governments. Your Directors thank the Financial Institutions and Banks associated with your Company for their support as well. Your Companys employees are instrumental in your Company scaling new heights, year after year. Their commitment and contribution is deeply acknowledged. Your involvement as Shareholders is greatly valued. Your Directors look forward to your continuing support. For and on behalf of the Board Mumbai Dated the 20th Day of June,2008 Chairman

Director’s Report