Hindalco Industries, the metal and mining arm of the Aditya Birla Group, plans to raise R5,000 crore from the equity markets, the company said in a filing to the bourses on Friday.
The board of directors of the company approved a fundraising plan of up to R5,000 crore through ?issuance of securities including equity shares or equity-linked securities, including a qualified institutional placement (QIP) route,? the company said in its filing. Hindalco has called a meeting of the shareholders on August 14 to approve the fund-raising plan.
The Aditya Birla Group has been one of the first Indian business conglomerates to aggressively announce fund-raising plans taking advantage of a resurgence in the market, following the election of the BJP government.
In June, its telecom arm Idea Cellular raised R3,000 crore through a QIP and another R750 crore through a preferential allotment of shares to Malaysian telecom firm Axiata. Also on Friday, Aditya Birla retail arm Pantaloons Fashion & Retail announced its intention to raise R500 crore, including R300 crore through a rights issue.
Hindalco might use these funds to repay the debt it had taken on to fund the large-scale capacity creation in India. It has also announced plans to incur a capital expenditure of R3,500 crore at its US subsidiary Novelis in the next two years.
Hindalco’s consolidated net debt stood at R51,636.20 crore at the end of fiscal 2014. Domestically, the company has no major capital expenditure lined up in the near future with operations at its projects like Utkal aluminium refinery, and aluminium smelter in Odisha gradually ramping up towards full capacity.
Analysts Abhijeet Naik and Nitij Mangal at foreign brokerage CLSA observe that Hindalco and Novelis? capital expenditure will drop significantly in and the company will turn free cash flow positive from FY16 onwards.
Novelis is increasing its auto-finishing capacity by 600 kilo tonnes by end of calendar year 2015 and will see 5% growth in volumes annually between fiscals 2014 and 2018 as new facilities ramp up production, a CLSA report dated June 30 stated.
Hindalco?s consolidated net debt is expected to peak in fiscal 2014-15 and decline at an average by around R5,800 crore per year between fiscals 2016 and 2019the CLSA report said.
