Hindalco shares hit record high ahead of Novelis IPO

Shares of Aditya Birla Group's metals flagship Hindalco Industries rose as much as 5% on Wednesday to hit a 52-week high of ₹713.40 on the BSE.

This comes after Hindalco's subsidiary Novelis said it is looking to raise up to $945 million by offering 45 million shares at a price range of $18 and $21 each. At these prices, Novelis is valued at up to $12.6 billion. Hindalco had bought Novelis for $6 billion in 2007.

Novelis will be listed on the New York Stock Exchange under the symbol "NVL".

The proposed IPO is an offer for sale by the existing promoter Hindalco Industries. Novelis, the world leader in aluminium rolling and recycling, will not receive any proceeds from the sale of common shares by its sole shareholder.

After the completion of the IPO, a wholly-owned subsidiary of Hindalco will own 555 million shares of Novelis’ common shares, representing 92.5% of Novelis’ total outstanding common shares or 91.4% if the underwriters exercise in full their over-allotment option.

“Novelis expects the selling shareholder to grant the underwriters an option to purchase up to an additional 6,750,000 common shares to cover over-allotments, if any, for 30 days after the date of the final prospectus,” Hindalco said in a regulatory filing.

Foreign brokerage CLSA has a ‘Buy’ rating on Hindalco with a target price of ₹770, implying a potential upside of 13% compared to its closing price on Tuesday.

Novelis believes the long-term demand trends for flat-rolled aluminum products remain strong. It has identified $6 billion of potential organic capital investment opportunities to grow the business through debottlenecking, recycling, and new capacity investments. It is focused on increasing capacity and align with sustainability commitments, says the company in its draft registration statement, which was submitted with the Securities and Exchange Commission (SEC) of the U.S. for review before public offering.

Novelis is building a recycling and rolling plant in Bay Minette, Alabama, for which the costs escalated by 65% to $4.1 billion from $2.5 billion. The plant will serve the beverage container market, with flexibility for automotive production. It also adds a new recycling center for beverage cans, increasing the company's recycling capacity by 15 billion cans per year when fully operational.

Novelis parent Hindalco reported a 32% rise in its consolidated net profit for the quarter ended March aided by improved margins across all business segments. For the full fiscal 2023-24, profit increased 1% to ₹10,155 crore. Consolidated revenue for the fourth quarter stood at ₹55,994 crore, flat year-on-year versus ₹55,857 crore in Q4 FY23, and up 6% quarter-on-quarter, on account of better realisations and volumes in India operations.