Hindalco Industries, part of the Aditya Birla Group, has postponed the $945-million initial public offering (IPO) of its US subsidiary, Novelis Inc. Experts say the delay is due to fears that lower-than-expected valuations for Novelis could hurt Hindalco’s overall value on the Mumbai stock exchange.
Novelis cited “market conditions” for the postponement, stating they will reassess the IPO timing later.
Hindalco bought Novelis before the global financial crisis to expand its global reach in metal cans and automotive components.
According to Satyadeep Jain, a research analyst at Ambit Capital, the expected IPO valuation range was 7.5-8.2 times FY26 EBITDA, higher than many peers. However, investors were likely uncomfortable with this valuation during roadshows, leading Hindalco to delay the IPO to avoid impacting its own valuation.
Novelis had planned a price range of $18 – $21 per share for the IPO, valuing the company at $12.6 billion at the high end. This valuation was higher than comparable companies like Japan’s UACJ Corp and France’s Constellium.
Jain mentioned that the holding company discount for Novelis is already factored into Hindalco’s current valuation. A lower-than-expected IPO valuation could increase this discount, making the IPO less attractive.
Hindalco aimed to raise up to $1.09 billion by selling up to an 8.6% stake in Novelis, including a green shoe option. However, the proposed price band for Novelis didn’t provide much incentive for investors, as it was relatively high compared to global peers. This could have decreased Hindalco’s share price from ₹750 to ₹715, according to Ritesh Shah of Investec Capital.
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