Novelis files IPO papers in US; CLSA maintains buy on Hindalco for over 13% potential gains

Novelis- Hindalco’s US-based subsidiary on Tuesday has filed IPO papers in the US. In the public issue, the aluminum company’s US arm will offer 4.5 crore shares in the price band of $18-21 per share.

The company is aiming at a valuation of up to $12.6 billion in its US IPO, said the aluminum rolling company on Tuesday.

Novelis will not receive any proceeds from the sale of common shares by its sole shareholder. 

After the completion of the IPO, a wholly owned subsidiary of Hindalco will own 555,000,000 shares of Novelis’ common shares, representing 92.5% of Novelis’ total outstanding common shares (or 91.4% if the underwriters exercise in full their over-allotment option), said the company’s release.

Morgan Stanley, BofA Securities and Citigroup are acting as lead book-running managers for the proposed offering with Wells Fargo Securities, Deutsche Bank Securities and BMO Capital Markets acting as additional book-running managers. BNP PARIBAS, Academy Securities, Credit Agricole CIB, PNC Capital Markets LLC and SMBC Nikko are acting as co-managers for the proposed offering

On the development, Hong Kong-based global brokerage CLSA has given its ‘buy’ view on the counter with a target of Rs 770, suggesting a possible upside of over 13 per cent.

At the suggested IPO price band, Morgan Stanley views Novelis' market capitalization to range between $10.8-12.6 billion and proceeds of $810-945m for Hindalco. This indicates a valuation (FY25 EV/Ebitda) of 7.7x–8.6x for Novelis, added the brokerage.

Analysts believe the focus will now shift to how the company will utilise the funds mobilised via the IPO.

Hindalco’s share price performance

Shares of Hindalco have zoomed by 66 per cent over the last one year providing returns nearly at par with the Nifty Metal index.