Aluminum producer Novelis hits pause on $945 million US IPO

Credit: Novelis

Aluminum producer Novelis Inc. has postponed a plan to raise as much as $945 million in an initial public offering that would have been one of the biggest listings in the US this year.

The unit of Indian billionaire Kumar Mangalam Birla’s Hindalco Industries Ltd. will continue to evaluate the timing of the offering, it said in a statement. Novelis, based in Atlanta, didn’t elaborate on the adverse market conditions that it said had led to the halting of the sale.

The metals company has been on a decade-long drive to boost production capacity and is the world’s largest aluminum recycler, operating 14 scrap-processing plants across North America, Europe, Asia and South America. It’s also the world’s biggest maker of flat-rolled aluminum products ranging from cars to soda cans, and said in February it had filed confidentially for the listing with regulators.

The delay comes as India’s stock market has been roiled after Prime Minister Narendra Modi’s ruling party lost its majority in parliament in a major upset, forcing him to rely on allies to form a government for the first time since he took power a decade ago. The Mumbai benchmark index dropped the most in more than four years on Tuesday.

Shares of Hindalco plunged as much as 6.5% in early Mumbai trading on Wednesday even as India’s benchmark stock index rose. They slumped 6.7% on Tuesday amid the broad market selloff.

Novelis had planned to sell 45 million shares for $18 to $21 each, it said in a filing last week. Hindalco would have owned about 92.5% of the company after the IPO. At the top of the indicated range, Novelis would have a market value of about $12.6 billion, based on the outstanding shares listed in its filing with the US Securities and Exchange Commission.

The offering was being led by Morgan Stanley, Bank of America Corp., Citigroup Inc., Wells Fargo & Co., Deutsche Bank AG and the Bank of Montreal.

‘Bit disturbing’

“The decision to delay the IPO is a bit disturbing given that Hindalco’s management is usually very thoughtful,” Kunal Kothari, an analyst who covers the parent company for Centrum Broking Ltd., said in a phone interview. “There could be a view at Hindalco that they think internal accruals could be enough for financing future projects and they don’t need external sources of funds.”

The aluminum producer had net sales of more than $16 billion in the year through March, with net income falling 9.5% to $600 million from the previous year. Competitors including Norsk Hydro ASA and Alcoa Corp. have reported lower earnings too.

However, aluminum prices on the London Metal Exchange have recovered sharply since the end of February, rising by almost a fifth since then. Birla’s metals flagship Hindalco said last month it had beat analysts’ estimate for profits in the quarter through March.

(By Jason Scott)


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