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Hindalco moves to wrap up Indal

The Aditya Birla Group on Monday flagged off a plan to wrap up its 97% subsidiary Indal into the Hindalco Industries fold, under a scheme of arrangement.

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MUMBAI: The Aditya Birla Group on Monday flagged off a plan to wrap up its 97% subsidiary Indal into the Hindalco Industries fold, under a scheme of arrangement.

The move gains significance as it comes in the backdrop of reports of a probable hostile bid for Hindalco from wily predators operating in the global non-ferrous arena.

The board of Hindalco will on Tuesday consider the scheme of arrangement with Indal under Sections 391-394 of the Companies Act.

Hindalco owns 97% of Indal (Indian Aluminium), a company it acquired several years ago from Canadian aluminium maker Alcan.

Hindalco followed up the acquisition with an open offer to mop up the remaining shares owned by other shareholders.

Hindalco has several subsidiaries and investment companies under its belt. Immediately after the board meeting on Tuesday, the company will hold its annual general meeting.

The scheme of arrangement under section 391-394 will involve a court convened meeting of shareholders. Aditya Birla Group had earlier employed the same strategy to consolidate its three companies — Birla Global Finance, Indo-Gulf Fertilisers and Indian Rayon under Aditya Birla Nuvo.

In the Hindalco balance sheet, the value of Indal shares has been pegged at Rs 13.83 crore for 6.92 crore shares.

Such a scheme of arrangement usually involves the stake owned by the parent company (in this case Hindalco) to be extinguished, as no company can hold its own shares.

Another possibility is that the 97% Indal stake, when converted into Hindalco shares, will be held by an investment subsidiary of Hindalco as treasury stock.

ICICI Bank and Reliance Industries have adopted this strategy. While ICICI Bank divested its own treasury stock and unlocked value, Reliance Industries still holds its own shares under a subsidiary called Petroleum Trust.

Hindalco could adopt a similar strategy, enabling its promoters to tighten their hold further in their flagship company from its existing 36%. Tuesday will provide the answer.  

Shares of Hindalco fell 4.13% to Rs 166.15 on the Bombay Stock Exchange on Monday. Indal was delisted after Hindalco crossed the 90% holding in it.

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