7/26/2019 Project Alloy - Status Report

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Project “Alloy”

Current Status

Based on the inputs from the company, Daiwa has prepared and circulated Teaser about ANRAK

 Aluminium (on a No-Name basis) to potentially interested companies globally, who, from our

understanding of the Alumina Refining and Aluminium Smelting industry, would be interested in this deal.

We have received interests from the following four companies for further considerations

1. Glencore International AG, Switzerland

Glencore is one of the largest Alumina and Aluminium trading companies in the world. They are

also involved in the production of primary Aluminium 

2. Rio Tinto Alcan, Canada

Rio Tinto Alcan is one of five product groups operated by Rio Tinto, a leading international mining

group. They own 23 Aluminium smelters in 10 countries and are one of the leading companies in

the world who have a presence in the entire value chain of Aluminium manufacturing 

3. Hangzhou Jinjiang Group, China

The Jinjiang Group is a large trading group focusing on non-ferrous metals in Asia. The group

has setup up a considerably competitive resource industrial chain in the non-ferrous metals

industry

4. Marubeni Corporation, Japan

The Marubeni Corporation is one of the leading Japanese trading companies, who focus on

metals, besides other products. Their trading activities include on-shore and off-shore trading in

 Aluminium as well as manufacturing primary Aluminium (they have plans to setup an AluminiumSmelter in Indonesia in the coming year)

 After signing a Non-Disclosure Agreement, we have shared the Information Memorandum for ANRAK

 Aluminium prepared by Daiwa after valuable inputs from ANRAK Aluminium. The Hangzhou Jinjiang

Group has already had a call with Mr. S. Ganapathi Rao.

Besides the above, we have already approached the below-mentioned companies for the deal, and are

awaiting a response from them:

1. Mitsubishi Corp., Japan

2. Mitsui Corp., Japan

3. Itochu Corp., Japan

4. Rusal, Russia

We would also like to add other names such as EMAL, Dubal, Sohar, etc

7/26/2019 Project Alloy - Status Report

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Timeline

We wish to follow the below-mentioned broad timeline to take this project ahead:

•  Conference Calls and preliminary Management Meetings – by 30th April, 2010

•

  Receive Non-Binding Bids – by 4

th

 June, 2010

•  Short listing Investors - by 28th June, 2010

•  Due Diligence – by 21st July, 2010

•  Closing of Transaction – by 20th August, 2010

 A detailed timeline is attached. 

Valuation

Phase 1 of the deal: Divestment of a 15-25% stake in ANRAK Aluminium

The preliminary valuation exercise for ANRAK values the company at USD 750 – 1000 million, broadly

about Rs. 20 – 30 per share, typically deals are done at 25% of company (Dubal, Chalco, etc).

•  15% share of this would be worth USD 112.5 – 150 million

•  25% share of this would be worth USD 187.5 – 250 million

Phase 2 of the deal: Long term Alumina Off-take contract

The following can be key aspects of the deal:

- Price: Typically linked to 3 month Forward Aluminium prices of LME

- Quantity: Anywhere from 25-40% of the production, typical deals are for 40-50% of production

(Glencore has also done deals at 15% of production)

- Duration: Typically 5 – 10 years, can be longer also

Fees (detailed letter attached)

- Retainer Fees:

o  Since the deal takes time and effort and involves employees globally, we would suggest

a fee of Rs. 5.0 lacs (five lacs) per months for the next 5 months, within which we will

close the deal and exclusivity of 6 months.

o  The retainer fees will be adjusted against the eventual success fees

- Success Fees:

o  Typically linked to transaction value of Equity and Value of 1st yrs off-take contract

o  We would like to suggest a fees of 2.0% of the above transaction value