Indo Gulf copper unit folded into Hindalco
Jindal Steel to go diamond hunting
Open offer for Indal

Mumbai, July 21: 
The A. V. Birla group today announced the merger of Indo Gulf Corporation’s copper business with Hindalco as part of a Rs 7,000-crore recast plan. Indo Gulf’s fertiliser unit will be spun off into a separate firm called Indo Gulf Fertilisers.

Twelve Indo Gulf shares will be exchanged for one of Hindalco. Investors will also get one share of Indo Gulf Fertilisers for every five shares of Indo Gulf Corp. The swap, approved by boards of both firms today, is based on the joint valuation report of C. C. Choksi and Ernst & Young. DSP Merrill Lynch was the transaction advisor.

The recast, which will transform Hindalco into a non-ferrous metal powerhouse, is similar to the consolidation of cement business under Grasim Industries a few years ago. It will give Hindalco more financial power, helping it pursue acquisitions, including the big-ticket divestment of Nalco expected later this year.

“The restructuring will immensely strengthen the balance sheet of Hindalco. The company will be in a position to not only bid for large global sized companies since it has a strong balance sheet, but it can also raise cheap funds for major acquisitions,” an analyst said.

A. V. Birla group chairman Kumar Mangalam Birla, making no bones about the fact Hindalco should grow inorganically, said: “This is an important step in our endeavour to create a business that is focussed and has the financial capability to become a global player. The non-ferrous metal sector is integral to our growth plan.” The transaction would improve the company’s financial capability, open more global opportunities and heighten investor interest given that capital market rewards large players with better valuations.

According to company watchers, the current balance-sheet size of Hindalco gives the firm a headroom to borrow over Rs 4,000 crore, a figure expected to rise sharply after the consolidation of Indo Gulf’s copper business.

The merger of Indo Gulf’s copper business will boost Hindalco’s topline almost two fold to Rs 4,513 crore, from Rs 2331 crore on March 31, 2002. Company officials say if Indal and Dahej Harbour & Infrastructure Ltd are consolidated, the balance-sheet will swell by 30 per cent to more than Rs 10,000 crore. While net sales will be Rs 6,000 crore, profits are seen at Rs 1,000 crore.

Hindalco, one of the largest producers of primary aluminium in the country with a capacity of 2.75 lakh tonnes, is completely integrated — it even manufactures downstream aluminium products. It is increasing the smelter capacity of its Renukoot unit to 3.42 lakh tonnes.

On the other hand, Indo Gulf’s copper business can produce over 1.50 lakh tonnes of the metal. The plant also makes copper cathodes and continuous cast copper rods. Group officials said Indo Gulf Corp shareholders would benefit from the opportunities to participate in Hindalco’s future growth.


Calcutta, July 21: 
Jindal Steel and Power Ltd (JSPL) will diversify into diamond mining during the current financial year.

The company, the world’s largest manufacturer of sponge iron, is in talks with the global diamond majors—De Beers of South Africa and BHP of Australia—to set up a joint venture for the project.

Confirming the move, JSPL executive vice-chairman and managing director Naveen Jindal said its experience in iron ore mining would help it in its diamond foray.

“We have adequate mining experience as we are operating a captive coal mine as well as an iron ore mine for our sponge iron manufacturing unit at Raigarh in Chattisgarh. This experience will help us in diamond mining as well,” he said.

JSPL, formed after Jindal Strips Ltd hived off its sponge iron and power divisions in 1998 following the restructuring of the O. P. Jindal group, has a sponge iron and power plant in Raigarh.

Jindal, however, refused to comment on the company’s talks with De Beers and BHP for setting up a joint venture. “There are some international companies which have shown interest in diamond mining in India. Some of them have approached us and we are now examining the proposals,” he said.

JSPL is determined to go on with the project even without a strategic partner and it has already applied for a mining lease for two prospective blocks in Chattisgarh.

The company will sign a memorandum of understanding with the Chattisgarh government for the proposed project.

Sources said JSPL will initially invest around Rs 50 crore for the survey and exploration activities in the area.

According to Jindal, Chattisgarh has great potential for diamond mining and the project aims at tapping this potential. The company has also applied for a mining lease for coal and iron ore in Orissa, where it plans to set up a steel plant, he added.

JSPL’s existing sponge iron manufacturing capacity is 6,20,000 tonnes per annum and it plans to raise this further. The company has captive coal and iron ore mines along with a ferro chrome mine, which has a capacity of 30,000 tonnes.

The company is also setting up a rail mill in its Raigarh unit which will go onstream in December, Jindal said.


Mumbai, July 21: 
Hindalco Industries Ltd is making an open offer to acquire the balance shareholding of Indian Aluminium Company Ltd (Indal) at a price of Rs 120 per share. The offer, if fully subscribed, would lead to Indal being de-listed from the bourses.

Officials estimated Hindalco’s current holding in Indal to be close to 75 per cent. They added that the offer price is at an attractive premium to the market price—being at a 24 per cent premium to the last one month’s average price and 36 per cent premium to the 26-week average. The scrip closed at Rs 111 on BSE on Friday. The total outgo from the offer is being put at Rs 218 crore.

Crisil said the offer will not affect Hindalco’s financial risk profile as its liquidity position is strong. Reaffirming its ratings on Hindalco’s non-convertible debenture issue, Crisil said after the merger of Indo Gulf’s copper business, its key financial parameters would remain strong. However, there would be a decline in financial indicators since the relatively less profitable copper business will account for around one-third of the total sales of the consolidated entity.


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