The Economic Times
Hindalco's US subsidiary will pay a dividend of $250 M to its parent company
Edited by : AL CIRCLE
2 min read
Hindalco's US subsidiary Novelis will play a significant role in reducing the parent's massive debt going forward as it trims its capital expenditure and generates cash on the back of better sales volume.
Novelis, the world's biggest maker of flat-rolled aluminum used to make beverage cans, decided to pay a dividend of $250 million (Rs 1470 crore) to the parent company this year. This is a huge contribution from Novelis considering it generated about $254 million in cash between fiscal 2008 and 2014 cumulatively and its debt being under review for a possible default by Moody's.
Novelis has been negatively impacted due to scarcity of scrap aluminium and rising premiums on the metal.
But most analysts are not worried about Novelis' debt and expect business to get better for the company, as it shifts focus to higher-margin automotive market from the subdued can market in Asia and America.
“The use of recycled metal, and higher automotive sales share and volumes from fiscal 2015 are likely to boost the adjusted earnings before interest, tax, depreciation and amortization (EBITDA), offsetting any adverse price pressure impact in Asia,“ said analyst Jimesh Sanghvi of IL&FS Broking services. The company expects volume growth to be 10% in the current fiscal.
Hindalco had a total debt about Rs. 25,682.93 crore as on Sept-end 2013 on standalone basis. It has skyrocketed due to investment in capacity building in India.
Novel is, which was acquired for $6 billion in 2007, paid dividend of $1.7 billion in 2010. “Novelis has now passed the in flection point with the path set for growth as benefits of the $2 billion t capex has started to kick in,“ wrote Motilal Oswal analyst San jay Jain. “Novelis has turned into a cash cow. “
The management of Novelis expects the share of auto segment in product mix to increase from 9% last year to 20% in fiscal 2017.
Analysts expect dividend payment to Hindalco to become an annual exercise considering the liquidity position of the company.
Novelis, the world's biggest maker of flat-rolled aluminum used to make beverage cans, decided to pay a dividend of $250 million (Rs 1470 crore) to the parent company this year. This is a huge contribution from Novelis considering it generated about $254 million in cash between fiscal 2008 and 2014 cumulatively and its debt being under review for a possible default by Moody's.
Novelis has been negatively impacted due to scarcity of scrap aluminium and rising premiums on the metal.
But most analysts are not worried about Novelis' debt and expect business to get better for the company, as it shifts focus to higher-margin automotive market from the subdued can market in Asia and America.
“The use of recycled metal, and higher automotive sales share and volumes from fiscal 2015 are likely to boost the adjusted earnings before interest, tax, depreciation and amortization (EBITDA), offsetting any adverse price pressure impact in Asia,“ said analyst Jimesh Sanghvi of IL&FS Broking services. The company expects volume growth to be 10% in the current fiscal.
Hindalco had a total debt about Rs. 25,682.93 crore as on Sept-end 2013 on standalone basis. It has skyrocketed due to investment in capacity building in India.
Novel is, which was acquired for $6 billion in 2007, paid dividend of $1.7 billion in 2010. “Novelis has now passed the in flection point with the path set for growth as benefits of the $2 billion t capex has started to kick in,“ wrote Motilal Oswal analyst San jay Jain. “Novelis has turned into a cash cow. “
The management of Novelis expects the share of auto segment in product mix to increase from 9% last year to 20% in fiscal 2017.
Analysts expect dividend payment to Hindalco to become an annual exercise considering the liquidity position of the company.
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