Mumbai: Hindalco Industries Ltd’s second quarter profit rose a better-than- expected 12%, boosted by higher metal prices and a weakening rupee that increased export earnings at India’s biggest aluminium producer.
The company has tied up with 11 banks to refinance a $1 billion (Rs4,930 crore) loan taken to fund the purchase of Novelis Inc., chief financial officer Sunirmal Talukdar said.
Deutsche Bank AG and three Japanese banks will be among the lenders to Hindalco, Talukdar said. Net profit rose to Rs720 crore in the three months ended 30 September from Rs640 crore a year earlier, the firm said on Friday in a statement to the Bombay Stock Exchange.
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Five analysts surveyed by Bloomberg had estimated a median profit of Rs624 crore. Sales, including fees from smelting copper, rose 14% to Rs5,640 crore. The price of aluminium rose 17% on average in the period.
Earnings may dip this quarter as demand from China, the biggest producer of the metal, wanes amid the global economic crisis and a deepening credit crunch, analyst Rakesh Arora said. “Things will get tougher for Hindalco as copper refining fees remain low and aluminium prices weaken,” said Arora, who has an “outperform” rating on the stock at Macquarie Group Ltd.
Hindalco’s shares rose 13.26% to Rs60.20 each at close on the Bombay Stock Exchange. The shares have slumped almost 70% this year on concern the company’s borrowing costs will rise.
Rival National Aluminium Co. Ltd said on Friday its profit this quarter rose marginally to Rs444 crore from Rs439 crore a year ago. Its revenue rose 12.36% to Rs1,654.5 crore. The firm had earlier warned of marginally lower profits unless aluminium rose to $2,200 a tonne on the London Metal Exchange. Aluminium for three-month delivery was trading at $2,052 a tonne in London.
Hindalco needs funds to refinance a $1 billion loan taken to buy Novelis, the world’s largest maker of rolled aluminium products. It bought the company in February last year for $6 billion to expand and access US customers, including Coca-Cola Co. Hindalco said in June it will raise as much as $3 billion selling shares and bonds to repay the loan taken for the purchase.
Hindalco, which floated a $1 billion rights offer this month, received only 17% demand, forcing the company’s owners and bankers to buy the remaining stock. Founders Aditya Birla Group and associated companies bought 39% of the offer, in line with their shareholding. The group will buy a further 10% and sale arrangers took 34% because of the poor response.