The share price of Hindalco Industries rose 11 per cent on Monday, the highest gain for the stock in over six years, before settling down with a 4 per cent gain at Rs 146.
The price rise was fuelled by speculation of a hostile bid on the Aditya Vikram Birla group company by an Alcan- Sterlite combine. Alcan itself has been a takeover target, fighting a hostile bid from Alcoa. Rio Tinto, BHP Hilton and Hindalco are all in the race to buy Alcan.
“A hostile bid seems extremely unlikely,” said Phani Sekhar, fund manager at Angel Broking. But the stock would be in action and could see two-way movement, said Sekhar. It was only last month that Hindalco completed the buyout of Novelis, which separated from Alcan in 2005, for $6 billion. The Birla group spokesperson declined to comment on speculation.
There was no reason for the stock to be moving up on the possibility of a hostile takeover attempt as it was distant, said an analyst not willing to be quoted. At Rs 146, it was a buy with a price target of Rs 170, he added.
Expectations are that the promoters might buy shares from the market to strengthen their position in case they perceive the takeover threat to be serious.
“The current promoter holding in the company makes them vulnerable,” said Arun Kejriwal of KRIS Research, but added that till date no one had mounted a hostile bid on the group. The promoters, through a preferential allotment approved in March, raised their holding in the company from 27 per cent to 31 per cent. Life Insurance Corporation of India, the largest Indian institutional shareholder in Hindalco, raised its stake in the company from 7.01 per cent to 9.06 per cent in April.
Hindalco bought out Alcan’s stake in Indian Aluminium (Indal) in 2000. Before selling its stake to Hindalco, Alcan had rejected the 10 per cent open offer made by Sterlite for Indal.