- 21 Feb 2024
- ICICI Securities
OVERSEAS SUBSIDIARY I.E. NOVELIS INC FILES PAPER FOR IPO IN US
News: In the regulatory filing, Hindalco has informed the stock exchanges that its wholly-owned American subsidiary, Novelis Inc., has filled papers for an initial public offering (IPO) to the U.S. Securities and Exchange Commission. The common shares are expected to be offered by Novelis' sole shareholder -Hindalco. It will be an OFS, hence the proceeds of the IPO will go to Hindalco, and Novelis will not receive any proceeds from the sale of common shares.
Views: This is sentimentally positive for the company, however its impact on Hindalco’s share price is purely determinant of valuations at which Novelis gets listed on US stock exchanges. Novelis is broadly valued at ~6-7x EV/EBITDA by the analyst community on forward basis to drive ~₹ 600 as target price for Hindalco. Hence any listed valuations less than this is negative and any premium to such levels is positive for Hindalco. We shall closely monitor further developments on this space. Novelis is expected clock sales volume of ~4 MT in FY26E and is likely to report EBITDA/tonne of US$ 550 with potential EBITDA pegged at ~$2.2 billion. This implies potential equity valuation of Novelis at ~$ 9-10 billion i.e. ₹ 70k-80k crore vs. the current Hindalco’s MCap of ₹1.15 lakh crore.
Impact: Positive