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Submitted to:

Prof. Himanshu Joshi

Submitted By:

Group 3

FMG 19 B

Ashima Mathur (191080)

Manas Tripathi (191095)

Neeraj Sharma (191098)

Nishat Parveen (191099)

Parul Garg (191103)

Yukti Mittal (191122)


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The objective of this project is to study the financial aspects of the Hindalco Industries Limited,
i.e. its financing functions, investment functions, dividend payout policy and working capital
management, and to understand the interplay of these forces with each other and their effect on
the market price per share.

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The Company¶s financial statements from 2001 to 2010 will be studied. The secondary data will
be collected from the financial disclosures on the Company¶s website and from Claroline
database.

Qualitative analysis of the Director¶s report will be studied to have an understanding of the
management¶s perspective. The concepts of statistics such as hypothesis testing and correlation
will be used to do quantitative analysis to study the capital structure.

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HINDALCO INDUSTRIES LIMITED, Aditya Birla Group:

An industry leader in aluminium and copper, Hindalco Industries Limited is the metals flagship
company of the Aditya Birla Group. It is the world's largest aluminium rolling company and one
of the biggest producers of primary aluminium in Asia. Its copper smelter is the world¶s largest
custom smelter at a single location.

Established in 1958, Hindalco commissioned its aluminium facility at Renukoot in eastern Uttar
Pradesh, India in 1962. Later acquisitions and mergers, with Indal, Birla Copper and the Nifty
and Mt. Gordon copper mines in Australia, strengthened its position in value-added alumina,
aluminium and copper products.

The acquisition of Novelis Inc. in 2007 positioned Hindalco among the top five aluminium
majors worldwide and the largest vertically integrated aluminium company in India. Today it is a
metals powerhouse with high-end rolling capabilities and a global footprint in 12 countries. The
company¶s consolidated turnover of USD 13 billion (60,000 crore) places it in the Fortune 500
league.

Hindalco operates on the three pillars of cost competitiveness, quality and global reach. The
company is also committed to the triple bottom line accountability of economic, environment
and social factors. Care for the community around its operating units is best exemplified by
Hindalco¶s social commitment.
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åe aim to study the capital structure of Hindalco Industries Ltd. To analyze the way the
corporation finances its assets through different combination of equity, debt, or hybrid securities.
Under this chapter, we would study the financing function of the company and find out its cost of
capital to obtain the minimum return that investors would expect for providing capital to
Hindalco. The cost of equity would be calculated using the CAPM model and the final weighted
average cost of capital (åACC) would be compared with the industry average to understand
Hindalco¶s position in the market.

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Under capital budgeting, we aim to study the investment function of Hindalco Industries Ltd. åe
would also analyze if the acquisition of Novelis in 2007 has been a boon or bane for the
company at a global level.

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The decision to issue dividends, and what amount, is calculated mainly on the basis of the
company's unappropriated profit and its earning prospects for the coming year. If there are no
NPV positive opportunities, then finance theory suggests that management should pay the
amount dividends. These free cash flows comprise cash remaining after all business expenses
have been met.

However, as an exception to this theory shareholders of a "Growth stock", expect that the
company will retain earnings so as to fund growth internally. In other cases, even though an
opportunity is currently NPV negative, management may consider investment flexibility or
potential payoffs and decide to retain cash flows.

Here we will study the dividend policy of Hindalco, see how it has changed over the past 5 years
and also analyze the form of the dividend distribution the company follows (cash dividends,
share buyback, or giving more stocks).

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åorking capital is basically the amount of capital which is readily available to an organization. It
is the difference between resources in cash or readily convertible into cash (Current Assets), and
cash requirements (Current Liabilities). Hence, the decisions relating to working capital are
always current or short term decisions.
Under this topic, we aim to study the cash flow or liquidity position of the company and its
profitability. åe will study Hindalco¶s cash conversion cycle, representing the time difference
between cash payment for raw materials and cash collection for sales. The cash conversion cycle
would indicate Hindalco's ability to convert its resources into cash.

The topics of study would include

uc Cash management- Identify the cash balance which allows for the business to meet day to
day expenses.

uc Inventory management- Identify the level of inventory maintained by the company and
see if it allows for uninterrupted production, reduces the investment in raw materials ,
minimizes reordering costs and hence increases cash flow.

uc Debtors management- Identify credit policy followed by the company and understand its
impact on cash flows and the cash conversion cycle.

uc Short term financing- Identify short term sources of financing that the company uses, if
any, given the cash conversion cycle.