Shares of Hindalco Industries were up 2.4 percent at market open on the NSE after the company’s subsidiary Novelis filed for an initial public offering (IPO) with the Securities and Exchange Commission (SEC) last evening. At 10:10 am, the stock was trading at Rs 523, after hitting a high of Rs 535.
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The shares are expected to be offered by Novelis’ sole shareholder AV Minerals (Netherlands), a wholly-owned subsidiary of Hindalco.
At this point, the market is not clear on how much money the IPO will benefit Hindalco shareholders. No details are available about the quantum of shares on offer and how much money Hindalco stands to get from the sale of its stake, as the filing is a confidential one. What is clear is that Novelis will not be getting the money directly as the shares are being sold by the promoter.
“The issuance of fresh shares (by Novelis) would have been beneficial but this act of sale of shares by the promoters does not provide any case for a rerating," analysts at broking firm Nuvama wrote in a note to clients.
Also read: Hindalco Q3 net profit rises 71% to Rs 2,331 crore
Hindalco shares have been under pressure of late after Novelis on February 13 said the capital cost of the Bay Minette project has increased by 65 percent to $4.1 billion. Also, the project is expected to be completed by the end of CY2026 or the second half of FY27. The management also said the revision will reduce returns from ‘mid-teens’ to ‘double digits’.
One of the assumptions by the market is that Hindalco may use the proceeds from the sale to pare debt in Novelis, thereby reducing consolidated net debt on the balance sheet.
In its earnings call with analysts, Hindalco said that its net debt stood at Rs 34,835 crores at the end of December 2023. In the Indian operations, there was net cash of Rs 3,632 crores, while Novelis net debt stood at Rs 38,467 crores. During the quarter, Hindalco prepaid long-term debts of Rs 4,370 crores in the Hindalco India operations.
Nuvama expects Novelis' net debt to rise to $5 billion (roughly Rs 42,000 crore) by the end of FY26.
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