Hindalco Raises US$500 MM via Stock Offering

Two-and-a-half years after a tepid reaction from investors to a similar opportunity, a qualified institutional placement (QIP) launched on Friday netted Hindalco US$500 million over the weekend.

The QIP, which was India’s first metal sector share sale using the method, was also the country’s largest non-bank QIP since 2015. Foreign investors including Fidelity, Halbis, Blackrock, Goldman Sachs AMC, East Spring, Jardine Fleming Asset Management (JFAM), and Bajaj Allianz participated in the offering. Several prominent Indian mutual funds bought in to the QIP, including HDFC Mutual Fund, Tata Mutual Fund, SBI Mutual Fund, and Birla Mutual Fund.

“Unlike the usual trend of hedge fund interest in cyclical industries like metals and mining, this time the demand was from large longonly investors who covered nearly 23rd of the issue. This reaffirms faith in quality offerings. This would be the largest QIP from India Inc in 2 years,” opined Vishal Kampani, JM Financial’s Managing Director, to domestic media.

According to the firm, the opening share price will be in the neighborhood of US$2.75 per share, plus a 2.7% premium. Hindalco says that the funds raised will be utilized in paying down company debt.

“Our focus would be to bring down debt-to-Ebitda to less than 3,” explained Satish Pai, Hindalco’s managing director. Hindalco has paid down US$150 million in debt to date in this fiscal year, and plans to pay down another US$209 million over the remainder of the fiscal year, and US$375 million over the course of the coming fiscal year. As it stands now, Hindalco’s debt burden on a consolidated basis is US$8.3 billion.

“Hindalco has completed all its major planned expansions and is benefitting from the recovery in LME prices, continued growth in the domestic aluminium prices and, through Novelis, benefit from the uptick in flat-rolled products’ demand globally,” explained Kaku Nakhate, Bank of America Merrill Lynch’s CEO.

The QIP offering comes as Hindalco’s future looks particularly bright. The firm has lately ramped up capacity at three of its main projects and sealed a deal to guarantee 75% coal security.



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