07 JULY 2014The Economic Times
Hindalco to mop up $500 million in QIP
Edited by : AL CIRCLE
2 min read
Kumar Mangalam Birla-led Hindalco plans to raise $500 million (around INR 3,000 crore) through the qualified institutional placement of shares to raise funds primarily to repay part of its debt, said three people in the know.
The floor price of the QIP that may hit the market next week could be INR 168 a share, the three people said.
Hindalco has mandated CLSA to manage the issue. On June 30, CLSA upgraded its rating on Hindalco to a 'buy' from 'sell', and raised its share price target by 31% to INR 215. CLSA said that Hindalco's subsidiary Novelis would be a big beneficiary of the accelerating shift of global automakers from steel to aluminium given its strong franchise and upcoming capacities. "We believe that stock could double in four years once Novelis' new units, India smelters and Mahan coal mine fully rampup," CLSA said in the report. Responding to the CLSA upgrade, shares of Hindalco soared to touch a 52-week high of INR 179 on Wednesday.
Hindalco, the aluminium and copper major, follows Indian companies who have so far mopped up around INR 15,000 crore in the last one month alone through the QIP route. Hindalco did not respond to ET's query, saying that executives were unavailable.
"There is money in the market and stock valuation has improved so the company could look at a QIP. Hindalco is in the last phase of its capex cycle in India and its US capex is also decelerating and cash flow is likely to increase going ahead. Given this, we don't see any immediate reason for Hindalco to go for an equity issue," said Giriraj Daga, senior analyst with Nirmal Bang Securities.
Experts tracking the company said that the company had not expressed any equity dilution plans until recently but the significant rise in share prices and the renewed investor interest in the market may have motivated it to plan a QIP. Shares of Hindalco have gained 46% in 2014 so far.
Hindalco's consolidated debt stood at INR 63,348 crore as of March-end and analysts expect the debt level to peak in the current year to March. "We expect consolidated net debt to peak in FY15 and decline at an average by INR 58 billion (INR 28/sh) per annum over FY16-19," the CLSA report said.
The floor price of the QIP that may hit the market next week could be INR 168 a share, the three people said.
Hindalco has mandated CLSA to manage the issue. On June 30, CLSA upgraded its rating on Hindalco to a 'buy' from 'sell', and raised its share price target by 31% to INR 215. CLSA said that Hindalco's subsidiary Novelis would be a big beneficiary of the accelerating shift of global automakers from steel to aluminium given its strong franchise and upcoming capacities. "We believe that stock could double in four years once Novelis' new units, India smelters and Mahan coal mine fully rampup," CLSA said in the report. Responding to the CLSA upgrade, shares of Hindalco soared to touch a 52-week high of INR 179 on Wednesday.
Hindalco, the aluminium and copper major, follows Indian companies who have so far mopped up around INR 15,000 crore in the last one month alone through the QIP route. Hindalco did not respond to ET's query, saying that executives were unavailable.
"There is money in the market and stock valuation has improved so the company could look at a QIP. Hindalco is in the last phase of its capex cycle in India and its US capex is also decelerating and cash flow is likely to increase going ahead. Given this, we don't see any immediate reason for Hindalco to go for an equity issue," said Giriraj Daga, senior analyst with Nirmal Bang Securities.
Experts tracking the company said that the company had not expressed any equity dilution plans until recently but the significant rise in share prices and the renewed investor interest in the market may have motivated it to plan a QIP. Shares of Hindalco have gained 46% in 2014 so far.
Hindalco's consolidated debt stood at INR 63,348 crore as of March-end and analysts expect the debt level to peak in the current year to March. "We expect consolidated net debt to peak in FY15 and decline at an average by INR 58 billion (INR 28/sh) per annum over FY16-19," the CLSA report said.
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