Hindalco shares jump 5% after Novelis files for IPO in the US

In Wednesday's early trading, Hindalco Industries, the leading metals company under the Aditya Birla Group, surged 5% to reach ₹538 per share. This rise in shares follows an announcement from the company's wholly-owned subsidiary, Novelis Inc., on Tuesday. 

Novelis, which makes flat-rolled aluminium products, said it has submitted a confidential filing for an initial public offering (IPO) with the US Securities and Exchange Commission (SEC) for its proposed initial public offering (IPO).

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"Novelis Inc., a leading sustainable aluminum solutions provider and the world leader in aluminum rolling and recycling, today announced that it has confidentially submitted a draft registration statement on Form F-1 with the Securities and Exchange Commission (the SEC) relating to the proposed initial public offering of its common shares," Hindalco said in a statement.

The common shares are expected to be offered by Novelis’ sole shareholder, (a wholly owned subsidiary of Hindalco Industries Limited). Novelis will not receive any proceeds from the sale of common shares by its sole shareholder. 

Novelis expects to complete the public offering after the SEC completes its review process, subject to market and other conditions.

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Analysts tracking Hindalco pointed out that it is a reasonably good time to go public in the US, with the Federal Reserve indicating an end to interest rate hikes.

The ongoing capex in Novelis would augment Hindalco as the global leader in beverage cans and automotive FRP segments, said domestic brokerage firm Motilal Oswal. 

The company previously announced the signing of new contracts with Ball Corporation, Coke, and Ardagh for beverage packaging at the upcoming Bay Minette facility in the US. This investment offers the company a first-mover advantage, establishing a highly efficient facility for long-term benefits. 

Once operational, the company said the capacity can be doubled efficiently, following the successful model of other brownfield projects.

Hindalco bagged Novelis in 2007, at a time when Indian corporate houses were in an acquisition frenzy in the West. At the time, group chairman Kumar Mangalam Birla had said that it was only reasonable for his company to pay a premium to acquire a world leader.

In Q3 FY24, Novelis reported revenue of $3.9 billion (compared to $4.2 billion), reflecting a 6% YoY decline influenced by lower average aluminum prices. Despite this, Novelis saw a 33% YoY improvement in adjusted EBITDA and EBITDA per ton, driven by favourable metal recycling benefits and reduced operating costs.

Novelis accounted for 60% of Hindalco’s consolidated revenue in the first nine months of FY24 and accounted for a similar share of its profits.

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