Birla to seek $2.7-bn debt refinance: Sources

Hindalco is seeking to reduce interest costs that are eroding profit

Hindalco Industries Ltd, the country’s second-biggest aluminum maker, is seeking improved terms on as much as $2.7 billion of debt as projects funded by the rupee loans come on stream, said two people familiar with the talks.     

The Kumar Mangalam Birla-controlled company wants to refinance loans worth $2.7 billion in the year ending March 31, said the people, asking not to be identified as negotiations are on. One of the new smelters started trial output last quarter, while the other is slated to start production in October.

Hindalco, whose debt swelled 39 per cent as of March 31, is seeking to reduce interest costs that are eroding profit. The Mumbai-based company’s shares slumped 20 per cent this year as local sales fell to a two-year low and profit, excluding unit Novelis Inc, fell in six of the past seven quarters. A 16 per cent drop in the rupee since end-March is buoying earnings, as it sells the lightweight metal at dollar-denominated prices.     

“If companies can refinance or restructure their debt under current high rate regime it will be a big boost for them in terms of lowering of costs,” said Alex Mathews, head of research at Geojit BNP Paribas Financial Services Ltd in Kollam.

“With a strong promoter-backing, Hindalco has a very high chance of getting lower rates from refinance.”     

Spokeswoman Pragnya Ram didn’t respond to an e-mail seeking comment on the refinancing.

Hindalco shares gained 11 per cent to Rs 104 in Mumbai, compared with a two per cent rise in the benchmark S&P BSE Sensex. Of the 50 analysts who track the stock, 20 recommend buying, while 17 favour selling, according to data compiled by Bloomberg.