Hindalco share price inches higher as arm to acquire US-based AluChem for ₹1,075 crore
Hindalco share price rose by over 1% during Wednesday's trading session following the announcement that its step-down wholly owned subsidiary, Aditya Holdings LLC, has entered into a definitive agreement to acquire a 100% interest in the US-based specialty alumina producer AluChem Companies Inc.
The deal was valued at an enterprise amount of USD$125 million (approximately ₹ 1,074 crores), and the transaction is anticipated to be completed within the next 2 to 4 months.
In an exchange filing, the company announced its acquisition of AluChem Companies, Inc. This decision to acquire the company as a stepdown subsidiary is a strategic initiative aimed at broadening the Company's global presence for its downstream range of specialty alumina and alumina products.
AluChem Companies Inc. specializes in the production of niche alumina. Hindalco's specialty alumina division emphasizes unique alumina and alumina hydrates, which they produce internally.
AluChem enhances Hindalco's footprint in North America, boasting an annual production capacity of 60,000 tonnes from its three state-of-the-art manufacturing plants located in Ohio and Arkansas.
'The acquisition unlocks immediate synergies for Hindalco, including market access and product portfolio expansion. Hindalco plans to work with AluChem's high performance technology solutions and scale up production of ultra-low soda alumina products to drive larger global market share. The acquisition reinforces our ability to offer end-to-end alumina solutions that are both future-ready and customer-centric,' said Saurabh Khedekar, CEO – Alumina Business, Hindalco Industries.
ICICI Direct Research, in their report, noted that through this acquisition, the company is entering the low soda Tabular Alumina sector, which serves high-precision mechanical components and energy-intensive industrial refractories. This acquisition includes a capacity of 60k tons, raising Hindalco's overall specialty alumina capacity to 560k tons, with ambitions to reach 1 million tons by 2030.
Consequently, this growth aligns with Hindalco's broader strategy to venture into value-added alumina markets, which are increasingly important for electric mobility, semiconductors, and precision ceramics. The acquisition has been valued at approximately 1.9x EV/sales based on CY24 earnings, which the brokerage considers slightly on the higher side. However, this segment is known for its strong profit margins, thus enhancing the company's overall profitability in the future.
'Thus, we maintain a positive view on the stock supported by strong demand for Aluminium and copper metal due to its incremental application in automobile and renewable spaces, strategic capacity expansion at Novelis and Hindalco and controlled leverage on B/S with Debt to Equity at ~0.5,' said ICICI Direct Research.
Hindalco share price today opened at an intraday high of ₹ 678.50 apiece on the BSE, the stock touched an intraday low of ₹ 668.40 per share.
According to Rajesh Bhosale, Equity Technical and Derivative Analyst at Angel One, Hindalco share price opened with a gap-up, but lacked follow-up buying in the initial session. Hindalco share prices are currently hovering near last month's swing high. A close or sustained move above 675 would confirm a bullish cup and handle pattern, potentially driving the stock towards 730. On the downside, 650 remains a strong support, aligning with the 200-SMA.
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