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Our Bureau

Board okays preferential issue to promoter group

Mr Kumar Mangalam Birla

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Mumbai March 2

Mr Kumar Mangalam Birla is now scaling up his stake in the AV Birla group's flagship company Hindalco. This comes on the heels of similar exercises undertaken by two of India Inc's biggest names — Mr Ratan Tata and Mr Mukesh Ambani.

The Hindalco Board, which met here on Friday, approved the issue of preferential shares and warrants to the promoter group, subject to shareholders' approval. The board approved the issue of up to 6.75 crore equity shares and 8 crore warrants to the promoters for a maximum of Rs 2,600 crore.

It approved issue of 6.75 crore equity shares of Re 1 each for a maximum of Rs 1,200 crore; and issue of 8 crore warrants that entitle the holder to obtain allotment of one equity share against one warrant, up to a maximum of Rs 1,400 crore. At the maximum price, the issues will work out to Rs 177.7 and Rs 175 per share respectively, a premium of around 27 per cent at current prices. But going by the previous six-month average, depending on the relevant date, the price would be in the range of Rs 145-150 per share. (Hindalco closed Friday at Rs 137.85 on the BSE, gaining by 0.47 per cent over the day).

The relevant date for determining the price for the preferential issue of both the shares and warrants would be 30 days prior to the date of the EGM scheduled for March 28, 2007. Sources said that Mr Birla, who holds about 26.5 per cent stake in Hindalco, is looking to scale up his holding by about 10 per cent through the preferential issue. This would raise the promoters' stake in the company to around 35-36 per cent.

Fund use

Although the company did not specify how the proceeds from the preferential issue would be utilised, sources said it would be used to part-finance its acquisition of Canada-based Novelis for $6 billion. Through the issue, the company is aiming at improving its debt-equity ratio that can be leveraged to borrow funds for the acquisition.

Hindalco is expanding the capacity of its alumina refinery from 110 ktpa to 450 ktpa, the smelting capacity of its Hirakud unit from 65 ktpa to 143 ktpaand its alumina refining capacity at Belgaum from 3.5 lakh tpa to 6.5 lakh tpa

It is also setting up a greenfield, integrated 1.5 million tpa alumina and 325 ktpa aluminium project. Further, another 325 ktpa aluminium smelter, with a 750 MW captive power plant and a five million tpa captive coal mine in Jharkhand, is on the drawing board.

Hindalco, which is paying a premium of 15 per cent for acquiring Novelis, will be doubling its group turnover to $20 million after the acquisition. The combination of Hindalco and Novelis is expected to establish a global integrated aluminium producer

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Pref issue: Hindalco board meet today

More Stories on : Overseas Investments | Preferential Allotments | Aluminium | Hindalco Industries Ltd

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