Hindalco Industries share price declined nearly 6 per cent in early trade on Wednesday after its US subsidiary Novelis Inc postponed its initial public offering (IPO) due to market conditions. The company said Novelis will continue to evaluate the timing for the public offer in the future.
Last week, Novelis set the price band for its IPO between $18 to $21 per share. The company planned to offer 45 million (4.5 crore) shares for sale through the IPO, with Hindalco as the sole selling shareholder. The shares were to be listed on the US stock markets. Hindalco aimed to raise between $810 million and $945 million through the offering. At the upper end of the price band, Novelis was targeting a valuation of up to $12.6 billion in its US IPO.
With the green shoe option available to the US primary market investors, the net proceeds from Novelis IPO were estimated to be between $931.5 million and $1.08 million.
The company’s sole shareholder AV Minerals (Netherlands) NV, another subsidiary of Hindalco Industries, was set to offload 45 million Novelis shares in the IPO. After a successful listing of Novelis shares, Hindalco Industries would have owned 555 million Novelis shares or a 92.50 per cent stake of its US subsidiary.
Novelis IPO was slated to be the biggest by an Indian company in the US.
Novelis is the world’s largest aluminum recycler with major global companies being its clients such as Coca-Cola, Ford and Jaguar LandRover.
Following the announcement of its listing, CLSA reiterated a ‘Buy’ rating on Hindalco, setting a target price of Rs 770 per share. Key discussions around the deal are expected to center on the valuation of Hindalco’s stake in Novelis and the utilization of IPO proceeds.
Analysts at Prabhudas Lilladher also maintained its ‘Buy’ rating on Hindalco, applying a 6.5x EV multiple to Novelis and a 5x multiple to its India business, citing improved performance by the company in the near term and expected gains in the India business due to higher LME prices.
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