Hindalco acquired Canadian aluminum company Novelis for approximately $6 billion in 2007. This made Hindalco the world's largest aluminum company and helped expand its global footprint. The acquisition provided benefits like increased market share, access to new technologies and customers, and a more diversified product portfolio to hedge against aluminum price volatility. In subsequent years, Novelis contributed increased revenues, shipments and profits to the combined company.

1. Acquisition of Novelis
by Hindalco

2. Team Profile
Team Eclipse
Name ID
Jobaida Akter Jaba SN-030-025
Meftahul Jannat SN-030-045
Md Abid Hasan SS-030-090

3. Introduction
 Hindalco announced in early 2007 about the acquisition
of the Canadian company Novelis.
 This acquisition helped Hindalco to be the world’s
largest aluminum company and India’s leading copper
producer.
 The acquired value of the Novelis was approximately $6
billon.
 The Chairman of the Aditya Birla Group's opinion was
that aluminum was a core business with growth
potentiality.

4. Pre-acquisition

5. Hindalco Industries Limited
 ‘We look upon the aluminium business as a core business that has
enormous growth potential in revenues and earnings,' 'Our vision is
to be a premium metals major, global in size and reach. The
acquisition of Novelis is a step in this direction’
 -Kumar Mangalam Birla, Chairman, Hindalco
Industries.
 Established in 1958.
 Hindalco has a total 60 percent share in the growing Indian market
for rolled products.

6. Novelis
 Novelis is the world leader in aluminium rolling, producing an
estimated 19 percent of the world's flat-rolled aluminium products.
 The company recycles more than 35 billion used beverage cans
annually.
 Industry-leading assets and technology.
 Alcan cast out its rolled products business to form novelis.
 No.1 in rolled products producer in Europe, South America and Asia.
 Facilities to produces metal cans for Pepsi and Coke.

7. Important Facts About Deal
 An all-cash transaction, enterprise value of approximately US $6.0 billion, including
approximately US $2.4 billion of debt.
 By january 1, 2010, all the sales contracts will get expired.
 Hindalco shipped primary aluminium to novelis for downstream value addition.
 The debt component of novelis stood at us $2.4 billion and additional US $2.8 billion
billion will be taken by hindalco to finance the deal.
 Crisil placed its outstanding long-term rating of ‘aaa/stable’ on hindalco.
 Paying us $44.93 A share.

8. The Benefits From This Acquisition
 The company will get a strong global footprint.
 Joint entity will become insulated from the fluctuation of LME aluminium
prices.
 Will give hindalco a strong presence in recycling of aluminium business.
 Recycling it requires only 5% of the energy needed to produce primary
aluminium.
 Novelis has a very strong technology for value added products and its latest
latest technology ‘novelis fusion’ is very unique one.

9. Reasons for Acquisitions
 Increased market power
 Learning and Developing new capabilities
 Overcoming the new entrants into the industry.
 Cost of new product development
 To avoid excessive competition

10. Funding Structure For The Deal
• With a debt-equity ratio of 7.23:1, Novelis couldn't borrow any more.
• borrowed $2.85 billion, $300 million raised as debt from group
companies and $450 million mobilised from its cash reserves.
• That is almost a third of the Rs 2,500 crore net profits Hindalco
estimated to post in 2006-07.
• The second part of the deal is the $2.4-billion debt on Novelis’s
balance sheet.

11. Strategic Rationale For The Deal
• Hindalco will be able to ship primary aluminium from india and make
value-added products.
• Low-cost alumina and aluminium facilities combined with high-end
rolling capabilities.
• Increasing scale of operation, entry into high—end downstream
market and enhancing global presence.
• Access to customers such as general motors corp. And coca-cola co.
• World's leading aluminium maker.

12. Valuation For Acquisition
• Too high a price for a company that incurred a loss of US $170 million
million for the nine months ended 30 September, 2006.
• Its share prices never crossed us $30 in 2005-06.
• Target of doubling its turnover to $ 20 billion three years in advance.
• Novelis management has indicated a pre-tax profit of us $35 million-
100 million for 2007, hindalco was being optimistic.
• Novelis nearly 50% larger than hindalco’s current market
capitalization.

13. Post Acquisition
Results

14. Performance Boost from the Deal
 The market share of Hindalco increased globally as the 19% share of the Novelis
in the global aluminum market was acquired by Hindalco.
 The free case flow of Novelis from this deal was $175 million in 2006.
 Free Cash flow was improved by $164 million due to this deal.
 Novelis was able to repay its loans due to the acquisition by Hindalco.
 Hindalco was able to become the biggest rolled almunium product manufacturer
in world due to the acquisition of Novelis.
 Hindalco is now a global player with a strong presence in five continents.
 product portfolio which is a natural hedge against the volatility of aluminium
prices.
 Novelis has reported a net profit of USD 28 million (under US GAAP) for the
period 16 May 2007 to 31 March 2008 vis-à-vis a loss of USD 265 million (under
US GAAP) in FY2007.
 Total shipments increased from 3113 kt to 3150 kt.
 Novelis Reported revenue of US$10.2 billion in its 2009 fiscal year.

16.  To conclude the achievements in the financial year, the company recorded a
commendable performance in an extremely difficult year that witnessed
unprecedented events in the financial and commodity markets.
 This performance is because of the underlying strength of business
operations & project management capabilities.
Conclusion

17. Thank You