This Aditya Birla Stock Is Climbing As Unit Aims For U.S. IPO

Shares of Hindalco Industries were gaining after the Aditya Birla Group company unveiled plans to take US-based subsidiary Novelis public 17 years after the group acquired the top aluminium maker.

What Happened: Novelis said it has submitted a confidential filing for an IPO with the US Securities and Exchange Commission (SEC). The IPO will involve a secondary sale of shares by Hindalco, with no capital being received by Novelis. Hindalco currently owns 100% of Novelis.

This confidential filing allows the applicant to submit information solely to the regulator, maintaining secrecy until the application is approved. However, Novelis did not reveal the size of the offer or the valuation it intends to seek.

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Why It Matters: Analysts observing Hindalco view this as an opportune moment to go public in the US, especially with the Federal Reserve signalling a halt to interest rate hikes. However, the specifics of how Hindalco plans to utilise the IPO proceeds remain unclear, including whether dividends will be distributed.

The acquisition of Novelis by Hindalco in 2007 marked a significant strategic move, positioning the Indian conglomerate as a global player in the aluminium industry. Today, Novelis has evolved considerably, notably with its ongoing construction of the first new aluminium mill in the U.S. in over 40 years in Alabama, and its ownership of Aleris, an Ohio-based aluminium products manufacturer acquired in 2020.

Novelis constitutes a substantial portion of Hindalco’s consolidated revenue and profits, making its performance pivotal to the parent company’s shares. However, recent announcements regarding increased capital investment for the Alabama plant led to a significant decline in Hindalco’s stock price, indicating the market’s sensitivity to Novelis’ developments.

Price Action: Hindalco’s share price was up 2.6% at ₹524.90 near the start of trade on Wednesday.

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