Hindalco set to get RS7,660 crore from Novelis

Having nursed its ailing subsidiary to health, it’s time to cash the cheque for Hindalco Industries Ltd.

The Aditya Birla Group’s flagship firm is set to receive about $1.7 billion or `7,660 crore from Novelis Inc, the Atlanta-based aluminium cans giant, from the proceeds of a $2.5 billion bond sale.

The return of capital will come as a boon for Hindalco, the aluminium maker which is in the midst of a major expansion programme entailing a capital expenditure of `40,000 crore in India.

Hindalco also carries a debt of Rs23,000 crore in its books as on June 30, 2010, according to a company filing made on September 30.

Novelis was acquired by Hindalco for $6 billion in 2007. The global financial crisis that followed immediately thereafter saw the overseas subsidiary with a $11 billion turnover awash in red.

Hindalco had to use its balance sheet to help restructure the debt mountain at Novelis. Additionally, it also had to shut down a plant and lay off about 1,000 employees in the US.

For Novelis, losses peaked to $1.8 billion in the third quarter of financial year 2009, mostly as a result of a high cost of capital. In 2010, the company posted a net profit of $400 million on sales of $8.7 billion. With that, the turnaround was complete.

DNA could not reach company officials for comment.

A Bloomberg report on Thursday mentioned Novelis’s plan to set yield guidance on $2.5 billion of bonds.

The proceeds will be used along with borrowings of $1.5 billion to refinance debt, and for a $1.7 billion distribution to Hindalco, the report said.