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Hindalco Shares Rise After Novelis' Upbeat April-June Guidance

Hindalco's stock rallies after upbeat guidance by U.S. subsidiary Novelis.

 The reception desk at Hindalco Ltd. office in Mumbai. (Photo: BloombergQuint).
The reception desk at Hindalco Ltd. office in Mumbai. (Photo: BloombergQuint).

Shares of Hindalco Industries Ltd. rose 4.9% after its U.S. subsidiary Novelis said it plans to raise $1,500 million to refinance higher-cost bonds and came out with better-than-expected earnings estimates.

Novelis Inc.’s wholly owned subsidiary Novelis Corp. priced an offering for $750-million senior notes due in 2026 at 3.250%, and another $750 million senior notes due in 2031 at 3.875%, according to its filings.

The company intends to use the net proceeds of the offering, together with cash on hand, to redeem outstanding 5.875% senior notes due in 2026.

Shares of Hindalco rose 5.05%, the most since May 11, after the report compared with a 0.6% fall in benchmark Nifty 50. The rally in the stock was aided by an upbeat earnings commentary by Novelis.

According to its advanced estimate filings:

  • Novelis expects adjusted Ebitda for the June quarter at $550-560 million.

  • It estimates shipments at 973 kilotonnes, implying Ebitda per tonne of $565-585.

  • Free cash flow from continuing operations at a negative $35-25 million.

  • Aleris Duffel update: Receivables of 115-million euros marked down to 45-million euros. Post-arbitrating proceedings still on.

Brokerage View

Edelweiss Securities

  • Novelis’ estimates significantly better compared with earlier forecasts.

  • A receivable mark-down on Duffel divestment a minor let-down.

  • Sales at $3.85 billion compared to Edelweiss’ estimate of $3.74 billion.

  • Shipments of 973 kt against the brokerage’s estimate of 934kt.

Investec Securities

  • Remains “constructive” on Hindalco

  • Increment refinancing bodes well for Novelis.

  • Higher Ebitda/tonne range allays short-term concerns on auto-linked volume growth.