Hindalco Industries looks to pocket $945 million through Novelis IPO

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3 min read Last Updated : May 28 2024 | 9:03 PM IST

Aditya Birla Group’s Hindalco Industries is set to list its US subsidiary Novelis on the New York Stock Exchange (NYSE),  offering 45 million shares at $18-$21 apiece. This represents 7.5 per cent of Hindalco’s current stake in the company, according to public disclosures made on Tuesday.


Novelis’ initial public offering (IPO) could generate up to $945 million for Hindalco Industries as proceeds from the offer for sale. At the above mentioned range, Novelis is valued at up to $12.6 billion. Hindalco acquired Novelis in 2007 in a deal that valued it at $6 billion.


If the green shoe option is exercised, the proceeds could reach $1.08 billion at the upper end of the price band, according to a source close to the development. Based on the net debt of $4.35 billion, according to the filing with the US Securities and Exchange Commission (SEC), the enterprise valuation of the company is estimated to be between $15.2 billion and $17 billion.


In a statement on Tuesday, Novelis said it has launched “a roadshow for the IPO of 45 million of its common shares held by Novelis’ sole shareholder (Hindalco)”. This will reduce Hindalco’s holding in the company to 92.5 per cent.

The US subsidiary also expects the selling shareholder to grant the underwriters an option to purchase up to an additional 6.7 million common shares to cover over-allotments, if any, for 30 days after the date of the final prospectus. If the underwriters exercise the full over-allotment, Hindalco’s stake in the company will further fall to 91.4 per cent, Novelis noted in the statement.


In February, Novelis announced plans to pursue a US market listing, with Hindalco Industries as the sole promoter offering the common shares. Currently, Novelis is a wholly-owned subsidiary of Hindalco Industries, and hence will be the sole beneficiary of the up to $945 million proceeds.


Hindalco’s management has not yet disclosed the purpose or planned utilisation of the expected proceeds. Analysts have noted the company’s current debt-light balance sheet makes the utilisation of the expected IPO proceeds a curious case. As of March, Hindalco’s net debt was at Rs 31,536 crore, at the consolidated level, with a treasury balance of Rs 22,965 crore.


At home, Hindalco plans to invest Rs 6,000 crore as capex in the current financial year. The company said on Friday that FY25’s capex will be funded entirely through internal accruals. In the US, Novelis is pursuing a $4.1 billion capex for a greenfield rolling and recycling facility at Bay Minette.


Novelis’ SEC filing also noted that the company will be a “controlled company” within the meaning of the rules of the NYSE and, as a result, will qualify for, and intend to rely on, exemptions from certain corporate governance requirements. The document added that the shareholder will not have the same protections afforded to shareholders of companies that are subject to such requirements.


Morgan Stanley, BofA Securities, and Citigroup are acting as lead book-running managers for the proposed offering, with Wells Fargo Securities, Deutsche Bank Securities, and BMO Capital Markets acting as additional book-running managers. BNP Paribas, Academy Securities, Credit Agricole CIB, PNC Capital Markets LLC, and SMBC Nikko are acting as co-managers for the proposed offering.


The SEC filing also noted that prior to the completion of this offering, the company will adopt an equity incentive plan, in which employees and non-employee directors of Novelis are eligible to participate.

First Published: May 28 2024 | 8:54 PM IST