MUMBAI: Hindalco Industries’s shares on 30 January 2007 on reports that the parent Aditya Birla group was considering acquiring aluminium products maker Novelis Inc., which analysts said made strategic sense.
The Hindustan Times said at the weekend that the family-run group, which also has interests in cement, textiles and mobile services, had completed a preliminary examination of Novelis’ books and was expected to submit a bid shortly.
The conglomerate was considering a $5 billion to $6 billion bid for Novelis, the newspaper said.
A spokeswoman for the Aditya Birla group declined comment.
“We would not like to comment on reports that are uncorroborated or speculative in nature,” she said.
Novelis said on Friday it was “in discussions with various parties that could lead to a potential sale of the company”.
Shares in Hindalco, India’s top private aluminium and copper producer, rose as much as 2.6 percent in a slightly weak Mumbai market with analysts saying an acquisition would make sense.
“Hindalco has ample raw-material reserves, but doesn’t have much experience in value-added and high-end products,” said Hitesh Kuvelkar at First Global Research.
“This would give them ready access to technology and global markets, so it makes their life much simpler.”
Novelis does not manufacture aluminium, but buys the metal to produce sheets for beverage cans and other industries.
The Atlanta-based Novelis was spun-off from Canadian aluminium giant Alcan Inc. two years ago.
Earlier, some Indian media reports said Alcan was selling its business for $8 billion to $10 billion to Hindalco, which Alcan later denied.
Aluminium demand in India is also set to grow rapidly with growth in the food processing sector and as auto makers launch lighter, more fuel-efficient vehicles in the fast-growing market.
Hindalco, valued at about $4.6 billion, last week reported a near-doubling in its quarterly net profit, helped by higher aluminium prices and a turnaround in its copper business.
Hindalco recently formed a joint venture with Almex USA Inc. to make high-strength aluminium alloys in India.
An analyst said this deal may not be routed through Hindalco, but another group company like Aditya Birla Nuvo Ltd.
“Hindalco has aggressive capex plans and it doesn’t make sense to pile on more debt in its books,” said Sandeep Shenoy, strategist at Pioneer Investcorp.
“So they may perhaps do it through Aditya Birla Nuvo.”
Aditya Birla Nuvo, the holding company for the group’s apparel, mobile and financial services units, is scheduled to report quarterly earnings later in the day.