Group 3: Satyaweer Agarwal Priyanka Zope Sudeshna Sarkar Sumit Chawla Vaishnav Dayanand

Indian Aluminum Industry

Highly Concentrated Industry Main Players 1. HINDALCO almost 39% market share 2. Sterlite Industries 3. NALCO 4. BALCO 5. 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 : Case
May 16, 2007: Hindalco acquired Novelis 2nd biggest acquisition valued at $6 billion Biggest being Tata acquiring Corus for $7.6

billion Novelis will work as a subsidiary of Hindalco Chairman will be Kumar Mangalam Birla Martha Finn Brooks: COO & President World Leader: United Company Rusal (Moscow, Russia)

Brief about Hindalco

Established in 1958 A flagship company of Aditya Birla Group Commenced its operations in 1962 with an

aluminium facility at Renukoot in U.P. Leading company in aluminium and copper industry in the world Generated high revenues in 2006-07 Significant Market Share

Brief about Novelis

Formed in January 2005
Was 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 countries Global Market Share

Acquisition
Analysts believed that the acquisition will have

both pros and cons: Pros: Global Presence, Production Capacity will Increase, one of the top aluminium manufacturing Cos 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 Hindalcos profit

NOVELIS
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 products.

World leader in the recycling of used aluminium

beverage cans.
The company had 36 operating facilities in 11 countries.

THE ACQUISITION
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.

ACQUSITION
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.

REASONS FOR ACQUISITION

Increased market power Learning and Developing new capabilities Overcoming the new entrants into the industry. Cost of new product development To avoid excessive competition

FACTS ABOUT DEAL

The acquisition of Novelis by Hindalco was in a cash

transaction.
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 the world.

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

increased.

Thank You!!