Hindalco to acquire Indo Gulf’s copper business
Poised to create a non-ferrous metals powerhouse in the country
The proposed merger of Indo Gulf Corporation's copper business with Hindalco Industries' is poised to create a non-ferrous metals powerhouse in the country. Hindalco said that the deal would be done after Indo Gulf demerges its fertiliser division into a new company. The restructuring is to ensure a ‘size’ and aimed at capitalising the ‘combined earnings potential’ of both businesses. It is also assumed that following this merger, the combined balance sheet strength of Hindalco, Indo Gulf and Indal (which may be merged with Hindalco after an open offer) is slated to provide it adequate financial strength to be a serious contender for Nalco.
Birla Group Chairman Kumar Mangalam said that the move will enhance Hindalco’s financial muscle, giving it a stronger balance sheet and prove attractive to the capital markets. It is also assumed that Hindalco aims to overtake Sterlite Industries, its only key rival in the long- term non-ferrous metal stakes. This proposed merger is likely to confer a significant advantage to Hindalco vis-à-vis Sterlite on the financial front.
However, the senior management of Hindalco has indicated that this merger is likely to correct the undervaluation of nearly 30-40 per cent in both Hindalco and Indo Gulf. But for the Indo Gulf shareholders also, this merger is favourable.
