Hindalco to infuse upto $250 mn additional equity in Novelis, taking total infusion to $1 bn

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• Hindalco to infuse up to $250M more into Novelis, raising total support to $1B
• Funds address liquidity pressures after two fires at Novelis' Oswego facility
• Novelis expects to recover 70–80% of fire losses through insurance proceeds

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Hindalco will infuse upto $250 million additional equity into its U.S.-based subsidiary Novelis, over and above the $750 million announced in November, to support working capital and cost-to-serve requirements over the next 6 to 8 months, following two consecutive fire incidents at its Oswego facility.

The additional infusion takes the total planned equity support to $1 billion and is aimed at bridging liquidity pressures arising from fire-related disruptions, managing director Satish Pai said in a post-earnings media call on February  12.

Hindalco funded the first equity infusion through a debt raised via its wholly owned Netherlands-based subsidiary AV Minerals.  The financing was structured with a built-in $250 million greenshoe option, which the company is now exercising, taking the total equity support to $1 billion, Pai said.

The funding will help offset near-term cash flow strain between incurring restoration costs and receiving insurance proceeds, while also supporting elevated capital expenditure at the Bay Minette project, Pai said.

The Oswego fires are estimated to have a gross cash flow impact of $1.3–1.6 billion before insurance recoveries. Novelis expects to recover 70–80 percent of the losses through insurance, though timing remains uncertain.

"The positive story is that the mill will be restarting in June.  We think that they (Novelis) should be okay with this one-time equity infusion of a billion dollars. The insurance discussion is going extremely well. We have already got $50 million. There are no negative surprises there and we think that we will be able to recover 70 to 80%," he added.

The plant is not completely idle; while the hot mill is down, the cold mill and cash lines remain operational, Pai said.

In an analyst call on February 11, Novelis said citing preliminary analysis,  that the first fire was caused by a combination of factors, including the composition and characteristics of the aluminum strip/coil being processed, as well as lubricants present in the mill and surrounding area.

The second incident in November happened while the area was being restored, management clarified that this fire was not caused by operating the mill.

The plant is a critical supplier for the North American automotive industry, with Ford Motor Company as its largest customer, particularly for F-150 production.

Other key automotive customers include Toyota, Stellantis, Hyundai, BMW, Mercedes-Benz, Renault-Nissan, and Volvo. The facility also serves the beverage can and specialty markets.