Hindalco Up As Aluminium Prices Stabilise

Shares of aluminium major Hindalco closed 1.92 per cent higher at Rs 586.25, following renewed buying interest in the wake of stabilising global aluminium prices.

Around 6,439 shares of the company changed hands on the Bombay Stock Exchange (BSE) today, while the volume of trade at the National Stock Exchange was 52,339 shares.

In nine sessions till date, the stock has moved up 6 per cent to its current level, from Rs 562.10 on August 5, 2002.

Hindalco has been the subject of renewed buying interest over the last few sessions as aluminium prices are holding steady in the global market, analysts said.

Earlier, aluminium prices had witnessed a major drop following poor global demand. Analysts said hopes of a recovery in the US market is also bringing an element of stability to aluminium prices.

If the US economy witnesses a downtrend, then aluminium prices can disintegrate further. The US is the biggest consumer and producer of aluminium in the world.

According to analysts, the aluminium industry is at a precarious juncture. If aluminium prices drop further, 75 per cent of the total global capacity could become unprofitable.

Currently, aluminium is trading at US $1,250 per tonne at the London Metal Exchange. Prior to the recovery, the prices of aluminium witnessed a sustained fall from US $1,295 to US $1,245 per tonne .

Meanwhile, analysts say the rise in Hindalco has materialised on speculation that the company is bidding for a stake in the National Aluminium (Nalco) by forming an alliance with Canadian firm Alcoa. However, any such agreement is yet to be confirmed.

Recently, the company announced an aggressive restructuring programme, involving the merger of Indo Gulf Corporation's copper business with itself.

The scheme of arrangement involved a share swap of 1:12 (one share of Hindalco for every 12 shares of Indo Gulf).

Hindalco also merged Indian Aluminium (Indal) with itself. The company has made an open offer for full control of Indal at a price of Rs 120 per share.

Currently, Hindalco holds a 74.6 per cent stake in Indal. If the open offer is successful, Indal will be de-listed from stock exchanges and will become a 100 per cent subsidiary of Hindalco. The total outlay for the open offer is Rs 218 crore.