Hindalco on major expansion mode

Mumbai: Hindalco Industries plans to invest Rs 19,800 crore in the next three years in various expansion programmes.

The company is expanding Muri-alumina refinery capacity from 1.10 lakh tonnes per annum (tpa) to 4.50 lakh tpa by 2008 end. The phase II smelting capacity expansion from 1 lakh tpa to 1.43 lakh tpa and power generation capacity of 367 MW at Hirakud is on the verge of completion.

Mr Debnarayan Bhattacharya, Managing Director, Hindalco, said the company plans to develop high-grade lithographic sheets in India and manufacture automotive sheets. Post reduction in fixed price contract, Novelis has reported a net income of $25 billion in the first quarter of fiscal 2009 against a net loss of $142 million.

Despite the turbulent international market conditions, Hindalco Industries has decided to stick to its plan to raise $1 billion through AV Minerals (Netherlands) B.V. The fund raising was part of the company’s plan to repay the $3.03- billion bridge loan it has availed to acquire Novelis in 2007. The bridge loan has to be repaid by November 10.

The company also proposes to raise Rs 5,047.70 crore through its rights issue, which opens for subscription on Monday. The issue, in a ratio of three shares for every seven held at Rs 96 a share, will be open for subscription till October 10. The company’s stock on BSE closed flat at Rs 113 on Friday.

Given the uncertain market scenario, Hindalco has appointed ABN Amro Securities, ABN Amro Asia Equities, Citigroup Global Markets, Deutsche Equities, DSP Merrill Lynch and SBI to underwrite the rights issue. Incidentally, Merrill Lynch, which ran into trouble recently, has been taken over by Bank of America.

Speaking at the 49th annual general meeting of the company, Mr Kumar Mangalam Birla, Hindalco’s Chairman, said the unutilised proceeds of Rs 1,789 crore from the previous rights issue will be used to payback the bridge loan, besides tapping the internal accruals.

According to the offer document of the rights issue filed by the company with SEBI, if IGH Holdings a promoter group company exercises the warrants at the pre-agreed price of Rs 173.87 per warrant, the equity shares shall constitute 4.56 per cent of the post issue paid-up capital of the company. The promoters currently own 31.42 per cent in Hindalco.

On April 11, 2007, Hindalco had issued 80 million warrants on a preferential basis to IGH Holdings. The warrant can be converted into the same number of equity shares before it expires on October 10, 2008.