Hindalco Industries Ltd000

7/31/2019 Hindalco Industries Ltd000

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Submitted To: Submitted By:

Dr. JASPAL SINGH HEMANT KALIA

Mba Sem (II)

Roll No. 41


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INTRODUCTION

Hindalco Industries Ltd. is one of the world's largest Aluminum manufacturing company and is

a subsidiary of theAditya Birla Group. It is run by one of the world's youngest billionaires,

Mr. K.M. Birla.

Financial information

The company has annual sales of$ 5 billion and employs 13,675 people and is listed on Forbes

2000. A metals powerhouse with a turnover of US$ 14 billion, Hindalco is one of the world's

largest aluminum rolling companies and one of the biggest producers of primary aluminum in

Asia.

History

The Hindustan Aluminum Corporation Limited was established in 1958 by the Aditya BirlaGroup. In 1962 the company began production in Renukoot in Uttar Pradesh making 20,000

million metric tons per year of aluminum metal and 40,000 million metric tons per year

ofalumina. In 1989 the company was restructured and renamed Hindalco.Sz

Novelis acquisition

On February 11, 2007, the company entered into an agreement to acquire

the Canadian company Novelis for U$6 billion, making the combined entity the world's largest

rolled-aluminum producer. At 2007 Novelis was the world's largest producer of rolled aluminum

and a major recycler of aluminum cans. On May 15, 2007, the acquisition was completed with

Novelis shareholders receiving $44.93 per outstanding share of common stock.

Hindalco, through its wholly owned subsidiary AV Metals Inc., acquired 75,415,536 common

shares of Novelis, representing 100 percent of the issued and outstanding common shares.
http://en.wikipedia.org/wiki/Aditya_Birla_Grouphttp://en.wikipedia.org/wiki/Kumar_Mangalam_Birlahttp://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/Forbes_2000http://en.wikipedia.org/wiki/Forbes_2000http://en.wikipedia.org/wiki/Renukoothttp://en.wikipedia.org/wiki/Uttar_Pradeshhttp://en.wikipedia.org/wiki/Aluminahttp://en.wikipedia.org/wiki/Canadianhttp://en.wikipedia.org/wiki/Novelishttp://en.wikipedia.org/wiki/Novelishttp://en.wikipedia.org/wiki/Canadianhttp://en.wikipedia.org/wiki/Aluminahttp://en.wikipedia.org/wiki/Uttar_Pradeshhttp://en.wikipedia.org/wiki/Renukoothttp://en.wikipedia.org/wiki/Forbes_2000http://en.wikipedia.org/wiki/Forbes_2000http://en.wikipedia.org/wiki/US$http://en.wikipedia.org/wiki/Kumar_Mangalam_Birlahttp://en.wikipedia.org/wiki/Aditya_Birla_Group


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Immediately after closing, AV Metals Inc. transferred the common shares of Novelis to its

wholly owned subsidiary AV Aluminum Inc.

When Hindalco made this bid in 2007 this became the largest Indian investment in North

America and the second-largest overseas investment by an Indian company (behind Tata SteelEurope's purchase of Corus two weeks earlier) to this time.

The day after Hindalco announced the acquisition its stock fell by 13% resulting in a USD $600

million drop in market capitalization. Shareholders criticized the deal but K.M. Birla responded

that he had offered a fair price for the company and stated, "When you are acquiring a world

leader you will have to pay a premium.

Other acquisitions and takeovers

In July 2007, Hindalco announced it is acquiring the stake ofAlcan Inc.'s in the Utkal AluminaProject located in Orissa.

In June 2000, acquisition of controlling stake in Indian Aluminum Company Limited (Indal) with74.6 per cent equity holding.

Forbes ranking

Hindalco is listed on the 2011 Forbes Global 2000 at the position 643.
http://en.wikipedia.org/wiki/Tata_Steel_Europehttp://en.wikipedia.org/wiki/Tata_Steel_Europehttp://en.wikipedia.org/wiki/Alcanhttp://en.wikipedia.org/wiki/Forbes_Global_2000http://en.wikipedia.org/wiki/Forbes_Global_2000http://en.wikipedia.org/wiki/Alcanhttp://en.wikipedia.org/wiki/Tata_Steel_Europehttp://en.wikipedia.org/wiki/Tata_Steel_Europe


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CORPORATE GOVERNANCE REPORT

GOVERNANCE PHILOSOPHY

The Aditya Birla Group is committed to the adoption of best governance practices and its

adherence in the true spirit, at all times. Our governance practices are a product of self-desire

reflecting the culture of the trusteeship i.e. deeply ingrained in our value system and reflected in

our strategic thought process. At a macro level, our governance philosophy rests on five basic

tenets viz., Board accountability to the Company and shareholders, strategic guidance and

effective monitoring by the Board, protection of minority interests and rights, equitable treatment

of all shareholders as well as superior transparency and timely disclosure.

In line with this philosophy Hindalco Industries Ltd continuously strives for excellence through

adoption of best governance & disclosure practices.

Compliance with Corporate Governance

Guidelines

The Company is fully compliant with the requirements of the prevailing and applicable

Corporate Governance Code. Your Companys compliance with requirements is presented in the

subsequent sections of this Report. All the Directors have intimated periodically about their

Directorship and Membership in the various Board committees of other companies, which are

within permissible limits of the Companies Act, 1956 and Corporate Governance Code.

Public Member Chairman

1. Independent Director means a director defined as such under Clause 49 of the Listing

agreement.

2. Mr. A. K. Agarwal was an Executive Director till 10th September 2003. Thereafter, he has

moved to other responsibilities in the Aditya Birla Group.


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3. Excludes Directorship held in Private Companies, Foreign Companies and Companies

incorporated under Section 25 of the Companies Act, 1956.

4. Represents only membership/chairmanship of Audit Committee and Shareholders / Investors

grievance Committee of Indian Public Limited Companies.

5. Ceased as a Director w.e.f 24th December, 2010 due to his demise.

6. Appointed as an Additional director w.e.f 12th February, 2011.

SWOT ANALYSIS OF HINDALCO

Strengths

Cost advantage

Asset leverage

Effective communication

High R&D

Innovation

Online growth

Loyal customers

Market share leadership

Strong management team

Strong brand equity

Strong financial position

Supply chain


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Pricing

Real estate

Reputation management

Weaknesses

Bad communication

Diseconomies to scale

Over leveraged financial position

Low R&D

Low market share

No online presence

Not innovative

Not diversified

Poor supply chain

Weak management team

Weak real estate

Over leveraged financial position

Strengths

Cost advantage

Asset leverage

Effective communication

High R&D

Innovation

Weaknesses

all this is bull ***

[*]Bad communication

[*]Diseconomies to scale

[*]Over leveraged fiancial position

[*]Low R&D

[*]Low market share

[*]No online presence


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Online growth

Loyal customers

Market share leadership

Strong management team

Strong brand equity

Strong financial position

Supply chain

Pricing

Real estate

Reputation management

Unique products

[*]Not innovative

[*]Not diversified

[*]Poor supply chain

[*]Weak management team

[*]Weak real estate[*]Weak, damaged brand

[*]Ubiquitiouegory, products, services

[/list]

Opportunities

Acquisitions

Asset leverage

Financial markets (raise money through debt,

etc)

Emerging markets and expansion abroad

Innovation

Online

Product and services expansion

Takeovers

Threats

Competition

Cheaper technology

Economic slowdown

External changes (government, politics, taxes,

etc)

Exchange rate fluctuations

Lower cost competitors or imports

Maturing categories, products, or services

Price wars

Product substitution


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Balance Sheet of Hindalco Industries

Mar '11 Mar '10 Mar '09 Mar '08 Mar '07

12 mths 12 mths 12 mths 12 mths 12 mths

Sources Of Funds

Total Share Capital 191.46 191.37 170.46 122.65 104.33

Equity Share

Capital191.46 191.37 170.05 122.65 104.33

Share Application

Money4.47 3.99 3.17 139.50 0.00

Preference Share

Capital0.00 0.00 0.41 0.00 0.00

Reserves 29,504.17 27,715.61 23,584.69 17,173.67 12,313.71

Revaluation

Reserves0.00 0.00 0.00 0.00 0.00

Networth 29,700.10 27,910.97 23,758.32 17,435.82 12,418.04

Secured Loans 5,170.31 5,153.90 5,713.23 6,205.42 6,410.20

Unsecured Loans 2,101.19 1,203.00 2,611.06 2,123.16 958.40

Total Debt 7,271.50 6,356.90 8,324.29 8,328.58 7,368.60

Total Liabilities 36,971.60 34,267.87 32,082.61 25,764.40 19,786.64


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Application Of Funds

Gross Block 14,287.32 13,793.35 13,393.07 12,608.46 11,252.66

Less: Accum.

Depreciation6,702.94 6,058.53 5,506.10 4,799.12 4,245.95

Net Block 7,584.38 7,734.82 7,886.97 7,809.34 7,006.71

Capital Work in

Progress9,464.05 3,702.79 1,389.63 1,119.87 1,476.43

Investments 18,246.75 21,480.83 19,148.84 14,107.99 8,675.32

Inventories 7,652.19 5,921.41 4,070.14 5,097.91 4,315.31

Sundry Debtors 1,268.99 1,311.87 1,201.22 1,565.02 1,504.50

Cash and Bank

Balance111.12 139.96 213.48 131.05 187.45

Total Current

Assets9,032.30 7,373.24 5,484.84 6,793.98 6,007.26

Loans and

Advances1,750.22 1,588.62 1,709.16 1,116.35 1,360.86

Fixed Deposits 122.27 0.25 630.24 15.93 478.05

Total CA, Loans &

Advances10,904.79 8,962.11 7,824.24 7,926.26 7,846.17

Deffered Credit 0.00 0.00 0.00 0.00 0.00


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Current Liabilities 8,583.69 6,891.19 3,363.91 4,293.04 3,937.01

Provisions 644.68 721.49 803.16 906.01 1,284.14

Total CL &

Provisions 9,228.37 7,612.68 4,167.07 5,199.05 5,221.15

Net Current Assets 1,676.42 1,349.43 3,657.17 2,727.21 2,625.02

Miscellaneous

Expenses0.00 0.00 0.00 0.00 3.17

Total Assets 36,971.60 34,267.87 32,082.61 25,764.41 19,786.65

ContingentLiabilities

11,333.90 18,607.32 9,775.80 17,660.42 1,362.42

Book Value (Rs) 155.07 145.85 139.71 140.95 107.11


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Profit & Loss account of

Hindalco Industries ------------------- in Rs. Cr. ------------------



Income

Sales Turnover 25,255.01 20,516.43 19,641.40 20,943.69 19,921.40

Excise Duty 1,497.87 1,059.45 1,481.59 1,825.68 1,608.47

Net Sales 23,757.14 19,456.98 18,159.81 19,118.01 18,312.93

Other Income 304.25 574.62 712.66 571.18 283.52

Stock Adjustments 403.63 765.87 -537.81 141.80 443.89

Total Income 24,465.02 20,797.47 18,334.66 19,830.99 19,040.34

Expenditure

Raw Materials 16,435.73 13,666.78 10,855.14 12,486.62 11,438.31

Power & Fuel Cost 2,221.48 1,938.00 2,231.56 1,910.83 1,848.62

Employee Cost 1,054.39 904.90 675.05 631.07 529.58

Other Manufacturing Expenses 255.84 200.32 143.46 115.90 232.17

Selling and Admin Expenses 552.73 535.63 447.53 444.65 381.11

Miscellaneous Expenses 471.46 386.50 357.12 401.33 231.02

Preoperative Exp Capitalised -390.30 -335.78 0.00 0.00 0.00


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Total Expenses 20,601.33 17,296.35 14,709.86 15,990.40 14,660.81



Operating Profit 3,559.44 2,926.50 2,912.14 3,269.41 4,096.01

PBDIT 3,863.69 3,501.12 3,624.80 3,840.59 4,379.53

Interest 610.26 613.78 336.93 280.63 242.39

PBDT 3,253.43 2,887.34 3,287.87 3,559.96 4,137.14

Depreciation 687.48 671.36 644.34 587.81 552.80

Other Written Off 0.00 0.00 0.00 3.62 4.00

Profit Before Tax 2,565.95 2,215.98 2,643.53 2,968.53 3,580.34

Extra-ordinary items 39.63 157.60 198.55 597.74 9.54

PBT (Post Extra-ord Items) 2,605.58 2,373.58 2,842.08 3,566.27 3,589.88

Tax 468.66 462.10 610.88 705.34 940.30

Reported Net Profit 2,136.92 1,915.63 2,230.27 2,860.94 2,564.33

Total Value Addition 4,165.60 3,629.57 3,854.72 3,503.78 3,222.51

Preference Dividend 0.00 0.00 0.02 0.02 0.00

Equity Dividend 287.17 258.32 229.58 226.89 177.34

Corporate Dividend Tax 46.59 42.90 39.03 38.56 24.87


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Per share data (annualised)

Shares in issue (lakhs) 19,149.44 19,134.62 17,002.71 12,271.30 11,593.30

Earning Per Share (Rs) 11.16 10.01 13.12 23.31 22.12

Equity Dividend (%) 150.00 135.00 135.00 185.00 170.00

Book Value (Rs) 155.07 145.85 139.71 140.95 107.11


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Key Financial Ratios of

Hindalco Industries


Investment Valuation Ratios

Face Value 1.00 1.00 1.00 1.00 1.00

Dividend Per Share 1.50 1.35 1.35 1.85 1.70

Operating Profit Per Share (Rs) 18.59 15.29 17.12 26.64 34.60

Net Operating Profit Per Share (Rs) 124.06 101.68 106.81 155.79 157.96

Free Reserves Per Share (Rs) 108.11 98.72 86.31 138.43 103.16

Bonus in Equity Capital 25.68 25.69 28.92 40.09 47.13

Profitability Ratios

Operating Profit Margin(%) 14.98 15.04 16.03 17.10 21.90

Profit Before Interest And Tax Margin(%) 11.87 11.41 12.07 13.64 18.55

Gross Profit Margin(%) 12.08 11.59 12.48 14.02 22.27

Cash Profit Margin(%) 12.00 10.89 13.76 14.31 16.72

Adjusted Cash Margin(%) 12.00 10.89 13.76 14.31 16.90

Net Profit Margin(%) 8.83 9.69 11.87 14.56 13.76

Adjusted Net Profit Margin(%) 8.83 9.69 11.87 14.56 13.91


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Return On Capital Employed(%) 8.90 7.46 9.00 12.44 19.07

Return On Net Worth(%) 7.19 6.86 9.38 16.54 20.65

Adjusted Return on Net Worth(%) 7.45 5.30 8.16 12.83 20.88

Return on Assets Excluding Revaluations 155.07 145.85 139.71 140.95 107.09

Return on Assets Including Revaluations 155.07 145.85 139.71 140.95 107.09

Return on Long Term Funds(%) 9.44 7.73 9.72 13.56 20.03

Liquidity And Solvency Ratios

Current Ratio 0.96 1.02 1.20 1.08 1.22

Quick Ratio 0.34 0.39 0.88 0.53 0.66

Debt Equity Ratio 0.24 0.23 0.35 0.48 0.59

Long Term Debt Equity Ratio 0.17 0.19 0.25 0.37 0.52

Debt Coverage Ratios

Interest Cover 5.89 4.30 10.43 13.63 20.90

Total Debt to Owners Fund 0.24 0.23 0.35 0.48 0.59

Financial Charges Coverage Ratio 6.52 5.26 10.48 13.53 17.87

Financial Charges Coverage Ratio Post Tax 5.63 5.21 9.53 13.30 13.88

Management Efficiency Ratios

Inventory Turnover Ratio 3.43 3.63 5.16 4.32 4.32

Debtors Turnover Ratio 18.41 15.48 13.13 12.46 13.30

Investments Turnover Ratio 3.43 3.63 5.16 4.32 4.89

Fixed Assets Turnover Ratio 1.67 1.42 1.37 1.53 2.30

Total Assets Turnover Ratio 0.64 0.57 0.57 0.74 0.93


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Asset Turnover Ratio 1.67 1.42 1.37 1.53 1.64

Average Raw Material Holding 86.80 66.64 49.40 58.22 42.95

Average Finished Goods Held 4.76 4.72 3.66 5.60 4.20

Number of Days In Working Capital 25.40 24.97 72.50 51.35 51.60

Profit & Loss Account Ratios

Material Cost Composition 69.18 70.24 59.77 65.31 62.46

Imported Composition of Raw Materials Consumed 88.47 89.76 86.35 90.35 89.50

Selling Distribution Cost Composition 1.70 1.86 1.75 1.62 1.60

Expenses as Composition of Total Sales 29.87 27.12 28.38 33.65 38.10

Cash Flow Indicator Ratios

Dividend Payout Ratio Net Profit 15.61 15.72 12.04 9.27 7.88

Dividend Payout Ratio Cash Profit 11.81 11.64 9.34 7.68 6.47

Earning Retention Ratio 84.94 79.67 86.16 88.05 92.20

Cash Earning Retention Ratio 88.51 86.01 89.61 90.56 93.58

AdjustedCash Flow Times 2.51 2.95 3.22 2.96 2.34


Earnings Per Share 11.16 10.01 13.12 23.31 22.12

Book Value 155.07 145.85 139.71 140.95 107.11


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Management - Hindalco

Name Designation

Kumar Mangalam Birla Chairman / Chair Person

Rajashree Birla Non Executive Director

Madhukar Manilal Bhagat Non Executive Director

Askaran Agarwala Non Executive Director

Ram Charan Non Executive Director

Name Designation

Debnarayan Bhattacharya Managing Director

Chaitan Manbhai Maniar Non Executive Director

Kailash Nath Bhandari Non Executive Director

Narendra Jamnadas Jhaveri Non Executive Director

Jagdish Khattar Independent Director

Material developments in human resources industrial relations front, including number of people

employed. Our Group has time and again is adjudged amongst the best employer in India by

global agencies such as Hewitt . Our culture and reputation as a business leader in the industry

enables us to recruit and retain the best available talent in India.
http://connect.in.com/kumar-mangalam-birla/profile.htmlhttp://connect.in.com/kumar-mangalam-birla/profile.htmlhttp://connect.in.com/rajashree-birla/profile.htmlhttp://connect.in.com/rajashree-birla/profile.htmlhttp://connect.in.com/madhukar-manilal-bhagat/profile.htmlhttp://connect.in.com/madhukar-manilal-bhagat/profile.htmlhttp://connect.in.com/askaran-agarwala/profile.htmlhttp://connect.in.com/askaran-agarwala/profile.htmlhttp://connect.in.com/ram-charan/profile-228183.htmlhttp://connect.in.com/ram-charan/profile-228183.htmlhttp://connect.in.com/debnarayan-bhattacharya/profile.htmlhttp://connect.in.com/debnarayan-bhattacharya/profile.htmlhttp://connect.in.com/chaitan-manbhai-maniar/profile.htmlhttp://connect.in.com/chaitan-manbhai-maniar/profile.htmlhttp://connect.in.com/kailash-nath-bhandari/profile.htmlhttp://connect.in.com/kailash-nath-bhandari/profile.htmlhttp://connect.in.com/narendra-jamnadas-jhaveri/profile.htmlhttp://connect.in.com/narendra-jamnadas-jhaveri/profile.htmlhttp://connect.in.com/jagdish-khattar/profile-796.htmlhttp://connect.in.com/jagdish-khattar/profile-796.htmlhttp://connect.in.com/jagdish-khattar/profile-796.htmlhttp://connect.in.com/narendra-jamnadas-jhaveri/profile.htmlhttp://connect.in.com/kailash-nath-bhandari/profile.htmlhttp://connect.in.com/chaitan-manbhai-maniar/profile.htmlhttp://connect.in.com/debnarayan-bhattacharya/profile.htmlhttp://connect.in.com/ram-charan/profile-228183.htmlhttp://connect.in.com/askaran-agarwala/profile.htmlhttp://connect.in.com/madhukar-manilal-bhagat/profile.htmlhttp://connect.in.com/rajashree-birla/profile.htmlhttp://connect.in.com/kumar-mangalam-birla/profile.html


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Human capital

Our professionals are our most important assets. We are committed to remaining among the

industrys leading employers. We have a pool of around 19,300 employees in our fold. The

group has a well laid talent development plan that ensures attracting the talent and provides for

nurturing and enhancement of talent.

Training and Development

Our training, continuing education and career development programs are designed to ensure that

our professionals enhance their business skills. Our group initiatives and our learning campus

provide continuous learning opportunities. Our in house faculty conducts integrated training for

our new employees. Leadership development is a core part of our training program. Conclusion

Yet again your Company recorded a strong performance in a year that witnessed strong

commodity prices, but nevertheless was a very challenging year in many ways. Strong

inflationary pressures leading to sharp rise in input prices, especially energy, appreciating rupee,

rising coal prices in India these were some of the challenges faced by industry. In addition, your

company also witnessed some of the one off unfortunate disruptions such as Hirakud outage and

Dahej cooling tower failure that led to significant production loss and severe cost escalation. On

this backdrop, this strong performance is testimony to the sound business models of our

Aluminium and Copper businesses, the underlying strength of business operations, stable and

capable processes, and successful implementation of a well thought out strategic plan foruantum growth supported by a strongbalance sheet and robust cash flows from existing

operations. The year also witnessed a strong performance by Novelis and ABML two contrasting

businesses operating in two entirely different geographies amidst different challenges. During the

year, We not only tied up financing for our Greenfield projects (Utkal and Mahan) but through

Novelis refinancing also successfully aligned our capital structure to the business needs thus


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facilitating the future growth. Global economy is expected to continue its recovery; however this

revival could be slow and may face strong headwinds. The upstream aluminum industry may

continue to witness pricing pressure on account of large inventories while the cost push is

expected to continue. The copper business too will continue to face challenges on account of cost

inflation even as TC/RC s are expected to better in FY12.

At present the focus is on

Maintaining profitability in an uncertain, inflationary macro- economic environment

Maximising Free Cash Flow from existing operations

Ensuring planned progress on the projects in a challenging environment Your company has

strengthened its balance sheet, has reduced our leverage and improved our capital structure. We

also have achieved financial closure of two projects .This would allow us to progress on the

Greenfield projects through a calibrated approach. The Brownfield expansions at Muri and

Hirakud have been commissioned and will deliver the targeted cash flows to help finance our

growth aspirations. We are working on five greenfield sites, in difficult terrains, in a challenging

regulatory environment and have put in place the necessary organization to keep these projects

on track.

These plans will enable your Company to grow in a steady and robust manner. Some of these

projects have gained a significant visibility and are on course to reinforce low-cost advantage.

This low cost advantage, along with high end technology of Novelis and a considerable head

start with respect to foot print expansion in the well understood emerging markets shall catapult

your company to greater heights.

Hindalco Industries Ltd000

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