Hindalco Said to Postpone $818 Million Share Sale Plan

By George Smith Alexander and Abhishek Shanker

Hindalco Industries Ltd. (HNDL), India’s second-largest aluminum maker, postponed a share sale to institutional investors on uncertainty about its access to cheap raw materials, people with knowledge of the matter said.
The company was seeking to raise as much as 50 billion rupees ($818 million) from the share sale in September, the people said, asking not to be identified as the details are private. A roadshow to meet with prospective investors, slated for earlier this month, was canceled, two of the people said.
Hindalco’s access to coal, used to fuel its own power plants that support the energy-intensive smelting process, could be hurt after the Supreme Court ruled last month that the government’s practice of giving mines to companies without competitive bidding is
illegal. The nation’s attorney general asked the court Sept. 1 to cancel 172 mine permits, including one for a central India coal project part-owned by Hindalco.
The company had planned to use the proceeds from the share sale to repay debt, one person familiar with the plans had said July 24. Hindalco had 647 billion rupees of debt at the end of March, more than double the amount three years earlier, data compiled by Bloomberg show.
The shares of the Mumbai-based company extended its two-day decline, falling 2 percent 160.35 rupees. The benchmark S&P BSE Sensex index fell 1.2 percent.

Mahan Smelter

Hindalco’s Mahan smelter, tied with another project as the company’s biggest aluminum plant with its 360,000-ton capacity, would be affected by the cancellation of the mine permit, according to one of the people. Hindalco hasn’t set a new timetable for the share sale and will wait until it has resolved the permit issue, the people said.
Canceling the permit would force Hindalco to run its plants on more expensive coal bought at auctions or shipped from overseas, rather than from its own mine. Electricity typically accounts for almost 40 percent of smelting costs.
Pragnya Ram, a Mumbai-based spokeswoman for Hindalco, declined to comment.
The company had hired underwriters including Bank of America Corp., Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, JM Financial Ltd., Kotak Mahindra Capital Co., Morgan Stanley, Standard Chartered Plc and SBI Capital Markets Ltd. for the institutional offering, according to two of the people.
Indian companies have raised 429 billion rupees through equity and equity-linked offerings this year, little changed from the same period in 2013, data compiled by Bloomberg show.