Novelis on Tuesday launched a roadshow for its proposed initial public offering (IPO), where Indian parent Hindalco plans to sell 45 million shares, or a 7.5% stake, in the company at $18-21 per share.
Hindalco will raise up to $945 million at the upper end of the proposed price range. Including a greenshoe option, whereby it could offer another 6.75 million shares or a 1.1% stake in case of overallotment, the total proceeds for the sole shareholder of Novelis could go up to $1.09 billion.
Novelis, which is the world’s largest recycler of aluminium sheets, has a major presence in beverage packaging, automobiles and aerospace. Hindalco acquired it in 2007 for $6 billion, one of the largest purchases in the industry at the time.
At the upper end of the proposed IPO price band, the US company will have a market value of $12.6 billion. The price range implies an enterprise value of $15.8 billion-17.6 billion, with an estimated operating profit (Ebitda) of $2.2 billion for fiscal 2026 and $5 billion of net debt for FY25, Satyadeep Jain of Ambit Capital said. This is more than the sum-of-the-parts valuation of $13.7 billion the brokerage has assigned to the company, he said, adding: “This provides comfort that Novelis is chasing/expects valuation provided to more specialised players.”Given the size of the share sale by Hindalco, price discovery and global listing appear to be the primary motive for the IPO, Jain said.Hindalco currently has not mentioned what it plans to do with the IPO proceeds. Novelis will not be receiving any from the share sale.Once the IPO is completed, Hindalco will own a 92.5% stake. If the underwriters decide to exercise the green-shoe option, the stake will come down to 91.4%.
The share sale by Hindalco comes at a time when it is investing in growth projects in India, including expansion of some of its facilities.
Hindalco intends to spend ₹6,000 crore on capital expenditure this fiscal year, up from ₹4,200 crore in FY24. The company plans to make these investments from internal accruals. Hindalco had posted operating profit (Ebitda) of ₹25,728 crore in 2023-24. It had consolidated net debt stood at ₹31,536 crore as of March-end, compared with ₹33,959 crore a year earlier.
Novelis, too, is investing in a fully integrated greenfield facility at Bay Minette in the US. It will be spending a little over $4 billion for a capacity of 600,000 tonnes. This project will be commissioned in the second half of 2026, after which the company will look at doubling capacity by further additions to the existing site.
Earlier this month, Novelis filed a registration statement with the US Securities and Exchange Commission for the listing. This was nearly three months after it first submitted a draft registration statement with the regulator.
Morgan Stanley, BofA Securities and Citigroup are acting as lead book-running managers for this proposed offering. Wells Fargo Securities, Deutsche Bank Securities and BMO Capital Markets are the additional book-running managers, while BNP Paribas, Academy Securities, Credit Agricole CIB, PNC Capital Markets LLC and SMBC Nikko are the co-managers.