E-Paper
Novelis to raise bonds to rejig $2.5 billion loans
MUMBAI: Novelis, an Aditya Birla Group company, and a world leader in high-value aluminium products, will refinance two of its long-term loans, which add up to $2.5 billion (about Rs16,700 crore), and will likely raise debt instruments. The instruments, mostly bonds, will start soon, as one of the two loans worth $1.1 billion is scheduled to mature in 2017.
Novelis needs to raise an additional amount to refinance its debt of $1.4 billion (about ₹9,352 crore) that will mature in 2020.
“We will refinance these two loans for Novelis. The market is currently good, and we’ll probably make some savings on the coupons here,” Hindalco managing director Satish Pai told HT.
Hindalco is the parent company of Novelis.
“There are no such plans for Hindalco at the moment, we don’t need to. For Hindalco, it is long-term debt till 2030. We plan to improve the EBIDTA (operating profit) at Hindalco,” Pai said.
Refinance includes raising cheaper loans to pay previous expensive loans. Novelis’ debt totals to $4.4 billion (about Rs 29,392 crore), while that of Hindalco is Rs 27,000 crore.
Hindalco will improve its operating profit mainly by increasing the share of high-value aluminium products, such as those used in aircraft, automobiles, and high-rise buildings.
“In Mumbai, the newly-constructed air traffic controller building is made of aluminium from Novelis. Aluminium is the right metal for such structures, where the higher you go, you need the safety and the efficiency of aluminium,” said Pai, who was recently appointed MD in place of group veteran Debu Bhattacharya at the end of his term. He has retained his post as vice chairman of Novelis.
Hindalco last week reported a sharp rise in net profit to Rs 294 crore against Rs 61 crore last year due to increased production efficiencies and lower input costs, mainly that of coal. However, the trend is unlikely to sustain.
Reliance Securities had said in a note while aluminium volumes will continue to remain stable at the current level, “profitability could be under pressure as compared to first quarter of 2016-17, due to a fall in regional premiums and higher coal prices.”
Pai also pointed at the fear of increased supplies from China for keeping aluminium prices muted. “China, the largest producer and consumer of aluminium, has surplus aluminium with it, while the rest of the world is in deficit. Last year, China had shut 4 million tonnes of capacity. There is a fear that China may re-start that capacity as aluminium prices on the LME has reached $1600 a tonne. That is keeping prices on the LME in a range-bound,” said Pai, explaining the fall in revenue for Hindalco at Rs 7,597 crore against Rs 8,575 crore.
For perspective, global production and consumption of aluminium is 57 million tonnes of primary aluminium, of which 31 million tonnes is made and consumed by China.