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Novelis, the US subsidiary of Hindalco Industries, has deferred its initial public offering (IPO) due to market conditions, announcing the decision on Wednesday after launching a roadshow for the offer last week.
Novelis said it would continue to evaluate the timing of the offering. Proceeds from the up to $945 million worth IPO were to accrue fully to its parent company. Further, the full exercise of the greenshoe option would have taken the proceeds to $1.08 billion at the upper end of the price band.
People in the know cited poor market demand for Novelis’ shares at the quoted IPO valuation as the reason for the announcement of deferral.
An email query sent to Hindalco on Wednesday remained unanswered.
According to the public disclosures made last week, Novelis was to list at $18 to $21 per share and offer 45 million shares. These plans are now on hold.
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At the earlier stated price, Novelis is valued at up to $12.6 billion.
Hindalco acquired Novelis in 2007 in a deal that valued the company then at $6 billion. Based on the net debt of $4.35 billion, according to the filing, the enterprise valuation of the company is estimated to be in the range of $15.2 billion to $17 billion.
Had the Novelis IPO proceeded, Hindalco was to be the sole beneficiary of the proceeds. However, Hindalco has so far not disclosed what it intends to do with the close to $1 billion proceeds.
“The company is comfortable funding its capital expenditure (capex) requirements with internal accruals. It was never clear what they intended for the proceeds,” said a person tracking the company.
As of March, Hindalco’s net debt was at Rs 31,536 crore, at the consolidated level, with a treasury balance of Rs 22,965 crore.
In India, Hindalco plans to invest Rs 6,000 crore as capex in the current financial year (2024-25/FY25). The company, in a media call on Friday, said FY25’s capex will be funded entirely through internal accruals. In the US, Novelis is pursuing a $4.1 billion capex for a greenfield rolling and recycling facility at Bay Minette, Alabama (US).
In Wednesday’s trade, Hindalco closed at Rs 694.8 per piece, up 7.41 per cent from the previous day’s close.
