Birla's Global Gambit ; Hindalco Gets an International Footprint with Novelis, but Chairman Kumar Mangalam Birla's Greater Challenge Begins Now.

Summary

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Till yesterday, Hindalco was a company with one aluminium smelter, a couple of alumina refineries and rolling mills, an extrusion plant, a foil plant and a string of memoranda of understanding to put up new smelting and refining capacities. All these proposed and existing capacities are, of course, domestic. One fine day, after a year of negotiations and plenty of prodding from investment bankers, Kumar Mangalam Birla, Chairman, Aditya Birla Group (of which Hindalco is a part), wakes up to discover he's now got plants located in 34 locations that are spread over four continents and 11 countries. Birla has reason to be contended with the development-and with his core team that spearheaded this transaction, which includes Debu Bhattacharya, Managing Director, Hindalco, and Sumant Sinha, Group CFO. By taking over Novelis, a world leader in aluminium rolled products-the deal is expected to be completed by the first quarter of 2007-08 and the acquisition needs the approval of at least two thirds of Novelis' shareholders- Hindalco has taken a giant stride on the global stage.

This clearly is the Aditya Birla Group's largest acquisition on international shores-and the second-largest by an Indian company after Tata Steel's buyout of Corus-but it isn't as if going global is a new phenomenon at this group, whose roots date back to the 19th century. Way back in 1969, when the late Aditya Birla was just 24, he set the group's global agenda at a time when few promoters were even thinking about it. In the years ahead, he set up some 19 companies outside India in countries like Thailand, Malaysia, Indonesia, the Philippines and Egypt. By acquiring Novelis, Birla has given the group's globalisation strategy a huge shot in the arm.

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Birla's Global Gambit ; Hindalco Gets an International Footprint with Novelis, but Chairman Kumar Mangalam Birla's Greater Challenge Begins Now.

The deal should have also come as a shot in the arm for the share price of Hindalco, which has been languishing for some time now. In absolute terms, it's fallen 9 per cent over a year, and relative to the Sensex it's down 35 per cent. If the transaction was expected to provide some respite in the short term to the stock, exactly the opposite took place: A day after the deal was announced, the Hindalco share plunged 13.74 per cent, and at the time of writing the stock was down 12.55 per cent from its pri...

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