Hindalco Said to Consider $500 Million Share Sale Amid Rally

(Bloomberg) -- Hindalco Industries Ltd. is considering raising about $500 million through a stock sale, as India’s biggest aluminum maker seeks to cut debt amid a share-price rally this year, according to people with knowledge of the matter.

Hindalco is weighing a rights offering or an institutional share sale, the people said, asking not to be identified because the details are private. The ultimate size and structure of the transaction will depend on its impact on the founders’ stake in the Mumbai-based company, which was 38 percent at the end of September, one of the people said.

Shares of Hindalco reversed gains Tuesday afternoon, falling as much as 1 percent to 165.85 rupees, after earlier rising 2.9 percent.

Any deal would follow a rally in Hindalco’s share price that has nearly doubled the company’s market value this year to $5.2 billion at the Monday close. The metals flagship of the Aditya Birla Group is “relentlessly focused” on cutting debt in the short term, Hindalco Managing Director Satish Pai said on an August earnings call with analysts.

“If the company goes ahead with the equity raising, it will be used for deleveraging,” Goutam Chakraborty, a Mumbai-based analyst at Emkay Global Financial Services Ltd., said by phone Tuesday. “There has been a turnaround in all metal prices except copper prices in the past few months. The sentiments in the aluminum and metal markets have improved.”

Hindalco is the second-best performer this year on the S&P BSE Metal Index, which has risen 42 percent in 2016. The benchmark S&P BSE Sensex has gained 5.6 percent over the period.

The stock sale would require shareholder approval, the people said. A representative for Hindalco declined to comment.

The Mumbai-based producer of copper and aluminum shelved an institutional share sale of as much as 50 billion rupees ($750 million) in 2014 because of uncertainty about its access to cheap raw materials, people with knowledge of the matter said at the time.

To contact the reporter on this story: George Smith Alexander in Mumbai at galexander11@bloomberg.net. To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Timothy Sifert