Hindalco Industries approves QIP of Rs 3,000 crore
Aluminium major Hindalco Industries on Thursday launched a $500 million (around Rs 3,300 crore) share sale to institutional investors in what could be the biggest equity capital markets offering so far this year and taking advantage of a liquidity driven market rally.
The Kumar Mangalam Birla-controlled company has set a floor price of Rs. 184.45 a share.
Bank of America-Merrill Lynch, Citigroup, JM Financial, SBI Capital Markets and Axis Capital are the leader managers to the issue.
Proceeds of the transaction will be used to cut burgeoning debt in the company’s books, multiple sources have told ET. Hindalco's consolidated net debt stands at Rs 55,500 crore. It's net debt-to EBIDTA is at 4.3. Net debt-to-EBIDTA of more than 3 is considered risky.
QIP is a capital-raising tool through which listed companies can issue equity shares, fully and partly convertible debentures, or any securities other than warrants that are convertible into equity shares to a qualified institutional buyer.
Hindalco shares closed at Rs. 189.50 apiece, up 0.19%, on Thursday on BSE, outperforming the benchmark Sensex, which ended 0.5 percent lower. The stock price has risen 139 % in the last one year as the company is turning around after almost two years of commodity slowdown and disruption caused by coal mine de-allocation.
Surging domestic inflows and the post budget pick up in FII flows have led the BSE Sensex higher by 10% (in US$ terms) and 8% (absolute terms). India is the second-best-performing market in Asia sofar this year.
The company is now focussing on reducing its leverage ratio by selling non-core assets and improving its operating profit under its new chief executive Satish Pai, who joined from Schlumberger.
"The first stated objective of this management team is to reduce debt to operating profit, or EBITDA, and deleverage the balance sheet before taking up any big project." Pai told ET in September.
The share sale is coming after two and half years when the company postponed its capital raising plans at the last minute in July-August 2014 due to poor market sentiment. The Supreme Court cancelled coal blocks allotted to the company and a downturn in the commodity cycle forced the management to call off the share sale in 2014.
"Hindalco's main aim right now is to deleverage. They have shared that their free cash flow will be used to pay off debt as there is no further capex planned. Hindalco is on the right path. It's a good time to bring down fixed cost as metal market sentiment is good," said Goutam Chakraborty, an analyst with Emkay Global.
The Kumar Mangalam Birla-controlled company has set a floor price of Rs. 184.45 a share.
Bank of America-Merrill Lynch, Citigroup, JM Financial, SBI Capital Markets and Axis Capital are the leader managers to the issue.
Proceeds of the transaction will be used to cut burgeoning debt in the company’s books, multiple sources have told ET. Hindalco's consolidated net debt stands at Rs 55,500 crore. It's net debt-to EBIDTA is at 4.3. Net debt-to-EBIDTA of more than 3 is considered risky.
QIP is a capital-raising tool through which listed companies can issue equity shares, fully and partly convertible debentures, or any securities other than warrants that are convertible into equity shares to a qualified institutional buyer.
Hindalco shares closed at Rs. 189.50 apiece, up 0.19%, on Thursday on BSE, outperforming the benchmark Sensex, which ended 0.5 percent lower. The stock price has risen 139 % in the last one year as the company is turning around after almost two years of commodity slowdown and disruption caused by coal mine de-allocation.
Surging domestic inflows and the post budget pick up in FII flows have led the BSE Sensex higher by 10% (in US$ terms) and 8% (absolute terms). India is the second-best-performing market in Asia sofar this year.
The company is now focussing on reducing its leverage ratio by selling non-core assets and improving its operating profit under its new chief executive Satish Pai, who joined from Schlumberger.
"The first stated objective of this management team is to reduce debt to operating profit, or EBITDA, and deleverage the balance sheet before taking up any big project." Pai told ET in September.
The share sale is coming after two and half years when the company postponed its capital raising plans at the last minute in July-August 2014 due to poor market sentiment. The Supreme Court cancelled coal blocks allotted to the company and a downturn in the commodity cycle forced the management to call off the share sale in 2014.
"Hindalco's main aim right now is to deleverage. They have shared that their free cash flow will be used to pay off debt as there is no further capex planned. Hindalco is on the right path. It's a good time to bring down fixed cost as metal market sentiment is good," said Goutam Chakraborty, an analyst with Emkay Global.
