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Shares of Hindalco Industries fell nearly 6% in morning trading on Wednesday after its US subsidiary Novelis Inc postponed its initial public offering (IPO) due to market conditions. The company said Novelis will continue to evaluate the timing of the public offering.
Last week, Novelis set its IPO price band at $18 to $21 per share. The company planned to sell 45 million shares (KRW 4.5 billion) through the IPO, with Hindalco as the sole selling shareholder. The stock was scheduled to be listed on the U.S. stock market. Hindalco was targeting to raise between $810 million and $945 million through the offering. At the upper end of its price range, Novelis was targeting a valuation of up to $12.6 billion in its U.S. IPO.
Net proceeds from the Novelis IPO were estimated at between $931.5 million and $1.08 million, with eco-friendly footwear options becoming available to investors in major U.S. markets.
The company's sole shareholder, AV Minerals (Netherlands) NV, another subsidiary of Hindalco Industries, had planned to sell 45 million Novelis shares in the IPO. If Novelis shares are successfully listed, Hindalco Industries will own 555 million shares of Novelis stock, or 92.50% of the US subsidiary.
The Novelis IPO was supposed to be the largest by an Indian company in the US.
Novelis is the world's largest aluminum recycler, with major global companies including Coca-Cola, Ford, and Jaguar Land Rover as its customers.
Following the listing announcement, CLSA maintained a 'buy' rating on Hindalco and set a target price of Rs 770 per share. Key discussions surrounding the transaction are expected to focus on valuing Hindalco's stake in Novelis and leveraging the IPO proceeds.
Analysts at Prabhudas Lilladher maintained a 'buy' rating on Hindalco, applying an EV multiple of 6.5x for Novelis and a multiple of 5x for the India business. It cited improvement in the company's near-term performance and expected profit increase from its India operations. LME price rises.
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