The Aditya Birla group is reconsidering the merger of Indal with Hindalco. Hindalco had earlier ruled out the possibility of a merger between the two companies on account of a high stamp duty cost.
Hindalco currently owns 96.3 per cent in Indal, while around 2.6 per cent is held by the Indian public and the rest with others including institutions. Indal was delisted from the bourses after the group made an open offer to acquire the remaining stake.
If the two group companies are merged in the near future, it could create a Rs 7,800 crore (Rs 78 billion)-plus monolith. While Hindalco's capacity to produce aluminium metal is 340,000 tonne per annum, Indal's capacity is being expanded to 65,000 tonne per annum.
Company sources said, "The merger is the next logical step. It is certainly on the company's radar. However, no formal decision has been taken in this regard. This also may not happen soon as Hindalco has just announced expansion plans for its copper division."
Sources also indicated that the merger will materialise based on the cost- benefit analysis, which is currently being discussed. Industry analysts estimate the cost of the merger around Rs 100 crore (Rs 1 billion).
Indal is the group's downstream aluminium-producing arm that Hindalco, acquired from Canadian major Alcan in March 2000. The company's strength is alumina chemicals and downstream products that complement Hindalco's dominance in primary metals.
Hindalco has announced a capacity expansion project to double its copper capacity to 500,000 tonne per annum, while Indal is also looking at capex in the current year.
Hindalco currently has total reserves of over Rs 6,000, of which Rs 1,200 crore (Rs 12 billion) would be utilised for the copper expansion. Hindalco has also raised $50 million through the external commercial borrowing route to augment the financing of it capex plans.
