Birla set to hike stake in Hindalco

After Ratan Tata and Mukesh Ambani, it is Kumar Mangalam Birla's turn to raise stake in his flagship company Hindalco Industries.

The company announced that its board would meet tomorrow to consider a preferential issue of equity and equity-linked instruments.

Although it did not mention to whom the preferential issue would be made, market sources said Birla and his investment companies would subscribe to the offer.

Industry sources said while Birla would scale up his stake from 26.79 per cent, the company would improve its debt-equity ratio through the offer.

Hindalco's debt is expected to go up after the acquisition of Atlanta-based aluminium downstream company Novelis for an enterprise value of $6 billion (Rs 27,000 crore).

They added that Birla might scale up his holding by 5 per cent, the maximum permissible limit under Indian law. In case, he wants to increase his holding by 5 per cent, he will have to subscribe to 86.1 million equity shares.

At the ruling market price of Rs 140, these shares will cost him Rs 1,200 crore. If he intends to increase his stake by 4 per cent, he will have to chip in Rs 950 crore for subscription of 68 million shares.

Analysts said Indian promoters had been scaling up their stakes to take their companies beyond the reach of predators.

Last year, the Tatas had raised their stake in Tata Steel by 3 per cent to 30 per cent.

Reliance Industries Chairman Mukesh Ambani recently announced infusion of Rs 16,000 crore to scale up his holding by 4 per cent to 55 per cent.