Kumar Mangalam: New order

Mumbai, Aug. 23: The boards of two Aditya Birla group companies — Hindalco and Indal — today approved a scheme of arrangement under which a majority of Indal divisions were absorbed into Hindalco.

“Hindalco owns nearly 97 per cent of Indal. I believe that the time is opportune to take this strategic stake to its logical conclusion,” Aditya Birla group chairman Kumar Mangalam Birla said.

As a result of the consolidation, the combined net worth of Hindalco will rise to Rs 8,700 crore.

Analysts said the proposed demerger will bolster Hindalco’s status as a non-ferrous metals powerhouse.

The scheme of arrangement between the two companies entails the demerger of all the businesses of Indal, except the one pertaining to the foil plant at Kollur.

“It was long overdue and was perhaps delayed as the group tried to mop up all the Indal shares through open offers,” an analyst said.

“Such a move would help in leveraging their combined strengths even further,” Hindalco managing director Debu Bhattacharya said.

Under the scheme, seven Indal shares will be swapped for one of Hindalco. Indal shares with the public will be retained, but with a reduced face value of Rs 2. The process is expected to be completed by March.

Hindalco will continue to maintain its 97 per cent stake in the leaner Indal.

The Hindalco share fell Rs 3.95 to close at Rs 1,128.55 from its previous close of Rs 1,132.50.

Capex plans worth Rs 2000 crore for Indal will be undertaken as planned, a group statement said. These include expansion of its metal output to 100,000 MT per annum, an increase in power generating capacity to 267.5 MW at Hirakud, ramp-up in the alumina plant at Muri to 5,00,000 MT per annum and a hike in special alumina chemicals capacity to 127,000 MT per annum at Belgaum.

The Utkal Alumina project in Orissa will also be transferred to Hindalco.

Hindalco has recently completed its brownfield expansion and is on a high growth mode. Its aluminium metal capacity has been ramped up to 345,000 MT, alumina at 660,000 MT and copper smelter at 250,000 MT. The copper smelter is being increased to 500,000 MT.

Indal shareholders have got a good deal, said analysts. The shares were not traded on the bourses, after Hindalco’s ownership crossed 90 per cent.

The transaction will allow Indal shareholders to participate in the combined business through a stake in Hindalco. At the same time, they will continue to gain from the strong foil business within Indal.