Hindalco Industries Ltd

• Debenture issue- Rs 100 crore Ratings: AAA (reaffirmed)
• Commercial paper programme- Rs 50 crore Rating : P1+ (reaffirmed)

CRISIL has reaffirmed the outstanding ratings of Hindalco Industries Limited (Hindalco) following the announcement of its proposed acquisition of around 74.6% equity stake in Indian Aluminium Company Limited (Indal). This acquisition is expected to enable Hindalco to further strengthen Hindalco's business position in the domestic aluminium industry (especially in the semi-fabricated aluminium products segment) without impacting its financial risk profile since the acquisition would be funded entirely out of the internal accruals and surplus liquid funds available with Hindalco. Subsequent to the above acquisition, Hindalco would be the largest player in most segments of the domestic aluminium industry.

The business position of Hindalco would strengthen primarily owing to the synergistic benefits available to the company following the acquisition. While Hindalco is primarily an upstream player with primary metal accounting for around 50% of its revenues in 1998-99, whereas Indal is primarily a downstream player with semi-fabs accounting for 65% of its sales in 1998-99. Further, while on one hand Hindalco faces a marginal shortage in alumina where Indal is surplus, on the other Indal is partly short of primary metal in which Hindalco is surplus.

Hindalco, a part of the Aditya Vikram Birla group of companies, is the largest producer of primary aluminium in India. Hindalco is a fully integrated aluminium producer that mines bauxite, refines bauxite into alumina, smelts alumina into aluminium and fabricates downstream aluminium products. The company also has captive power plants that meet its entire power requirements. On the product front, Hindalco sold around 46% of its output in the form of value added semi-fabricated products and this constituted about 50% of the company's revenues in 1998-99. The company has shelved off the large green-field aluminium project to be implemented in Orissa and has instead decided to implement a brown-field expansion project at its existing manufacturing facilities at Renukoot, Uttar Pradesh. During 1998-99, the company reported a PAT of Rs. 5.67 Billion on a gross sales of Rs. 20.13 Billion.