Promoters of the Rs12,202 crore Hindalco Industries, India’s largest metals company, are set to hike their stake from 26.79% to 35.5%. This will be done through a preferential allotment of shares and warrants that the Hindalco Industries board approved on Friday.
In a notice sent to the Bombay Stock Exchange, the company said it would sell 67.5 million shares and 80 million warrants to the promoters at Rs178 a share. This will raise the stake of promoters, the Birlas, in the company to 35.5 % from the current 26.79 %.
In February, Mukesh Ambani, promoter of Reliance Industries Ltd, India’s largest private sector firm, increased its stake in the company to about 55% at a cost of Rs15,000 crore.
For rasing their stake in Hindalco Industries, the promoters will spend Rs2,600 crore. The fund is likely to be used, at least partly, to finance the proposed $6 billion (Rs26,400 crore) buy out of Canadian company Novelis.
The Hindalco stock on Friday rose by a marginal 0.5% to close at Rs137.85 on the Bombay Stock Exchange. The stock lost 21% since last month as shareholders trounced the company’s stock, viewing the buy as expensive.
“The fact that shares are being sold at close to 30% premium to its market price shows that the promoters are confident of the long-term outlook of the company even though investors are selling the Hindalco stocks,” says an an-alyst with a domestic brokerage, who does not wish to be identified.
The Hindalco board has called for an extraordinary general meeting on 28 March seeking shareholders’ approval for sale of shares through a preferential allotment.
The company has not specified what it plans to use the funds for, but analysts tracking the firms say Hindalco could use the funds to partly fund its buyout of Novelis.