Indal merged with Hindalco

Share swap ratio fixed at 7:1.

Hindalco Industries, the Aditya Birla group flagship, today announced a merger with itself of all the businesses of Indian Aluminium Company (Indal), except the latter's aluminium foils division at Kollur in Andhra Pradesh. The merger bolsters Hindalco's position in the aluminium sector, leaving Nalco a distant second.

The Hindalco board today approved the scheme of arrangement and decided that shareholders of Indal would get one share of Hindalco for every seven shares held.

The face value of Indal shares will be reduced from Rs 10 per share to Rs 2. Hindalco has a 97 per cent stake in Indal and will continue to maintain it in demerged Indal.

The arrangement will be effective from April 1, 2004. The merger process was expected to be completed by March 2005, the company said in a statement to stock exchanges.

The Birlas hold nearly a 25 per cent stake in Hindalco. The Hindalco scrip closed 0.35 per cent lower at Rs 1,128.55 in a depressed market today, before the merger announcement was made.

The Indal scrip was delisted after Hindalco bought out Indal shareholders and raised its stake to 97 per cent.

Hindalco Managing Director Debu Bhattacharya told Business Standard: "The merger will help Indal take up larger projects. It will help the Birla group save sales tax for inter-company transactions and realise the optimal use of depreciation from large investments."

Indal, which has a 55 per cent stake in Utkal Aluminium, has plans to invest Rs 5,000 crore over the next few years.

Bhattacharya said the Kollur unit was kept out of the purview of the proposed merger to save "substantial transaction costs". The transaction cost of the proposed merger is only Rs 12 crore.

Earlier known as Annapurna Foils Ltd, the Kollur unit was acquired in proceedings conducted at the Board for Industrial and Financial Reconstruction (BIFR).

The group has obtained tax concessions for the rehabilitation of the unit under the condition of a five-year lock-in period before the unit can be divested. The Kollur unit has a turnover of Rs 64 crore.

Bhattacharya also said Indal's Rs 2,000 crore capital expenditure plan would now be undertaken under Hindalco.

The plan includes the expansion of its metal capacity to 100,000 metric tonnes and power generating capacity to 267.5 megawatts at Hirakud, ramping up of the alumina plant at Muri to 500,000 million tonnes and enhancement of the special alumina chemicals capacity to 1,27,000 million tonnes at Belgaum. 

Financials as on March 31, 2004
Rs crore	Hindalco	Indal	Total
Total assets	10,417.63	1,520.33	11,937.96
Equity capital	92.47	71.26	163.73
Reserves	6,765.42	941.66	7,707.08
Investments	3,377.21	231.71	3,608.92
Net sales	6,190.89	1,613.99	7,804.88
Other income	244.62	21.41	266.03
Net profit	838.93	132.15	971.08
Debt/equity ratio	0.32	0.54	-
EPS (Rs)	90.71	18.55	-
Market cap	10,439.00	-	-

The Utkal alumina project in Orissa will also be transferred to Hindalco. The copper smelter capacity of Indal is being increased to 500,000 million tonnes.

The Birla group acquired majority control of Indal nearly four years ago through the acquisition of Alcan's 54.6 per cent stake.

The buyout and a subsequent purchase of 20 per cent from minority shareholders through an open offer at Rs 120 per share had cost the group over Rs 1,000 crore.