Happy with Novelis despite downturn: Kumar Mangalam Birla

07 November 2008

The commodity bias has stopped the Aditya Birla Group's Hindalco, which made a Rs 5,047-crore rights issue devolved two weeks ago. When filed, the rights issue, at Rs96 a share was priced at a considerable discount to the market price of Rs140. But regulatory processes meant by the time it came to market, the rights price made little sense forcing underwriters to pick up 40 per cent and Kumar Mangalam Birla to pick up 18.6 per cent more than the promoter's share of 31.4 per cent.

The issue would have succeeded if SEBI had allowed fewer time lags in issue pricing, especially in the prevailing market conditions. The rights issue proceeds were meant to refinance one-third of the $3 billion debt Hindalco took on to make its audacious $6-billion purchase of Novelis.

Kumar Mangalam Birla, chairman, Aditya Birla Group, said, "We have a huge sense of confidence in Hindalco." He thinks that the price was far below intrinsic price; it was lower than what the price would be just given the cash on its balance sheet. "So, we had the issue underwritten to the extent of 40 per cent by the banks and 50 per cent by us as promoters," he added. He further said, "We did get 90 per cent of the cash that we wanted in the kitty. I've strongly believed that had it not been for the crisis that we suddenly found ourselves in, the issue and the price at which the issue happened would've been a huge success.''

The diversified Birla group also owns Idea Cellular. It is amongst the leading players in service providers domain. According to Birla, the best years of telecom are over because of increase in the number of players. ''It still remains a very attractive business for existing incumbents - those who have a network or are spreading out their network like Idea is and those who are on the cusp of growing up like Idea and that's not a spiel for Idea. But, the new players who intend to come in will find it very difficult to survive in this market.''

CNBC-TV18 shares with domain-b its exclusive interview with Kumar Mangalam Birla.
 
The rights offer document had said that you had subscribed up to your portion of the rights and then over and above that all the way up to 50 per cent of the issue. Was there an occasion at all at any point where you were willing to maybe purchase more in that rights issue?
We felt that given the new scheme of things, and given the fact that we probably would adjust some of our capex, we felt that going up to the 50 per cent limit that we talked about in the prospectus was good enough for us. 

What is it like right now in the middle of so many different projects across your various businesses to be able to find money to fund those projects? What are some of the more unique challenges that you are facing in these last 2-3 months?
For us most of our projects are funded and most of them are work in progress. So, we have very few projects that are yet to be funded.