Birla group firms tapping international market to raise $3.1 billion

Birla group firms, Novelis — a subsidiary of Hindalco — and SKI Carbon Black Mauritius are tapping international markets to raise $3.6 billion of debt. 

While Novelis raised $1.6 billion at a lower rate than the previous loan, SKI Carbon Black has hired 16 banks to raise $1.5 billion by selling bonds.

SKI Carbon Black is owned by the promoters and in June last year invested in Vodafone Idea rights issue. The company plans to use the funds for refinancing and general corporate purposes, bankers said. 

Novelis, which is on the verge of acquiring another US-based company, Aleris Corp for $3 billion, will be getting at least 200 basis points lower rates than the previous loan — saving a sizeable finance cost for the company, bankers said. Bankers said if, by any chance, the Aleris acquisition agreement by Novelis is terminated, for a period of 12 months from the date of issuance, Novelis may redeem up to $400 million of bonds at the issue price.

The acquisition of Aleris is currently awaiting clearance from the United States government even as the European Commission and the Chinese government have cleared the deal. The European approval is subject to the sale of Aleris’ plant at Duffel in Belgium, which produces aluminium for the automotive and specialties markets.

Source: Bloomberg

If the company misses the transaction deadline of January 21, the closing date under the merger deal may be extended, bankers said.

The Birla group fundraising comes within days of Bharti Airtel raises close to $3 billion from overseas investors by selling bonds and shares. 

Bankers said in spite of a slowing economy, foreign investors are evidently still bullish about India — looking at the response to the debt and share sale issues by well-rated companies. “However, whether this enthusiasm extends into the near future will depend on both domestic and global volatility as well as government reforms in the coming Budget,” said a banker. In 2019 calendar year, Indian companies raised $23.6 billion as dollar bonds, a fivefold rise over 2018 (see chart). With inputs from Bloomberg