Birla to up stake in Hindalco

Novelis to make operational profit from 2012-13, says Kumar Birla at AGM.

Aditya Birla Group Chairman Kumar Mangalam Birla plans to increase his shareholding in aluminium producer Hindalco Industries from open market purchases. He did not specify the timeframe or amount of stake that he wished to purchase, while speaking to shareholders at the company’s annual general meeting here today.

According to Bombay Stock Exchange data, the promoter and promoter group had a 36.1 per cent stake in Hindalco at the end of June.

Talking about Canadian subsidiary Novelis, Birla said the company was expected to make about Rs 5,000 crore of operational profit from the financial year 2012-13. Novelis had recorded a Rs 8,769-crore loss in the last financial year.

“As far as Novelis is concerned, the worst is behind us,” the chairman said. “We are seeing a surge in demand for Novelis products across Asia,” he added.

The company has also drawn up an annual cost reduction plan of about $140 million at Novelis. Birla did not specify for how many years this cost-cutting is expected to continue.

Hindalco is expected to make a capital expenditure of Rs 5,623 crore in the current financial year and will spend Rs 10,458 crore in the next financial year as its greenfield projects come onstream.

The company has set a production target of 350,000 tonnes of copper for the current financial year on the back of demand from the fast-growing power industry.

The company is also looking at increasing its export to 35 per cent of its revenue this year. It also expects its overall revenue to grow by 10 per cent. Its revenue for the last financial year stood at of Rs 65,414 crore, while net profit was reported at Rs 485 crore — down from Rs 2,193 crore in the previous year.

Hindalco is likely to raise $500 million in a QIP or by other routes this financial year to finance its expansion plans. The company’s board approved raising of additional finance by issue of securities in domestic or international markets.

Birla said Hindalco has formulated a team for financial restructuring to deal with various costs associated with its organic and inorganic growth plans. The recent economic downturn, particularly in the commodities space, is expected to result in the impairment or diminution in value of certain assets and investments, he said.

Accordingly, Rs 8,647 crore has been transferred to a business reconstruction reserve, of which Rs 67 crore has been utilised in a standalone account and Rs 4,616 crore in a consolidated account, he said.

Birla also said the company has been able to leverage the benefit of brownfield expansion and earlier inorganic acquisitions to tide over the macro-economic challenges in 2008-09.