On Tuesday, Hindalco Industries, a subsidiary of Aditya Birla Group, announced its plans to list its US counterpart, Novelis, on the New York Stock Exchange (NYSE).
The company intends to offer 45 million shares at a price range of $18-21 per share. This offering represents 7.5% of Hindalco's existing stake in Novelis, as disclosed in public statements.
Hindalco Industries stands to potentially raise as much as $945 million through the initial public offering (IPO) of Novelis. This offering could value Novelis at a maximum of $12.6 billion. Back in 2007, Hindalco acquired Novelis for $6 billion.
Novelis announced on Tuesday that it has initiated a roadshow for the initial public offering (IPO) of 45 million common shares. These shares are currently held by Hindalco, the sole shareholder of Novelis. As a result of this IPO, Hindalco's ownership in the company will decrease to 92.5%.
The US subsidiary expects the selling shareholder to give the underwriters an option to buy an additional 6.7 million common shares if there are any over-allotments within 30 days of the final prospectus. If the underwriters exercise the full over-allotment, Hindalco's ownership in the company will decrease to 91.4%.
Novelis announced in February its plan to list in the US market, with Hindalco Industries as the only promoter offering the common shares. Currently, Novelis is a wholly-owned subsidiary of Hindalco Industries and will receive all the proceeds, which could be up to $945 million.
Hindalco's management has yet to reveal the purpose or planned use of the anticipated proceeds. Analysts have observed that the company's current debt-light balance sheet presents an intriguing scenario for the utilization of the expected IPO funds. As of March, Hindalco's net debt stood at Rs 31,536 crore at the consolidated level, with a treasury balance of Rs 22,965 crore.
Hindalco plans to allocate Rs 6,000 crore for capital expenditure in the current fiscal year.
The company announced on Friday that the capex for FY25 will be entirely financed through internal accruals. In the US, Novelis is embarking on a $4.1 billion capex for a greenfield rolling and recycling facility in Bay Minette.
Novelis’ SEC filing disclosed that the company will be classified as a "controlled company" under NYSE regulations, allowing it to benefit from exemptions related to certain corporate governance obligations. Consequently, shareholders will not receive the same level of protection as those of companies subject to such requirements.
Morgan Stanley, BofA Securities, and Citigroup have been appointed as lead book-running managers for the offering, while Wells Fargo Securities, Deutsche Bank Securities, and BMO Capital Markets will serve as additional book-running managers. BNP Paribas, Academy Securities, Credit Agricole CIB, PNC Capital Markets LLC, and SMBC Nikko will act as co-managers for the proposed offering.
The SEC filing additionally mentioned that before finalizing this offering, the company will implement an equity incentive program, allowing both employees and non-employee directors of Novelis to be eligible for participation.
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