Hindalco Industries - Focus On Downstream Remains Key To Value Creation: ICICI Securities
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ICICI Securities Report
Hindalco Industries Ltd.’s decision to acquire Hydro's aluminium extrusions business in India (Kuppam in Andhra Pradesh) for Rs 2.5 billion falls within the envelope of Hindalco’s ‘doubling the downstream’ strategy wherein the company has entailed a capex of $1.1 billion.
The plant will also serve as an archetype for Hindalco's upcoming extrusions plant in Silvassa (Rs 7.3 billion capex for 34 kilo tonnes per annum greenfield plant).
Once commissioned, the Kuppam and Silvassa units are expected to boost Hindalco's total aluminium extrusions capacity from 60 ktpa to 109 ktpa.
The transaction is expected to close by Q1 CY22. Sales in extrusion market is driven by dealer network, differentiated by quick turnaround and increasing stock keeping units, and customers prefer distributed setup closer to demand footprint.
This, in our view, will be a deviation from the current means of doing business in Hindalco.
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