Hin­dalco Re­vives QIP Plan, Looks to Raise ₹ 3,500 cr

FUND TRAIL Co had post­poned its fund-rais­ing plans in mid-2014 due weak mar­ket sen­ti­ment

The Economic Times - - Companies: Pursuit Of Profit -

Jwalit Vyas & Ari­jit Bar­man

Mum­bai: Nearly two-and-half years af­ter an aborted at­tempt, Aditya Birla Group’s Hin­dalco is kick­ing off its fund rais­ing plans once again, by sell­ing shares to in­sti­tu­tional in­vestors.

Hin­dalco has planned a qual­i­fied in­sti­tu­tional place­ment (QIP) is­sue to raise ₹ 3,500 crore, peo­ple aware of the trans­ac­tion said on con­di­tion of anonymity. The global in­vestor road shows are set to kick off from next week. This would be the first high pro­file is­suance of the year. The com­pany in July-Au­gust 2014, had post­poned its cap­i­tal rais­ing plans at the last minute due to poor mar­ket sen­ti­ments fol­low­ing the Supreme Court can­cel­la­tion of its coal blocks and the down­turn in the com­mod­ity cy­cle. With de­mand resurg­ing to sup­port prices, the com­pany has de­cided it is an op­por­tune time to re­visit those plans. The Hin­dalco share has tre­bled in the last one year and is up 21.4% in the last 4 months to close on Fri­day at ₹ 183.4 per share.

Bank of Amer­ica Mer­rill Lynch, Citi, JM Fi­nan­cial, Axis and SBI Caps have been man­dated for the share sale.

An Aditya Birla spokesper­son de­clined to com­ment on what he called mar­ket spec­u­la­tion.

The funds will be raised pre­dom­i­nantly to delever­age the bal­ance sheet of the com­pany. "Hin­dalco's share prices have risen sharply over the past few months due to strong alu­minium prices. The com­pany is tak­ing ad­van­tage of the high val­u­a­tions that it is get­ting right now to rightly delever­age its bal­ance sheet," said Rakesh Arora, MD, GoIn­dia Ad­vi­sors.

On a con­sol­i­dated ba­sis its net debt is now at ₹ 55,500 crore. The In­dian op­er­a­tions have ₹ 32,000 crore of debt on an EBITDA of around ₹ 5,416 crore in the last year. “Our fo­cus would be to bring down our debt-to-EBIDTA to less than 3,” Hin­dalco MD Satish Pai had told ET ear­lier this week. “We also have the board ap­proval to raise eq­uity of up to ₹ 5,000 crore, but we would be rais­ing much less than that," he said.

On delever­ag­ing front, the com­pany so far in FY17, has pre-paid ₹ 1,000 crore of debt and ex­pects to pre-pay ₹ 1,400 crore in FY17 and ₹ 2,500 crore the fol­low­ing fis­cal. The man­age­ment has gone on record its in­tent to limit Debt/EBITDA be­low 3.0x from 4.5x cur­rently. Last Au­gust, Hin­dalco’s Novelis unit raised $1.1 bil­lion through a bond is­suance in US to re­fi­nance its debt.

An­a­lysts track­ing the sec­tor feel the timely ramp-up of Hin­dalco’s new ca­pac­ity ad­di­tion projects at Ma­han, Aditya & Utkal along with ap­prox­i­mately 75% coal se­cu­rity achieved by the com­pany by way of link­ages and auc­tioned mines has placed the com­pany fa­vor­ably to ben­e­fit from any re­cov­ery in alu­minium prices. The do­mes­tic cop­per busi­ness too con­tin­ues to gain from steady mar­gins and high by-prod­uct prices. On the back of the grow­ing trend of global auto ma­jors switch­ing to light-weight alu­minium from steel to meet stricter emis­sion norms and fuel ef­fi­ciency, Novelis is also on course to achieve its $1 bil­lion EBITDA tar­get.

A must-do for sev­eral cap­i­tal in­ten­sive sec­tors like banks, tele­com, real es­tate, in­fra­struc­ture dur­ing the 2014-15 vin­tage, fund rais­ing through the so called QIP route, had dra­mat­i­cally shrunk in re­cent times with 2016 see­ing the low­est amount raised in 5 years with less than ₹ 4,500 crore raised, as per data avail­able. This is in sharp con­trast to ₹ 31,684 crore and ₹ 19,065 crore that was was raised through QIPs in 2014 and 2015 re­spec­tively, data from pri­mary mar­ket tracker Prime Data­base shows.

Newspapers in English

Newspapers from India

© PressReader. All rights reserved.