Hindalco slumps 6% on deferring Novelis IPO amid valuation concerns

Shares of Hindalco fell up to 5.8 per cent at Rs 608.40 per share on the BSE in Wednesday’s intraday trade after it postponed the initial public offering plan of its arm Novelis. 

Novelis Inc, Hindalco Industries' US subsidiary, postponed its initial public offering (IPO) for the time being due to market conditions, the company said in an exchange filing today. 

“There was a lot of interest in Novelis and strong support for the company and its growth trajectory. However, market conditions did not support achieving the premium outcome we were seeking,” the company said in a statement. 

Hindalco stated that Novelis would continue assessing the optimal timing for the public offering in the future. 

Initially, the company aimed to raise between $810 million and $945 million by offering shares priced between $18 and $21, with a potential total proceeds of $931.5 million to $1.08 billion, including the greenshoe option.

This IPO was poised to be the largest ever by an Indian company in the US. AV Minerals, another Hindalco Industries subsidiary, was the selling shareholder offloading approximately 45 million shares. Post-IPO, Hindalco would have retained 92.5 per cent ownership of Novelis, holding 555 million common shares.

Novelis, the world's leading aluminium recycler, serves prominent clients like Coca-Cola, Ford, and Jaguar Land Rover. With a robust EBITDA/tonne of $540 in Q4FY24, the company bolstered Hindalco’s operational performance.

In fourth quarter of fiscal year 2023-24 (Q4FY24), Hindalco Industries recorded a flattish consolidated revenue from operations at Rs 55,994 crore. However, the company recorded a significant 31.6 percent year-on-year increase in consolidated net profit, reaching Rs 3,174 crore compared to Rs 2,411 crore in the same period last year.

At 10:14 Am; the stock of the company recovered most of its early losses to trade 1.02 per cent lower at Rs 640.25 per share. By comparison the BSE Sensex was up 0.69 per cent. 

The stock is currently trading at a price to earnings multiple of 39.01 times, with an earning per share of Rs 16.45.