Group 3: Group 3: Satyaweer Agarwal Satyaweer Agarwal Priyanka Zope Priyanka Zope Sudeshna Sarkar Sudeshna Sarkar Sumit Chawla Sumit Chawla V
Indian Aluminum Industry
Indian Aluminum Industry
Highly Concentrated Industry Highly Concentrated Industry
Main PlayersMain Players
1.
1. HINDALCOHINDALCO –– almost 39% almost 39% market market shareshare
2.
2. Sterlite IndustriesSterlite Industries
3. 3. NALCONALCO 4. 4. BALCOBALCO 5. 5. MALCOMALCO
V Very strery strangangely ely the the per per capita capita consuconsumption mption of theof the aluminium metal in India is less than 1kg, whereas aluminium metal in India is less than 1kg, whereas the same is estimated at 25 to 30 kgs in US &
the same is estimated at 25 to 30 kgs in US & Europe, 15 kgs
Europe, 15 kgs in Japan, 10 in Japan, 10 kgs in Tkgs in Taiwan and 3 kgaiwan and 3 kgss in China.
Introduction : Case
Introduction : Case
May 16, 2007:
May 16, 2007: Hindalco ac
Hindalco acquired Novelis
quired Novelis
22
ndndbiggest ac
biggest acquisiti
quisition
on valued at $6 bil
valued at $6 billion
lion
Biggest being
Biggest being T
Tata acquiring Corus for $7.6
ata acquiring Corus for $7.6
billion
billion
Nov
Novelis will work as
elis will work as a subsidiar
a subsidiary of
y of Hindalco
Hindalco
Chairman will b
Chairman will be Kumar M
e Kumar Mangalam Bi
angalam Birla
rla
Martha Finn Brooks: COO & President
Martha Finn Brooks: COO & President
W
World Leade
orld Leader: U
r: United C
nited Compan
ompany R
y Rusal (M
usal (Mosco
oscow
w,,
Russia)
Russia)
Brief about Hindalco
Brief about Hindalco
Established in 1958Established in 1958
A flagship company of Aditya Birla GroupA flagship company of Aditya Birla Group
Commenced its operations in 1962 with anCommenced its operations in 1962 with an
aluminium facility at Renukoot in U.P. aluminium facility at Renukoot in U.P.
Leading company in aluminium and copperLeading company in aluminium and copper
industry in the world industry in the world
Generated high revenues in 2006-07Generated high revenues in 2006-07
Brief about Novelis
Brief about Novelis
Formed in January 2005
Formed in January 2005
W
Was
as a
a result
result of ‘forced’
of ‘forced’ spin
spin
-off from its parent,
-off from its parent,
aluminium giant and Canada-based Alcan Inc.
aluminium giant and Canada-based Alcan Inc.
Leadin
Leading producer
g producer of alu
of aluminium sheet and li
minium sheet and light guage
ght guage
(thin)
(thin) rolled production for the c
rolled production for the construction &
onstruction &
industrial markets
industrial markets
Operated in 11 countries
Operated in 11 countries
Acquisition
Acquisition
Analy
Analysts
sts believ
believed that
ed that the
the acqu
acquisition
isition will ha
will have
ve
both pros and cons:
both pros and cons:
Pros: Global Presence, Production Capacity will
Pros: Global Presence, Production Capacity will
Increase, one of the top aluminium
Increase, one of the top aluminium
manufacturing Co’s
manufacturing Co’s
Cons:
Cons: Hug
Huge amount and Novelis was incurring
e amount and Novelis was incurring
losses, no short term and medium term benefi
losses, no short term and medium term benefits,
ts,
Debt was
Debt was also there in the B/S of
also there in the B/S of Nov
Novelis (This
elis (This
in-turn will effect the Debt-Equit
in-turn will effect the Debt-Equity Ratio
y Ratio of
of
Hindalco)
Hindalco) & Interest on the loan will affect
& Interest on the loan will affect
Hindalco’s
N O V E L I S
N O V E L I S
Formed in January 2005.Formed in January 2005.
Was a result of a ‘forced’ spinWas a result of a ‘forced’ spin-off from its parent,-off from its parent, aluminium giant and Canada-based Alcan Inc. aluminium giant and Canada-based Alcan Inc.
World leader in aluminium rolling, producing anWorld leader in aluminium rolling, producing an estimated
estimated 19 %19 % of the of the world's flat-rolled aluminiumworld's flat-rolled aluminium products.
products.
World leader in the recycling of used aluminiumWorld leader in the recycling of used aluminium beverage cans.
beverage cans.
T H E A C Q U I S I T I O N
T H E A C Q U I S I T I O N
In 2003, Alcan won a hostile takeover of In 2003, Alcan won a hostile takeover of French aluminium company Pechiney.
French aluminium company Pechiney.
Result : NOVELISResult : NOVELIS
Novelis : Always a problem childNovelis : Always a problem child
In 2007, Hindalco acquired Novelis, making itIn 2007, Hindalco acquired Novelis, making it a wholly owned subsidiary of the company.
ACQUSITION
ACQUSITION
An acquisition, also known as a takeover or aAn acquisition, also known as a takeover or a buyout, is the buying of one company (the buyout, is the buying of one company (the ‘target’)
‘target’) by anotherby another..
An acquisition may be friendly or hostile.An acquisition may be friendly or hostile.
Acquisition usually refers to a purchase of aAcquisition usually refers to a purchase of a smaller firm by a larger one.
Increased market powerIncreased market power
Learning and Developing new Learning and Developing new capabilitcapabilitiesies
Overcoming the new entrants into the industry.Overcoming the new entrants into the industry.
Cost of new Cost of new product developmentproduct development
To avoid excessive competitionTo avoid excessive competition R E A S O N S F O
The acquisition of Novelis by Hindalco was in a cashThe acquisition of Novelis by Hindalco was in a cash transaction.
transaction.
Global integrated aluminium producer with low-costGlobal integrated aluminium producer with low-cost alumina and aluminium production facilities.
alumina and aluminium production facilities.
Biggest rolled aluminium products maker and fifth largestBiggest rolled aluminium products maker and fifth largest integrated
integrated aluminium aluminium manufacturer in manufacturer in the the world.world.
Globally positioned Globally positioned organizaorganization.tion.
Hindalco is the lowest cost producers of primary aluminiumHindalco is the lowest cost producers of primary aluminium in the world.
in the world.
F
The debt component of Novelis stood at US $2.4The debt component of Novelis stood at US $2.4 billion and additional US $2.8 billion taken by billion and additional US $2.8 billion taken by Hindalco to finance the deal.
Hindalco to finance the deal.
Debt and interest burden of the company hasDebt and interest burden of the company has increased.
increased.
