Sterlite eyeing Hindalco?

Shares in India's largest aluminium maker, Hindalco Industries Ltd, rose as much as 10.8 percent on Monday to their highest in almost four months on speculation that it could become a takeover target.

The Times of India newspaper reported on Monday Canada's Alcan Inc could team up with India's Sterlite Industries to bid for Hindalco as a way of making Alcan less of a takeover target.

Alcan received a $28 billion hostile bid approach from Alcoa Inc last month in a deal that could create the world's largest aluminium producer.

A spokesman for Sterlite, a subsidiary of London-based Vedanta Resources Plc, said he was not aware of any such move.

"It is not our company policy to comment on wild rumours," said Pragnya Ram, spokeswoman for India's Aditya Birla Group that owns more than 27 percent of Hindalco.

Hitesh Agrawal, a metals analyst at Angel Broking in Mumbai, said: "It could be a speculation but we can't say it's not possible."

Financial institutions and foreign funds together held about 37 percent of Hindalco, he said, but they would demand a high premium if they decide to sell because the company has been producing good results.

Hindalco, which also makes copper, posted a 15 percent rise in quarterly profit last month, beating market expectations, and said it expected strong metal prices to continue.

At 2:10 pm today, Hindalco shares were up 5.2 percent at 148.30 rupees, in a slightly weaker Mumbai market, after rising as high as 156.25 -- their highest since Feb. 12 when the stock fell nearly 14 percent after Hindalco agreed to buy Canada's Novelis.

Hindalco completed the Novelis takeover in May, paying $3.5 billion in cash for stock and assuming debt of $2.4 billion.

Last week, the Hindustan Times newspaper said Hindalco and Sterlite's parent Vedanta were in talks with global firms to separately bid for Alcan.

Citing unnamed sources, the paper said Vedanta was in advanced talks with global miner Rio Tinto to form a special purpose vehicle to bid for Alcan, while Hindalco could partner BHP Billiton for a joint bid.

Miner Vedanta, founded by India-born billionaire Anil Agarwal, is expanding its aluminium making capacity in India to 400,000 tonnes a year through its subsidiaries from 130,000 tonnes now, the company said on its website. ($1 = 40.5 rupees)