Professional Documents
Culture Documents
Energy management is a critical focus in all the plants: energy cost is 40%
of manufacturing cost for metal and 30% for rolled products
Figures in Mn
• Established in 1958 , it’s a flagship company of Aditya Birla Group.
• The country's largest integrated aluminium producer and ranks among the low cost
producers in the world.
• The product range includes alumina chemicals, primary aluminium ingots, wire rods,
rolled products, extrusions, foils and
alloy wheels.
Canadian Company formed in early 2005 as a result of a ‘forced’ spin-off from its parent
Company Alcan.
World leader in aluminium rolling, producing an estimated 19 percent of the world's flat-
rolled aluminium products.
Also it is the world leader in the recycling of used aluminium beverage cans.
The company produces aluminium sheet and foil products for customers in high -value
markets including automotive, transportation, packaging, construction and printing.
Key customers : Coca-Cola, Crown Cork & Seal, Ford, General Motors, Alcan, Kodak, Tetra
Pak,
Number one rolled product supplier in the world
– #1 in Europe
– #2 in North America
– #1 in Asia-Pacific
– #1 in South America
The rationale:
• Increasing scale of operation, entry into high—end downstream
market:: Novelis, the global leader in rolled products has an
annual production capacity of 2.8 million tonnes and a market
share of 19 per cent - presence in 11 countries and provides
sheets and foils for varied purposes
• Enhancing global presence: access to customers such as
General Motors Corp. & Coca-Cola Co
• After full integration, the joint entity will become insulated from
the fluctuation of LME Aluminium prices
• Superior technological expertise: ‘Novelis Fusion’ technology
enables it to produce 3 million tonne of flat rolled products
compared to Hindalco’s 220,000 tonnes a year- Hindalco plans to
triple aluminium output to 1.5 million metric tonne by 2012
• Increasing rolling capabilities through mill upgrades and innovative
practices
• Leverage on first mover advantage in high value added product
segments in India
• Thrust on recycling capacities – recycling needs just 5% of that of
producing primary aluminium
• Deal worth for Hindalco: the replacement value of the Novelis is
US $12 billion (as per company details)
•On May 15, 2007, the Company acquired Novelis Inc., Canada through
its indirect wholly-owned subsidiary AV Metals Inc. pursuant to a plan of
arrangement entered into on February 10, 2007 and approved by the
Ontario Superior Court of Justice on May 14, 2007
•Two new subsidiaries Tubed Coal Company Limited (with Tata Power
as the other JV partner) and East Coast Bauxite Mining Company
Private Limited (with Orissa Mining Corporation as the other JV partner)
have been formed.
Valuation – a cause of concern for Novelis acquisition
In 2005, Novelis’ net profit was S$ 90 million; share prices
never crossed US$ 30
Novelis management indicated a loss of US$ 240-285 million
in 2006
Immediate effect: Hindalco would achieve turnover of US$ 20
billion
Perfect fit for long term goal – a step ahead towards
Hindalco’s goal of becoming a leading producer of aluminium
and copper
Novelis is nearly 50% larger than Hindalco’s current market
capitalization: concern for severity and value dilution
Hindalco’s exposure to a weaker balance sheet
Company will move from high margin metal business to low-
margin downstream products business
Greater debt and erosion of profitability, although Hindalco’s
revenues shall be tripled
Decreased profits for Novelis - metal price increase due to
metal price ceilings in certain company’s sales contracts
Change in currency rates can negatively impact the financial
results and competitiveness of aluminium compared to other
metals
Company’s agreement of not to compete with Alcan in
certain end-use markets may hinder Novelis ability to take
advantage of new business opportunities
Integration: Integration of companies with diverse cultures,
nationalities across various levels and functions
Retaining cutting edge: Spirit and capability of innovation,
key customer relationships, people skills to be expanded
across greater Hindalco
Identifying and realising synergies: IT and risk
management skills, jointly realising downstream vision, and
international marketing
Improving Novelis’ financial performance: focus on costs,
operations, pricing and working capital
End-use markets for certain of Novelis’ products are highly
competitive - customers can accept substitutes for the same
Many customers of Novelis significant to the company’s
revenues - adversely affected by changes in the business
An aggressive growth plan by Hindalco, a combination of organic & inorganic growth
Upstream growth through organic route; a prudent mix of Brownfield & Greenfield
expansions
Downstream growth through acquisition (Novelis)
Progress on Planned
Continued stress on Financial turnaround &
Greenfield projects and
Operational excellence Leverage on technology
deliver on time