HINDALCO-NOVELIS

Case study
ADITYA BIRLA GROUP
 A US $28 billion corporation, in the league
of Fortune 500.
 Extraordinary force of 100,000
employees, belonging to 25 different
nationalities.
 "The Best Employer in India and among
the top 20 in Asia" by the Hewitt-
Economic Times and Wall Street Journal
Study 2007.
 Over 50 per cent of its revenues flow from
its overseas operations
GLOBALLY THE ADITYA BIRLA
GROUP IS
 A metals powerhouse, among the world's most
cost-efficient aluminum and copper producers.
Hindalco-Novelis is the largest aluminum rolling
company.
 No.1 in viscose staple fibre
 The fourth largest producer of insulators
 The fourth largest producer of carbon black
 The 11th largest cement producer globally, the
seventh largest in Asia and the second largest
in India
 Among the world's top 15 BPO companies and
among India's top four
HIGHLIGHTS OF THE DEAL
 The acquisition of Novelis by Hindalco was in
an all-cash transaction, which values Novelis
at enterprise value of US $6.0 billion,
including approximately US $2.4 billion of
debt.
 After merger Hindalco will emerge as the
biggest rolled aluminium products maker and
fifth -largest integrated aluminium
manufacturer in the world.
HIGHLIGHTS OF THE DEAL
 The Novelis acquisition will give the company
immediate scale and strong a global footprint
 Novelis has a rolled product capacity of
approximately 3 million tonne
HIGHLIGHTS OF THE DEAL
 Novelis is the global leader in aluminium
rolled products and aluminium can recycle,
with a global market share of about 19%.
 Hindalco has a 60% share in the currently
small but potentially high-growth Indian
market for rolled products
 Novelis will work as a forward integration for
Hindalco as the company is expected to ship
primary aluminium to Novelis for
downstream value addition.
HIGHLIGHTS OF THE DEAL
 Novelis is a globally positioned organization,
operating in 11 countries with approximately
12,500 employees.
 In 2005, the company reported net sales of
US $8.4 billion and net profit of US $90
million.
THE MANUFACTURING
PROCESS
Aluminum manufacture is
accomplished in two phases:
 Bayer process of refining the
bauxite ore to obtain aluminum
oxide
 Hall-Heroult process of smelting
the aluminum oxide to release pure
aluminum
ALUMINUM PRODUCTION CYCLE
Aluminum* is melted and mixed
Bauxite ore is mined; with various alloys depending on
four or five tonnes of the product to be made, then
bauxite ore are used cast into ingot and billets, rolled
to refine into two and extruded; intermediate
tonnes of alumina, products are then cut, shaped,
which is then smelted and molded into wide range of
to yield one ton of products for use in applications
aluminium such as airplanes, automotive,
beverage cans, and construction

Bauxite ore is Alumina is reduced to primary

refined into aluminum by the process of
aluminium oxide or electrolytic reduction
alumina
INGOTS AND BILLETS
ALUMINIUM EXTRUSIONS
ALUMINIUM –ROLLED PRODUCTS
ALUMINIUM –FOILS
ALUMINUM USES IN SOCIETY
 At Home- window frames, door knobs , utensils in the
kitchen aluminium foils
outdoor furniture, tennis bats, refrigerators, toasters,
saucepans, kettles, etc.

 Transportation - parts of aircraft, boats and ship

construction , Railway carriages
 Aluminium Uses In Cars -wheels, engine blocks, suspension
components, hoods, transmission housings, wheel spacer
bars are made of aluminium. Other parts such as
carburettors housings, aluminium handles, few ornaments
and logos, brackets, mirrors, air filler adapters, alternator
housings, Valve covers are also made of aluminium
ALUMINUM USES IN SOCIETY
 Packaging-Drink cans, bottle caps, foils,
trays, etc. are all made out of aluminium.
Other aluminium uses for packaging are
storage boxes, utensil lids, thermos, etc.

 Aluminium Uses in Construction

Aluminium scrap, casting, fabricating, pipes,
sheets, tubing, tanks, bars, wire, stampings,
windows, pins, doors, rods, railings, ladders,
shutters, building bridges, skylights, etc. also
used in commercial buildings. Staircases are
also made from aluminium
ALUMINUM END-PRODUCTS –
GLOBAL USES
 Transportation and construction applications
account for more than one-half of global
demand
 Aluminum usage differs by region and state
of economic development
– In developed economies, the greatest
demand is for transportation based
applications
– In developing economies, construction-based
applications (residential and commercial) are
the largest source of demand
ALUMINUM END-PRODUCTS
 Examples of end-products by segment
– Transportation : aircraft, ships, automotive

– Building & Construction : from screws, nails, and

rivets, to siding, gutters, roofing, etc.

– Packaging : soda cans and packaging for keeping

food and cosmetics fresh

– Electrical : aluminum conducts electricity almost as

well as copper and has a cost advantage, electric
transmission lines almost exclusively use aluminum
ALUMINUM END-PRODUCTS –
GLOBAL USES
Machinery & Equipment : internal parts of
large and small machines and household
appliances, assorted tubes, fencing, etc.
– Consumer durables : aluminum foil,
containers
ALUMINUM CONSUMPTION
 Second most consumed metal in world
 Developed economies account for about 75%
of global consumption
 Significant growth predicted in developing
world
– Overall GDP growth accompanied by
increases in per capita aluminium
consumption
– China’s and India’s significant growth is
expected to continue
ALUMINUM CONSUMPTION
 Per capita aluminum consumption in China &
India is still very low compared to developed
countries and is expected to follow their
historic growth patterns
 Growth also driven by the development of
new and improved end-use applications
ALUMINUM CONSUMPTION – TOP
CONSUMERS

Eight countries are responsible for 2/3 of total world primary

consumption
PER CAPITA ALUMINIUM
CONSUMPTION
RIO TINTO
 Market Capitalization : $87 billion,
Rio Tinto is far and away the biggest of the major
aluminum-producing companies on the major exchanges.
Headquartered in London, England, and Melbourne,
Australia, Rio Tinto was founded in 1873 when a group of
investors bought a Spanish mine on the Rio Tinto river.
Rio Tinto’s since evolved in the fourth-largest mining
company on the planet, with six different mining divisions.
The important one here is the Rio Tinto Alcan, which
focuses on aluminum mining and production.
Rio Tinto Alcan became the largest aluminum company in
the world after merging with Alcan, Inc., in 2007. The deal
pushed Rio Tinto ahead of Alcoa and Rusal.
RUSAL UNITED COMPANY
Total Estimated Assets: $30 billion.
A private aluminum-producing company
based in Russia, Rusal produces
approximately 12 percent of the world’s
aluminum. If they ever go public, investors
will likely pounce on the stock. Despite a
hefty debt load, the company has interests in
13 mines across 8 countries with more than
90,000 employees on their payroll.
ALCOA, INC
Market Capitalization: $12.5 billion
The Aluminum Company of America is the third-
largest aluminum producer in the world, behind Rio
Tinto and Rusal. Alcoa was founded by Charles Martin
Hall in 1903, and Hall himself was a co-inventor of
the process used to smelt aluminum to this day.
Hall’s prescience helped him establish a number of
smelters across the country, and, for decades, the
company was the only one legally allowed to supply
aluminum in the United States. Today Alcoa has
interests in 25 smelters in 8 countries around the
world.
ALUMINUM CORPORATION OF
CHINA
Market Capitalization: $14 billion
Also known as Chalco or Chinalco, the
Aluminum Corporation of China is the largest
aluminum producer in the People’s Republic
of China. It is, in fact, the only producer of
alumina in the country. The company owns a
9 percent stake in Rio Tinto and will soon
start mining in Peru.
BHP BILITON INC.
Market Capitalization: $174 billion
BHP Biliton is the world’s largest mining
company with roots in the Indonesian
archipelago where mining rights were
purchase in 1860. BHP Biliton now has
interests in 10 aluminum smelters, bauxite
mines and alumina refineries with an output
of 1.3 million tons of aluminum every year.
MAJOR PLAYERS IN THE INDIAN
ALUMINIUM INDUSTRY
 Hindustan Aluminium Company (HINDALCO)
 National Aluminium Company (NALCO)
 Bharat Aluminium Company (BALCO)
 MALCO
 INDAL
 India is world's fifth largest aluminium
producer with an aluminium production
competence of around 2.7 million tones,
accounting almost 5% of the total aluminium
production in the world.
 India is also a huge reservoir of Bauxite with
a Bauxite reserve of 3 billion tones.
HINDALCO:
 Hindalco is the biggest player in the
aluminium industry in India with around 39%
of market share.
 An Aditya Birla Group flagship company,
Hindalco has its aluminium plant at Renukoot
in Uttar Pradesh.
 It has various aluminium products with a
market share of 42% in primary aluminium,
20% in extrusions 63% in rolled products, 31%
in wheels and 44% in foils.
STERLITE INDUSTRIES
 The aluminium business of Sterlite Industries
Limited comprises of two Indian aluminium
giants – BALCO and MALCO. While BALCO is a
partially integrated, MALCO is a fully
integrated producer of aluminium. Sterlite
has got a market share of around 32%.
NALCO:
 It is also one of the leading aluminium
producers in India. Government of India has a
stake of 87.15% in this company. Its
aluminium refinery is located at Damanjodi.
It also has a smelter located at Angul, Orissa.
Currently, NALCO is concentrating on a capex
programme to increase its production from
345,000 tonnes to 460,000 tonnes.
KUMAR MANGALAM BIRLA, CHAIRMAN, HINDALCO
INDUSTRIES

'We look upon the aluminium

business as a core business that
has enormous growth potential in
revenues and earnings,' 'Our vision
is to be a premium metals major,
global in size and reach .... The
acquisition of Novelis is a step in
this direction'
PROFILE - HINDALCO
 Hindalco , a leader in Asia's aluminum and
copper industries, and is the flagship
company of the Aditya Birla Group, a $14
billion multinational conglomerate, with a
market capitalization in excess of $23 billion.
 Established in 1958, Hindalco is currently
structured into two strategic businesses,
aluminum and copper, with 2006 revenues of
approximately $2.6 billion.
 market capitalization $4.3 billion.
PROFILE - HINDALCO
 Hindalco's copper division is situated in Dahej
in the Bharuch district of Gujarat
 Its copper smelter is the world's largest
custom smelter at a single location
 largest integrated aluminium producer in
the India and ranks among the top quartile of
low cost producers in the world
 The aluminium division's product range
includes alumina chemicals, primary
aluminium ingots, billets, wire rods, rolled
products, extrusions, foils and alloy wheels.
PROFILE - HINDALCO
 Following the transaction, Hindalco, with
Novelis, will be the world's largest aluminum
rolling company, one of the biggest
producers of primary aluminum in Asia, and
India's leading copper producer
PROFILE NOVELIS
 The Company operates in 11 countries, has
approximately 12,500 employees, and reported
$8.4 billion in 2005 revenue.

 Novelis Inc is the world's leading producer of

aluminum rolled products

 Novelis has manufacturing presence in 4

continents and has marketing presence
worldwide.
 Novelis has 33 operating plants and 3 research
facilities in 11 countries, across 4 continents
PROFILE NOVELIS
PROFILE NOVELIS
 In the spin-off process, Novelis ended up
inheriting a debt mountain of almost $2.9
billion on a capital base of less than $500
million
 It buys primary aluminium, processes it into
rolled products like stock for soft drink cans,
automotive parts, etc., and sells it to
customers such as Coke and Ford
PROFILE NOVELIS
 But the management took a wrong call on
aluminium prices. In a bid to win more business
from soft drink manufacturers, it
promised four customers not to increase
product prices even if raw material aluminium
prices went up beyond a point
 A few months after Novelis signed those
contracts, aluminium prices shot up 39 per cent
(between 30 September 2005 and 2006). To
these four customers, Novelis was forced to sell
its products at prices that were lower than raw
material costs.
PROFILE NOVELIS
 These four account for 20 per cent of
Novelis’s $9-billion revenues. But the
management’s wrong judgment led to losses
of $350 million (in 2006).

 By January 1, 2010, all the sales contracts

will get expired and profitability will
increase substantially from then onwards.
 NOVELIS FINANCIAL DATA

YEAR NET SALES PBT PAT

2006 9849 (278) (275)

2005 8363 224 96

2004 7755 231 55

STRATEGIC RATIONALE FOR
ACQUISITION
 Immediate global reach and scale along
with technological expertise
 Downstream business derives its margin
through conversion mark-up, should act as
a natural hedge for LME-driven, volatile,
upstream commodity business
 Industry leading technology, assets and
expertise can be leveraged to grow high-
value-added, flat rolled products in fast-
growing markets such as India and China
STRATEGIC RATIONALE FOR
ACQUISITION
 In 2003 Hindalco was a upstream player in
commoditized industry ( it made aluminum), so
its profits varied overtime.
 It decided to add downstream operations
(converting aluminum into aluminum products)
to its portfolio to steady the profit stream and
reduce its dependence on commoditized
business.
 To that end it acquired two leading downstream
companies in the aluminum industry (Indal in
India & Novelis in North America
STRATEGIC RATIONALE FOR
ACQUISITION
 Post acquisitions, the company will get a
strong global footprint.
 After full integration, the joint entity will
become insulated from the fluctuation of
LME Aluminium prices.
STRATEGIC RATIONALE FOR
ACQUISITION
 Upstream growth through organic route; a
prudent mix of Brownfield & Greenfield
expansions Downstream growth through
acquisition (Novelis)
STRATEGIC RATIONALE FOR
ACQUISITION
 Post acquisitions, the company will get a
strong global footprint.
 After full integration, the joint entity will
become insulated from the fluctuation of
LME Aluminium prices
 The deal will give Hindalco a strong presence
in recycling of aluminium business. As per
aluminium characteristic, aluminium is
infinitely recyclable and recycling it requires
only 5% of the energy needed to produce
primary aluminium
STRATEGIC RATIONALE FOR
ACQUISITION
 Novelis has a very strong technology for value
added products and its latest technology
‘Novelis Fusion’ is very unique one.
 It would have taken a minimum 8-10 years to
Hindalco for building these facilities, if
Hindalco takes organically route.
 As per company details, the replacement
value of the Novelis is US $12 billion, so
considering the time required and
replacement value; the deal is worth for
Hindalco.
ACCESS TO NEW SET OF
CUSTOMERS…
 Coca-cola
 Budweiser
 Ford
 GM
 Audi
 BMW
NOVELIS FUSION
STRATEGIC RATIONALE FOR
ACQUISITION
 Novelis being market leader in the rolling
business has invested heavily in developing
various production technologies. One of such
technology is a fusion technology that increases
the formability of aluminium. This means that
it can be better used formed into the design
requirement by the car companies
 All raw aluminium is processed so that it can be
used in products. Forty percent of the products
are rolled products and Novelis is in leader in
rolling business with a market share of 20%.
STRATEGIC RATIONALE FOR
ACQUISITION
 Any change in the raw material price is directly
passed on to the customers who range from coca
cola to automobile companies like Aston martin
 The current revenue of Hindalco is very much
dependent on the aluminium prices and when the
prices are high they make a larger margin, this
not the case with rolling business which usually
has a constant margin. For Hindalco to develop
such technology will take a lot of time. According
to “Standard and Poor” it would take 10 years
and $ 12 billion to build the 29 plants that Novelis
has with capacity of close to 3 million tonnes.
VALUATION FOR ACQUISITION
 Analysts believe the Birlas are paying too
high a price for a company that incurred a
loss of US $170 million for the nine months
ended 30 September 2006.
 Hindalco paid US $44.93 a share for a loss-
making company
 Novelis share prices never crossed US $30
during 2005 and 2006.
VALUATION FOR ACQUISITION
 The valuation for the enterprise value for the
deal works out to around 11.4 times the
company’s EBITDA, and this is a highier
compared to global peers. Alcan trades at around
5.8 times its 2006 EBITDA and Alcoa at 5.5 times.
 It would have taken a minimum 8-10 years to
Hindalco for building these facilities, if Hindalco
takes organically route.
 As per company details, the replacement value
of the Novelis is US $12 billion, so considering the
time required and replacement value; the deal is
worth for Hindalco.
FUNDING STRUCTURE FOR THE
DEAL:
 The funding structure of this deal is remarkably
different from the leveraged buyout model that
Tata Steel used to fund the Corus buy.
 The Tatas purchased 100 per cent of Corus’
equity for $12.1 billion. Only $4.1 billion of this
is being raised by the Tatas.The remaining $8
billion was raised (as debt) and repaid on the
strength of the Corus
balance sheet.
Effectively, the Tatas paid only a third of the
acquisition price.
FUNDING STRUCTURE FOR THE
DEAL:
 This was possible because Corus had relatively
low debt on its balance sheet and was able to
borrow more.
 But that is not the case with Novelis. With a
debt-equity ratio of 7.23:1, it can’t borrow any
more.
 To buy the $3.6 billion worth of Novelis’s
equity, Hindalco is now borrowing almost $2.85
billion (of the balance, $300 million is being
raised as debt from group companies and $450
million is being mobilised from its cash
reserves).
FINANCIAL HIGHLIGHTS
 Since the acquisition by Hindalco, the
company’s earnings performance on a
normalized basis has improved significantly
when compared to the prior year. This
improvement is driven by:
 Reduced exposure to the price ceilings
 Improved pricing and mix
 Lower corporate costs
 The company has also improved its
performance on a Free Cash Flow basis and
has maintained a strong position in terms of
liquidity. This position has been solidified by
 Stronger earnings performance
 Refinancing of Senior Secured Credit
Facilities
 Better working capital management
 HINDALCO NET SALES & PAT
In Rs-crores

YEAR NET SALES PAT OPM

2004-05 9523 1329 23.86
2005-06 11355 1655 22.25
2006-07 18313 2564 21.9
2007-08 19118 2861 17.1
2008-09 18220 2230 16.03

2009-10 19536 1916 15.20

CONSOLIDATED FINANCIAL
HIGHLIGHTS Rs Crores
RESULTS FY 2006-07 FY 2007-08

Net Sales 19,316 60,013

EBITDA 4,840 7,291

Net Profit 2,686 2,387

Capital 23,285 56,266

Employed
 HINDALCO(CONSOLIDATED) NET SALES &
PAT
In Rs-crores

YEAR NET EBIDTA PAT OPM EPS

SALES
2007-08 60013 13645 7291 14.1% 17.04

2008-09 65963 3661 483.9 12.6 3.21

2009-10 60722 10069 3925.5 9.1% 22.17

2008/09 includes non-cash

unrealized derivative loss of
around Rs. 2,381 crores
CONSOLIDATED RESULTS
 Consolidated revenues were lower at Rs.
60,722 crore, mainly due to lower aluminum
prices and softness in the Company’s end-
markets in the first half of the year,
especially for Novelis.
 Further, change in the status of Idea
Cellular Ltd. from joint venture to associate
w.e.f from 01 Jan 2009 for the purpose of
consolidation, also resulted in proportionate
revenue from Idea not being included in the
consolidated revenues.
CONSOLIDATED RESULTS
 Profit before depreciation, interest and taxes
soared to a record level of Rs.10,069 crore
from Rs. 3,661crore in FY09.This includes
USD 578 million of unrealised gains consisting
of USD 504 million reversal of previously
recognised losses upon settlement of
derivatives and USD 74 million of unrealised
gains relating to mark to market adjustments
on metal and currency derivatives at Novelis.

.
CONSOLIDATED RESULTS
 Aluminium business revenue fell by 11% to
Rs.48,091 crore on the back of lower LME
and lower demand in first half of the year.
Earning before interest and tax turned
around from a loss of Rs.425 crore to a profit
of Rs.5,998 crore. This reflects steady
improvements in operations across the
board. Copper business revenue increased by
13% to Rs.12,575 crore and EBIT trebled from
Rs.374 crore to 1,003 crore
 Overall results clearly reflect derisked
business portfolio in terms of geographic
and product mix.
 REASONS FOR HINDALCO TO
BID
1 De-risked Operations owing to
 Presence in multiple geographies
 Costs and revenues in different currencies
 Presence across the value chain
2 Hindalco Cost Advantage & Novelis Technology
& customer base, offers Enormous growth
potential especially In emerging markets
 The flagship company of Aditya Birla group,
Hindalco Industries revealed that its
consolidated net profit for the year ended
March 2010, escalated sharply due to
enhanced productivity at its Canadian
subsidiary Novelis and accounting gains from
preceding derivative dealings.
 Hindalco shared that it’s for the fiscal year
increased eight-fold to Rs 3,926 crore from
Rs 484 crore a year-ago. It had acquired
Novelis in 2007 for an enterprise value of $ 6
billion. This profit comprise of a non-cash
gain of $578 million as well as an additional
profit of $74 million from market
amendments on metal and currency
derivatives at Novelis.
 Though India's per capita consumption of
aluminium stands too low (under 1 kg)
comparing to the per capita consumptions of
other countries like US & Europe (range from
25 to 30 kgs), Japan (15 kgs), Taiwan (10 kgs)
and China (3 kgs), the demand is growing
gradually. In India, the industries that
require aluminium most include power (44%),
consumer durables, transportation (10-12%),
construction (17%) and packaging etc.
 On basis of scale of operations and level of integration,
aluminium producers can be categorized into the following
two types:
 Integrated producers/Primary producers: Integrated
producers have presence right from the mining of bauxite
(raw material) to producing aluminium ingots (finished
product). Some companies may even go a step further and
have downstream manufacturing facilities such as
manufacturing of semi-fabricated products (foils). Primary
producers could either be a company that is just into
mining of bauxite and alumina production or pure
aluminium ingot manufacturing. For companies, which
have restricted themselves from venturing into the
downstream segment, the user industries are basically the
secondary producers
 Secondary producers: For this segment of
producers, which are involved in the
production of semi-fabricated products, the
raw material is acquired from primary
producers, which is in the form of aluminium
ingots and billets. The user industries for this
segment would be the packaging industry
(foils), auto ancillary (wheels), to name a
few.
 Aluminium products can be classified under
three categories. Rolled products find
applications in automobiles, consumer
durable, construction and engineering
sectors. Extrusions include bars, pipes and
tubes that find usage in the electrical and
the transportation sectors. Finally, foils are
used in the packaging sector, which are high-
value products and have higher margins.
 aluminium is a value-add commodity. It is a
highly capital intensive sector (Rs 200 bn
required for a 1 million tonne greenfield
capacity expansion)
 Fortunately, the advantage of having the 5th
largest bauxite reserves in the world coupled
with cheap and abundant labour helps the
Indian companies to retain the distinction of
being the lowest cost producers in the world.
COMPANY REVENUE NET EMPLOYEES
INCOME
RIO TINTO 1.786 68000
ALCAN- BILLION
CANADA
ALCOA-US 26.9 74 MIILION 87000
RUSAL- 14.3 3506 75000
RUSSIA
ALUMINIUM INDUSTRY
 Aluminum represents the second largest metals
market in the world.
 Growing demand for the lightweight metal
is fuelled largely by the booming Chinese
economy which already consumes a quarter
of the world’s aluminium production
 China consume 36% of world’s aluminium
production as early as 2010
 In addition, the EU is discussing the possibility
of introducing stricter CO2 emission
requirements for automobiles which will
inevitably boost demand for aluminium
 Aluminium is lighter than steel, so its wider
use in the automotive industry will make cars
much more efficient
 A kilo of aluminium, used as a substitute
for heavier metals in car industry, reduces
gas consumption by 8.5 litres and produces
20 kg less CO2 emissions. A 10% reduction
of car weight results in a 9% increase of fuel
consumption efficiency.
 Finally, rising prices for substitute metals, such
as zinc and copper, stimulate a direct increase
of demand for aluminium in the power,
transportation and construction sectors in particular.
 Demand is enormous, consumers are wealthy,
profitability is evident: it seems a lot of companies
should be rushing to enter the aluminium sector,
yet, the situation is not as simple as it may seem.
Only those who can establish and manage the full
production cycle (from the extraction of raw
materials, the production of alumina, and the
reduction of aluminium) in a highly efficient way can
become leaders in the aluminium industry.
WHOEVER OWNS RESOURCES
OWNS THE WORLD
 Resources of bauxites, the raw material
for aluminium, are not widespread throughout
the world. There are only seven bauxite-rich areas:
Western and Central Africa (mostly, Guinea), South
America (Brazil, Venezuela, Suriname),
the Caribbean (Jamaica), Oceania and Southern Asia
(Australia, India), China, the Mediterranean (Greece,
Turkey) and the Urals (Russia). The main deposits
of high-quality bauxites with high aluminium content
(not less than 50%), are already divided by the main
players. Other companies have to either buy alumina
on the free-market — and wholly depend on price
movements — or join forces with deposit owners.
 Aluminium is mainly produced from bauxite. Over
90% of the world’s bauxite resources
are concentrated on the tropical and sub-tropical
belt in Australia, Guinea, Jamaica, Surinam,
Brazil, and India
 Alumina — or aluminium oxide (Al2O3),
is produced from extracted ore. Despite its name,
it has nothing to do with clay or black soil
but resembles a flour or very white sand. Alumina
is then transformed into aluminium through
electrolytic reduction. One tonne of aluminium
is produced from every two tonnes of alumina
 Bauxite consist of 40-60% alumina, as well
as earth silicon, ferrous oxide, and titanium
dioxide. To separate pure alumina, the Bayer
process is applied. First, the ore is heated
in an autoclave with caustic soda. It is then
cooled and a solid residue — «red mud» —
is separated from the liquid. Aluminium
hydroxide is then extracted from this
solution and calcined to produce pure
alumina.
 The final stage is the reduction of aluminium
through the Hall-Heroult process. It is based
on the following principle: when the alumina
solution is electrolyzed in molten cryolite
(Na3AlF6), pure aluminium is produced.
The reduction cell bottom serves as a cathode,
and coal bars immersed in cryolite serve
as anodes. Molten aluminium is deposited
under a cryolite solution with 3-5% alumina.
During this process, temperatures reach
950°C, considerably higher than the melting
point of the metal itself, which is 660°C.
IMPORTANT FACTS ABOUT
DEAL
 The acquisition of Novelis by Hindalco was in
an all-cash transaction, which values Novelis
at enterprise value of approximately US $6.0
billion, including approximately US $2.4
billion of debt
 This merger of Novelis into Hindalco will
establish a global integrated aluminium
producer with low-cost alumina and
aluminium production facilities combined
with high -end aluminium rolled product
capabilities
NOVELIS
 Novelis is a globally positioned organization,
operating in 11 countries with approximately
12,500 employees. In 2005, the company
reported net sales of US $8.4 billion and net
profit of US $90 million
 The company reported net sales of US $7.4
billion and net loss of US $170 million in nine
months during 2006, on account of low
contract prices.
NOVELIS
 By January 1, 2010, all the sales contracts
will get expired and p r o f i t a b i l i t y will
increase substantially from then onwards
 After merger Hindalco will emerge as the
biggest rolled aluminium products maker and
fifth -largest integrated aluminium
manufacturer in the world
NOVELIS

 Shipments of aluminium rolled products totalled 2,708 kilotonnes

for fiscal 2010, a decrease of two percent compared to
shipments of 2,770 kilotonnes in the previous year, driven by
softer end-market conditions in most of the regions during the
first half of the year

Net sales for fiscal 2010 were USD 8.7 billion; a decrease of 15
per cent compared to the USD 10.2 billion reported in the same
period a year ago, a result of lower aluminum prices and softness
in the Company’s end-markets in the first half ofthe year.

Adjusted EBITDA for the year was a record USD 754 million,
representing a 55 per cent increase from adjusted EBITDA of USD
486 million posted for the same period a year ago. These record
operating results were primarily due to the Company’s focus on
cost reductions and restructuring initiatives
A TRANSMISSION HOUSING FOR
AN AUTOMOTIVE VEHICLE
TODAY THE BIG TEN ALUMINIUM
MANUFACTURERS ARE