Hindalco to sweeten rights with 3:7 offer

MUMBAI: Thanks to the uncertainty in the capital market, India’s top aluminium producer, Hindalco has decided to sweeten its rights issue by giving three shares for every seven held at a price of Rs 96 each. The issue would raise up to Rs 5,000 crore and the scheduled date is expected to be around September 15, said a company executive. The issue is primarily aimed at refinancing the company’s acquisition of Canadian firm, Novelis. A committee of directors of the company’s board met on Thursday to decide on the pricing of the rights issue and other terms and conditions. The company on June 20 had announced a 1:3 rights offer (one share for every three held) to raise up to Rs 5,000 crore for refinancing the acquisition of Novelis, which it had bought for an enterprise value of $6 billion in February 2007. To finance this, Hindalco had taken bridge loans of $3.03 billion from a host of banks. These loans need to be refinanced by November. The Hindalco stock has fallen 18.5 per cent from the date of announcement of the rights issue. The stock slipped to Rs 135.80 on Thursday from Rs 161 on June 20. In 2008, the Sensex lost quarter of its value, thus delaying a number of share sales. In a communication to stock exchanges, the company had earlier announced that it had an additional cushion of Rs 1,684 crore, which is left over from the rights issue of January 2006, and has not been utilised yet. The January 2006 issue was made to part-finance various brownfield and greenfield projects. The brownfield expansions of Muri Alumina and Hirakud Aluminium are in the final stages of commissioning. The company will now use Rs 1,684 crore to replace the bridge loans as these funds are fungible. Hindalco is also planning to raise $1 billion as debt from international banks. ---the economic times