Hindalco Novelis Case
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Transcript of Hindalco Novelis Case
Hindalco’s Acquisition of Novelis
Group 3:Satyaweer AgarwalPriyanka ZopeSudeshna SarkarSumit ChawlaVaishnav Dayanand
Indian Aluminum IndustryHighly Concentrated Industry Main Players1. HINDALCO – almost 39% market share2. Sterlite Industries3. NALCO4. BALCO5. MALCO Very strangely the per capita consumption of
the aluminium metal in India is less than 1kg, whereas the same is estimated at 25 to 30 kgs in US & Europe, 15 kgs in Japan, 10 kgs in Taiwan and 3 kgs in China.
Introduction : CaseMay 16, 2007: Hindalco acquired Novelis2nd biggest acquisition valued at $6
billionBiggest being Tata acquiring Corus for
$7.6 billionNovelis will work as a subsidiary of
HindalcoChairman will be Kumar Mangalam BirlaMartha Finn Brooks: COO & PresidentWorld Leader: United Company Rusal
Brief about HindalcoEstablished in 1958A flagship company of Aditya Birla GroupCommenced its operations in 1962 with an
aluminium facility at Renukoot in U.P.Leading company in aluminium and copper
industry in the worldGenerated high revenues in 2006-07Significant Market Share
Brief about NovelisFormed in January 2005Was a result of ‘forced’ spin-off from its
parent, aluminium giant and Canada-based Alcan Inc.
Leading producer of aluminium sheet and light guage (thin) rolled production for the construction & industrial markets
Operated in 11 countriesGlobal Market Share
AcquisitionAnalysts believed that the acquisition will
have both pros and cons:Pros: Global Presence, Production
Capacity will Increase, one of the top aluminium manufacturing Co’s
Cons: Huge amount and Novelis was incurring losses, no short term and medium term benefits, Debt was also there in the B/S of Novelis (This in-turn will effect the Debt-Equity Ratio of Hindalco) & Interest on the loan will affect Hindalco’s profit
N O V E L I S Formed in January 2005.
Was a result of a ‘forced’ spin-off from its parent,
aluminium giant and Canada-based Alcan Inc.
World leader in aluminium rolling, producing an
estimated 19 % of the world's flat-rolled aluminium
World leader in the recycling of used aluminium
The company had 36 operating facilities in 11 countries.
T H E A C Q U I S I T I O N
In 2003, Alcan won a hostile takeover of
French aluminium company Pechiney.
Result : NOVELIS
Novelis : Always a problem child
In 2007, Hindalco acquired Novelis, making it
a wholly owned subsidiary of the company.
An acquisition, also known as a takeover or a
buyout, is the buying of one company (the
‘target’) by another.
An acquisition may be friendly or hostile.
Acquisition usually refers to a purchase of a
smaller firm by a larger one.
Increased market power
Learning and Developing new capabilities
Overcoming the new entrants into the industry.
Cost of new product development
To avoid excessive competition
REASO NS FO R ACQ UI SITIO N
The acquisition of Novelis by Hindalco was in a cash
Global integrated aluminium producer with low-cost alumina
and aluminium production facilities.
Biggest rolled aluminium products maker and fifth largest
integrated aluminium manufacturer in the world.
Globally positioned organization.
Hindalco is the lowest cost producers of primary aluminium in
FACTS ABOUT DEAL
The debt component of Novelis stood at US $2.4
billion and additional US $2.8 billion taken by
Hindalco to finance the deal.
Debt and interest burden of the company has
FACTS ABOUT DEAL