2. Alignment with Group Strategy – Vision, Mission and Goals
Vision: To be a premium global conglomerate with a
clear focus on each of the businesses
Mission: To deliver superior value to our customers,
shareholders, employees and society at large.
Values: Integrity, Commitment, Passion,
Seamlessness, Speed
Goals: To increase the top line to $65 billion by
2015 (Kumar Mangalam Birla, Forbes India, October
4th, 2012)
Strategy
•CAGR of 18% (approx)
•Nature of Industries – Mainly Commodities and
B2B (organic growth 5-8%)
•Looking for Inorganic Growth (10-13%)
•Diversifying into downstream value addition
industries (vertical integration)
•Looking for more B2C exposure and access to new
markets and geographies
•Leveraging upstream operations to gain more
synergy for downstream acquisitions
Implicit Strategic Intent – Recent Acquisitions
2013
•Pantaloons
•Chlor-alkali and Phosphoric Acid Division of Solaris Chemtech
2012
•Terrace bay Pulp Mill in North Western Ontario
2011
•Domingo Fabriker, leading Swedish specialty pulp and biorefinery
company
•Columbian Chemicals Company in Atlanta, became the largest
producer of Carbon Black by volume in the world
• Chlorochemicals division of Kanoria Chemicals & Inndustries
2010
•Ultratech Cement Limited acquired a majority stake and
management control in Dubai Based Star Cement Company. Gained a
strong foothold in Middle East Markets
2007
•Hindalco acquired Atlanta headquartered Novelis. Became world’s
largest aluminium rolling company and one of the biggest producers
of primary aluminium
3. Industry Analysis and Opportunities
•76% of Aluminium being produced is exported in pure form, minimal presence of downstream activities, no
economic value addition, local production would give cost advantage in terms of Raw Material, Transport and
Duties
•Blue Ocean Market Place – high demand supply gap for aluminium drill pipes, subsea winches and sail boats, solar
panels and sheet reflectors, heat sinks, aerospace and defence equipments, currently met through imports
•Huge derived demand for Aluminium Powder/Flakes and Paste , Aluminium Foam, Aluminium Foil, Aluminium
Light Reflectors , Aluminium Composites
•Large Premiums on LME prices
• Proximity to mid west markets (expected to become more attractive due to revision of LME warehouse norms)
•Competition from Bahrain Atomizers, Mepco (India), Alulight International GmbH (US), AVL Metal
Powders(Belgium), Garmco (Bahrain), Hydro(Norway)
•Presence of Hindalco as a strong player (exporter) in the sheets(Foil, Reflectors and Composite) Segment
•Strong presence in US and Canada through Novelis
•US economy poised for a bull run from 2015 to 2018
• Aerospace Industry expected to grow at 7.8% through 2014
•Corporate Average Fuel Efficiency norms expected to fuel
demand for aluminium body sheets for automobile industry
•New LME warehousing norms may prompt manufacturers to
look for local suppliers for aluminium
•CAGR of 2.4% by value till 2017
•Around 10% growth anticipated in 2014
•Strong Presence in Mining
•Competition from Entrenched Players
like ALCOA and Rio Tinto Alcan
* References: Megatrends Aluminium 2020, Frost and Sullivan, 2010; Marketline Industry Profile, Aluminium in Australia, 2013; Metal Bulletin Daily; Euromoney
Institutional Investor PLC
4. Sector Strategy
Old Product
Market
Penetration
(6-8%)
Short Term
Market
Development
(2.5%-4%)
Short Term
New Product
Product
Development
(2.5%-4%)
Long/Medium
Term
Diversification
(2.5%-4%)
Long/Medium
Term
Group Strategy And Targets
Old Product
New Product
Novelis
US and Canada
Hindalco and Novelis
Moving on to
downstream value
addition through
inorganic routes
Hindalco and Novelis
Hindalco
Moving on to
Market Development
downstream value
MENA
addition through
inorganic routes
Strategy for Aluminium Sector
Long Term Wait and
Watch Approach. Look
for companies to acquire
which will give the
greatest synergies. Look
to move into
downstream value
additions like heat sinks,
industrial coatings, etc.
Can leverage the
expertise of chemical
sector.
Overview of Short Term Company Strategy
Novelis
•Capacity expansion - Large CAPEX already initiated in 2012-13
•Interest rates to increase in 2014 , which
will have a detrimental effect on CAPEX by competitors
•Relationship development with local buyers, as decrease in LME
premiums due to change in warehousing norms will make the market
less attractive for exporters
•With US economy set for boom from 2014-2017, organic growth of
10% can be targeted
Hindalco
• Strong Presence as Exporter in MNEA – in sheets segment
• Look for local presence in the Middle East – through JVs or
acquisitions (less likely)
• Access to raw materials (the region is expected to produce 15% of
world’s aluminium by 2015)
• Chance to leverage expertise in downstream value addition activities
• Less competition, blue ocean marketplace, market share of 30%-40%
can be targeted (equivalent to 6% of Hindalcos revenues in 5 years)
Horizontal Strategy: Operational excellence, continuous improvement, TQM and Six Sigma Drives that will improve processes and enable
greater leverage to utilize inorganic growth opportunities to increase bottom line and, in some cases, the top line.
5. Company Strategies - Hindalco
Milestone
Timeline
Steps
Expand into Middle East
Options –
Greenfield/Brownfield
Capacity Installation to be completed by
2015 for Greenfield(GF) Expansion, by
2014 for Brownfield(BF) Expansion
Look for companies to acquire, this will give instant access to market and
distribution channels, otherwise set up Greenfield Projects for primary
Downstream Value Addition
10% Market Share
2015 For GF/2014 For Brown Field
Leverage Existing Goodwill in Foils business to engage customers
20% Market Share
2016 For Greenfield/2015 For Brown
Field
Engage Automotive, Paint, Aerospace, Defense and Construction clients for
powder, foam and reflector businesses
30% Market Share
2017 For Greenfield/2016 For Brown
Field
Expansion into integrated products player offering reflectors, casings, foams
, specialized automotive body sheets, etc.
40% Market Share
2018 For Greenfield/2017 For Brown
Field
Expand the chemicals business to become an integrated value chain player
to gain a sustainable competitive advantage and boost profitability
Investments
Powder/Flakes $10,000,000
Foams
$10,000,000
Foil
$200,000,000
Reflectors
$50,000,000
Market Share
Revenues
Incomes
Investment
CF
NPV
MTPA
14000
2500
200000
20000
2015
10%
$69,420,000
$4,358,159
$200,000,000
($195,641,841)
$530,097,201
Premium
$900
$900
$1,050
$1,000
2016
20%
$152,860,800
$9,596,537
$70,000,000
($61,603,030)
Avg LME
Price
$1,900
$1,900
$1,900
$1,900
Total Price
$2,800
$2,800
$2,950
$2,900
Total Market
Size
$39,200,000
$7,000,000
$590,000,000
$58,000,000
CAGR
7%
20%
10%
12%
2017
30%
$245,341,584
$15,402,442
2018
40%
$350,020,660
$21,974,151
2019
40%
$374,522,106
$23,512,341
$15,402,442
$21,974,151
$23,512,341
8% CAGR
Sensitivity
Best Case
Average Case
Worst Case
Final Market
Share
50%
40%
30%
NPV
$722,538,857
$530,097,201
$337,655,546
Opportunities and Risks: 1) Critical to be first
entrant to maximize market share 2) Changes in
government, law and order and regulatory
environment 3) High volatility in Al prices –
necessity for downstream value addition - Huge
scope to leverage group synergies in to boost
revenues and profitability beyond initial
assessment 4) Growing, Blue Ocean Market
6. Company Strategies - Novelis
Milestone
Timeline
Capacity Expansion in US and
Canada
Completed
Record capital investment in the business of $775 million
2015
•Implement best practices (incl. environmental) to take lead among
domestic producers –Started with Recycling Centers in Korea and increase of
recycling content by 4% with declaration of intent to increase it to 80%
•Establish strong presence in the region – started with establishment of
Brazilian Rolling Centre
•Expand owned warehouse infrastructure to have competitive cost and
profit structures under the new LME warehousing norms
•Aggressive B2B marketing to engage local customers
25% Market Share in US and
Canada
Market Size
CAGR
Market Share
Revenues
FCF
NPV
2014
$4,903,061,224
0%
19.60%
$961,000,000
$111,163,371
$640,524,033
Novelis
Steps
2015
2016
2017
2018
$5,491,428,571 $6,150,400,000 $6,888,448,000 $7,715,061,760 Sensitivity
12%
12%
12%
12%
Best Case
25%
25%
25%
25%
$1,372,857,143 $1,537,600,000 $1,722,112,000 $1,928,765,440 Average Case
$158,804,816 $177,861,394 $199,204,762 $223,109,333
Worst Case
Market Share
NPV
30%
$748,417,317
25%
$640,524,033
20%
$532,630,748
Opportunities and Risks: 1) Volatility in Al Prices 2) Large Reserves to offset volatility in supply chain 3) Value addition activities to offset a part of LME
price volatility through enhancement premiums 4) Competition from other global competitors 5) Strong US presence to offset it 6) Correct timing for
capacity expansion with upward pressure on US interest rates through 2014-2018 7) Strong Statement of Intent and Brand Image to engage customers
Horizontal Strategy :1) Invest in supply chain and leverage reserves to offset supply disruptions for downstream value adding group businesses 2)Leverage
value addition capabilities to enhance market share , revenues and profitability 3)Invest to stabilize supply chain and enhance process capability
*References: Megatrends Aluminium 2020, Frost and Sullivan, 2010; Metal Bulletin Daily; Euromoney Institutional Investor PLC; Wallstreet Journal; Annual Report
Hindalco 2012-13;,Annual Report Aditya Birla Nuvo 2012-13