Indal Alcan share transfer

In March, Indal’s majority stakeholder, Alcan, announced its decision to divest 54.6 per cent stake to Hindalco Industries Ltd, a major alumimium producer, at a price of Rs 190 per share.

Equity analysts here say that the acquisition would give tremendous synergy to Hindalco. Hindalco’s access to metal at competitive costs and Indal’s superior presence in downstream markets would add to the bottomline of the target company after the new board takes over.

During the year 1999-2000, the Financial performance of Indal showed marginal improvement in profitability with net profit margin rising from 7.4 per cent in 1998-99 to 7.9 per cent. However, the company performed well on the exports front with Indal’s forex earnings rising from Rs 182.5 crore in 1998-99 to Rs 256.6 crore in 1999-2000.

The open offer for an additional 20 per cent equity as per Sebi takeover code, analysts say, might appear attractive for the existing shareholders as the ruling price of the Indal stock is hovering around Rs 157.

However, investors might agree to hold on to the stock as Hindalco’s takeover might create better shareholder value. As it is, punters believe that the Indal Stock, given the fundamentals of the compamy, is undervalued.

The divestment by Alcan had been a part of the global strategy to focus on low-cost alumina and smelting together with high-value world class flat rolled products.

In spite of equity sale, Alcan has decided to offer continued technical support to Indal in raw materials and fabricated products. In addition, Alcan would continue to be the equity partner in Utkal Alumina project along with Indal and Norsk Hydro.

About the future outlook of Indal, the current management under Jones is of the view that the demand for sheet would rise and prices for fabricated products would firm up.

Besides, the company had also taken steps to reduce costs annually by Rs 30 crore.