Mumbai: The five banks that bought 34%, or about 179 million shares, of Hindalco Industries Ltd’s recent rights issue are facing a combined notional loss of at least Rs631.5 crore as shares of the country’s largest aluminium maker dived to a five-year low on Wednesday.

Shares of Hindalco, the flagship company of the Aditya Birla Group, fell nearly 6% on the Bombay Stock Exchange (BSE) to end the day at Rs60.70 a piece, its lowest since June 2003, and nearly 37% below the rights issue price of Rs96 per share.

BSE’s benchmark index, the 30-stock Sensex in which Hindalco has a 1.04% weightage, fell nearly 5%, or 513.49 points, to close at 10,169.90.

Underwriters to the issue—ABN Amro Asia Equities (India ) Ltd, Citi Group Global Markets India Pvt. Ltd, DSP Merrill Lynch Ltd, Deutsche Equities India Pvt. Ltd and State Bank of India—had each bought about 36 million unsold shares for Rs343.58 crore.

“We have agreed to hold our shares for now and will look at an exit later," said a banker whose firm had underwritten the issue, who did not want to be named as he is not authorized to speak to the media.

An investment banker, who had advised rights issues before he set up his consultancy, said promoters normally buy shares at a fixed price from underwriters after a rights issue so they can raise their stakes in the company at a lower price. But in Hindalco’s case, the underwriters have little option but to hold on to the shares till the market improves, the banker said, asking not to be identified.

A Hindalco spokeswoman said she couldn’t comment on the rights issue as the company was in a so-called “silent period" ahead of its second-quarter results on 31 October.

Some of Hindalco’s retail investors and institutional investors such as Life Insurance Corp. of India had shied away from the issue, which closed on 10 October, as it was cheaper to buy from the market. As of that date, Hindalco shares had fallen 44.83% to Rs80.65 from Rs146.18 on 20 June, when the company had announced its Rs5,047.70 crore rights issue plan.

Hindalco needs the money to repay by December part of the $3.01 billion (Rs14,839 crore today) short-term loans it took to buy Canadian aluminium can maker Novelis Inc. for $6.2 billion in 2006.

Hindalco managed to sell 294.2 million shares, or 55.9% of the 526 million shares on the block, raising Rs2,824.32 crore, making it mandatory for the Aditya Birla Group and underwriters to buy the rest. Aditya Birla Group chairman Kumar Mangalam Birla and his promoter companies had informed the Securities and Exchange Board of India that they would buy up to 50% of the unsold shares in the issue. The bankers had committed to buy 40% of the shares.