Hindalco Industries Ltd, the flagship of the Aditya Birla Group, which revealed a $1.8 billion third quarter loss at its Novellis unit, is reported to be planning to raise$5 billion (Rs25,000 crore) by pledging assets and future earnings of its units.
Lenders will be repaid from cash receivables from sales, on which they will have the first claim, according to the report quoting its chief financial officer S Talukdar. The fund raising will be completed by 2012 and the money will be used for future expansion, the report said.
''Individual companies will borrow money without recourse to Hindalco. We will securitise cash flows and assets with the lender to raise money," Talukdar told the paper.
Earlier this week, the company said its board had approved a proposal to use US$1.8 billion in its share premium reserve to write off costs relating to its foreign acquisition and domestic expansion.
Hindalco had acquired Canadian aluminium product maker Novelis in 2007 for $5.9 billion and has also announced investment of $4 billion (Rs19800 crore) over three years to expand capacity in India.
Novelis has reported a net loss of $1.8 billion in the third quarter ended 31 December 2008 owing largely to a goodwill loss of $1.5 billion, a fallout of the ongoing global meltdown.
''The impact of the loss posted by Novelis on Hindalco Industries would be felt at the end of the current fiscal when Hindalco consolidates its earnings. The impact should, however, be limited as Hindalco has initiated steps to offset the $1.5-billion loss of the total $1.8-billion loss incurred by Novelis. The remaining $300-million loss would impact Hindalco's profitability,'' the company said in an earlier release.
Hindalco's net sales and revenues at Rs4,117 crore in third quarter of FY 09 were lower as compared to Rs4,539 crore for the corresponding period in FY 08. The steep reduction in aluminium and copper LME led to fall in the overall sales revenue; this was mitigated by the rupee depreciation against the US dollar. Despite lower sales realisations and higher export sales due to lower domestic demand, the net profit at Rs545 crore was marginally higher than Rs543 crore in the corresponding year's comparable quarter. Higher metal production consequent to the Hirakud brownfield expansion, profit improvement measures and higher other income have been the drivers.
The revenue in aluminium business rose by 14 per cent to Rs1,980 crore vis-à-vis Rs1,736 crore in the corresponding period in the previous year on the back of the highest ever metal volumes. However the unprecedented 25 per cent fall in LME and spiraling input cost squeezed the margin, despite gains from weaker rupee. The shrinkage in domestic demand for downstream products resulted in an adverse product mix.
In the copper business, revenues stood at Rs2,139 crore lower by 24 per cent vis-à-vis Rs2,806 crore in Q3FY08 as a result of the 46 per cent lower LME. The profit before interest and tax rose by 23 per cent to Rs. 116 crore from Rs. 94 crore in the corresponding quarter last year despite a 33 per cent fall in TcRc, mainly due to better by-product realisation, operational efficiencies and forex translation impact.
Meanwhile, Hindalco has incorporated a joint venture company, Hydromine Global Minerals GMBH Limited, in British Virgin Island for development and operation of bauxite mines in the Minim Martap and Ngaoundal regions of the Adamaoua province in Cameroon (Africa). Hindalco and Dubai aluminium holds 45 per cent equity each and the balance 10 per cent is with Hydomine, USA.
The expansion of the Muri alumina refinery from 110,000 tpa to 450,000 tpa has been completed and production is being ramped up in a phased manner.
Phase II of the expansion of the smelting capacity at Hiracud from 100,000 tpa to 143,000 tpa was completed on time. Work on expansion to 155 ktpa is in progress and is expected to be completed by August 2009. The power generation capacity has been raised from 267.5 mw to 367.5 mw and all the units have been commissioned.
The allotment of the lease for bauxite mines for expanding the alumina refinery capacity at Belgaum, Karnataka from 350 ktpa to 650 ktpa is still awaited.
Aditya Aluminium, the integrated aluminium project, encompassing 1 to 1.5 million tpa alumina refinery, 260,000 to 359,000 tpa aluminium smelter and 750 to 900 mw captive power plant is progressing as planned. The Mahan aluminium project with a smelter capacity of 359 ktpa and CPP of 900 mw is also on track.
Plant location of the proposed Jharkhand aluminium smelter with a capacity of 359 ktpa and a CPP of 900 MW has been shifted from Latehar to Sonahatu block which is 20 km from Muri and 55 km from Ranchi.
The construction of Utkal alumina refinery with a proposed capacity of 1.5 mtpa is currently underway, it said.
Hindalco's joint venture, Hindalco Almex Aerospace Limited, for the manufacture of high-strength aluminium alloys for applications in the aerospace, sporting goods and surface transport industries has been commissioned in November 2008 and production has started.
The transport sector remained the largest consumer for aluminium products in 2008, the company said in a release. With the downturn expected in transport, building and construction sectors, producers have announced production cutbacks up to 5.05 million tonnes per annum.
Global refined copper consumption during 2008 grew by about 0.6 per cent. The forecast is that the demand would either remain flat or decline during 2009 until the economic environment improves. Over all concentrate market is expected to be steady or slightly surplus during CY 2009.