Hindalco's Novelis to spend Rs 1,820 cr on Korea deal

Korean subsidiary to focus on Asia, North Africa.

Atlanta-based Novelis Inc, part of the Aditya Birla group’s Hindalco Industries, Asia’s largest integrated aluminium and copper producer, has raised debt of $225 million (Rs 1,170 crore) to complete the purchase of its Korean subsidiary. It will pay $125 million (Rs 650 crore) cash to seal the deal.

The stake purchase of 31.2 percent in Novelis Korea will raise Novelis Inc’s holding to nearly 100 percent. Novelis is the world’s largest recycler of aluminium cans used by beverage companies. The Korean subsidiary will service the Asian and North African markets.

"Our decision to buy out the minority shareholders in Novelis Korea represents another key step in Novelis' strategy to prepare for future growth in Asia," said Phil Martens, president and chief executive of Novelis.

Through Novelis, Hindalco is trying to capture the upstream market of value added aluminium products such as beverage cans. Novelis also makes aluminium for cars.

Novelis plans to invest between $500-600 million (roughly Rs 3,120 crore) in its global expansion plans in the current year.

Most of this capital expenditure is happening in its Brazilian and Asian rolling mill expansion, strategic automotive capacity increase in North America and recycling initiatives across its plants. In its Pinda plant in Brazil, Novelis is spending $300 million (Rs 1,560 crore) over the next two years to expand the aluminium rolling capacity by over 50 per cent.

In Asia, apart from the 31.2 per cent stake to make Novelis Korea a complete Novelis subsidiary, the company is also spending $400 million (Rs 2,080 crore) in its aluminium rolling and recycling plants. The total capacity to make aluminium sheets in Korea will increase to 1,000 kilo tonnes per year in FY13, raising Novelis' aluminium sheet capacity in Asia by more than 50 per cent.

Novelis' can-body plant of Rogerstone, UK, is being shifted to India. The machinery has been transported to Hindalco's Hirakud plant and it is scheduled to start in early 2012.