Skip to main content

Will the $6-B Novelis buyout drag down Hindalco?

Announced as it was between the $10 billion plus Vodafone-Hutch and Tata-Corus deals, the Birla Group's $6 billion offer for Canada-based aluminium-rolled products maker Novelis has not received much attention. Businessworld however has a critical analysis of the deal.
There are two parts to the deal. First, Hindalco is to buy 100 per cent of Novelis equity at $44.93 per share. That adds up to almost $3.6 billion...With a debt-equity ratio of 7.23:1, (Novelis) can’t borrow any more. So, the Birlas were unable to do a leverage buyout. To buy the $3.6 billion worth of Novelis’s equity, Hindalco is now borrowing almost $2.85 billion (of the balance, $300 million is being raised as debt from group companies and $450 million is being mobilised from its cash reserves). “We estimate the interest costs on this $2.85 billion will be between Rs 700 crore-800 crore,” says Uberoi. That is almost a third of the Rs 2,500 crore net profit Hindalco may post in 2006-07. (It has reported a net profit of Rs 1,843 crore for the first three quarters of this year.)

...The second big concern is Novelis’s valuation. Analysts believe the Birlas are paying too high a price for a company that incurred a loss of $170 million for the nine months ended 30 September 2006. In its latest guidance, the Novelis management has indicated a loss of $240 million-285 million for the whole of 2006. Even in 2005, when Novelis had made a $90-million net profit, its share prices never crossed $30. So, why is Hindalco paying $44.93 a share for a loss-making company?

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.

Popular posts from this blog

PE-VC investments in Q2'23 decline 33% to $9.9 Billion

Private Equity-Venture Capital (PE-VC) investments in India during the quarter ended June 2023 (Q2'23), at $9.85 Billion across 182 deals, registered a 33% decrease compared to the same period in 2022 (which saw $14.6 Billion being invested across 371 deals). The investment amount however rose 74% compared to the immediate previous quarter (which saw $5.7 Billion being invested across 181 deals), shows data from  Venture Intelligence , a research service focused on private company financials, transactions, and their valuations. The PE-VC investment figures for the first 6 months of 2023 - at $15.5 Billion (across 363 deals) - was 50% lower compared to the same period in 2022 (which saw $31 Billion being invested across 800 deals). Q2’23 witnessed 19 mega deals ($100 M+

Chiratae, Speciale and Stride Ventures win APEX'24 Venture Capital Awards

Chiratae Ventures, Speciale Invest and Stride Ventures were awarded as among the leading Venture Capital investors in India for 2023 as part of Venture Intelligence APEX‘24 Private Equity & Venture Capital awards event in Mumbai.  The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer. The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms and "crowd sourced" voting from the Limited Partner, PE-VC and advisory communities. (The main criteria are Return Track Record, New Fund Raises & Follow-on Funding Rounds for Portfolio Companies) VC Investor of the Year Chiratae Ventures received the Venture Capital Investor of the Year 2023 Award on the back of 10 part exits totaling $178 million via Secondary Sales during the year. Its exits included those from retail unicorn Lenskart, SaaS Startup Pixis and baby pr

Blackstone, MO Alts and InvAscent win APEX'24 Private Equity Awards

Press Release Blackstone, MO Alternates (formerly Motilal Oswal PE) and InvAscent were awarded as among the leading Private Equity and Growth Capital investors in India for 2023 as part of Venture Intelligence APEX‘24 Private Equity & Venture Capital awards event in Mumbai.  The Venture Intelligence “Awards for Private Equity Excellence” (APEX) is dedicated to celebrating the best that the Indian Private Equity & Venture Capital industry has to offer. The APEX Awardees are selected based on both Self Nomination by the participating PE-VC firms and "crowd sourced" voting from the Limited Partner, PE-VC and advisory communities. (The main criteria are Return Track Record, New Fund Raises & Follow-on Funding Rounds for Portfolio Companies) PE Investor of the Year Blackstone received the Private Equity Investor of the Year 2023 Award on the back of strong complete exits during the year: from Sona Comstar and IBS Software. Ganesh Mani and Amit Dalmia, Senior Managing D

Avendus tops League Table for Transaction Advisors to PE deals in Q1'23

Aeka Advisors and Ambit claim the No.2 & 3 slot Avendus topped the Venture Intelligence League Table for Transaction Advisor to Private Equity Transactions for Q1 2023 advising 5 deals worth $808 million. Aeka Advisors stood second having advised 3 deals worth $228 million. Ambit followed with 4 deals worth $160 million. Ernst & Young ($114 million across 4 deals) and o3 Capital ($80 million across 2 deals) completed the top five for Q1 2023. Avendus acted as advisor to ADIA’s $500 million investment in omnichannel eyewear retailer Lenskart . Aeka Advisors acted as advisor to Kreditbee’s $160 million fundraise from Advent International, Mitsubishi UFJ Financial Group (MUFG) and existing investors. Ambit advised the $104 million fundraise of Freshtohome from Mount Judi Ventures, Iron Pillar, Amazon and others. The  Venture Intelligence League Tables , the first such initiative exclusively tracking transactions involving India-based companies, are based on the value of PE

PE-VC investments fall 38% in 2023 to below $30 B

The value of investments by Private Equity - Venture Capital (PE-VC) firms in India fell by 38% to less than $30 Billion in 2023. PE-VC firms invested $29.7 Billion (across 756 deals) in Indian companies in 2023, compared to $47.6 Billion (across 1,362 deals) in the previous year, reports Venture Intelligenc e, a research service focused on private company financials, transactions, and their valuations. (Note: These figures exclude PE investments in Real Estate).                                                                                                                                                                      2023 witnessed 67 mega deals ($100 M+ rounds) worth $21.2 Billion, compared to 112 such investments worth $31.8 Billion in 2022. The $2.4 Billion investment in Manipal Hospitals by Temasek (which gained majority control) and TPG Capital was the largest PE-VC investment in 2023. This was followed by the $1.35 Billion buyout of education loans focused HDFC Credila