Hindalco proposes to use its share premium reserves to write off expenses incurred by the company on its international acquisition and domestic expansion. The company’s board has approved a proposal to this effect.
The company has a share premium reserve of around Rs8,500 crore. It proposes to create a separate reserve called Rs.Business Reconstruction Reserve Account’ out of its share premium account.
This corpus would be used to write off the goodwill and the expenses incurred by the company and would not exceed the amount lying in the share premium account as on December 31, 2008.
This is a preliminary development and there is no clarity as to the amount to be written off and the implications thereon. We remain NEUTRAL on Hindalco.