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Hindalco Novelis Deal

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Merger & AcquisitionHindalco & Novelis

Submitted By : Group 3

Ashish Chandel (11B)

Pradeep B Reddy (33B)

Prasoon Gupta (34B)

Prince Choudhary (35B)

Reedhima Singh (39B)

Rajesh Gadde (32C)

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Table of Content

Strategic fit Analysis

Introduction 3

Industry Overview 3

Company OverviewHindalco 5

Company Overview- Novelis 7

Deal Value Analysis

Funding structure of the deal 8

Strategic rationale for acquisition 8

Important facts about deal 10

Valuation for Acquisition 11

Post Deal Analysis

Post-Acquisition scenario 13

Future outlook 13

Challenges for the acquisition 14

References

Appendices

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Strategic fit Analysis

INTRODUCTION

Indian Companies as a part of their growth strategy have done a series of takeovers globally. In

this chain on February 10, 2007, Indian aluminum giant Hindalco entered into an agreement with

Novelis to acquire the company in an all-cash transaction which valued Novelis at approximately

$ 6.0 billion, including debt. Hindalco, through its wholly-owned subsidiary AV Metals Inc.,

acquired 75.415 million common shares of Novelis, representing 100 per cent of the issued and

outstanding common shares. AV Metals Inc. transferred the common shares of Novelis to its

wholly-owned subsidiary AV aluminum Inc. The transaction makes Hindalco the worlds largest

aluminum rolling company and one of the biggest producers of primary aluminum in Asia, as well

as being Indiasleading copper producer. The combination of Hindalco and Novelis establishes

an integrated producer with low- cost alumina and aluminum facilities combined with high-endrolling capabilities and gives it a global footprint. Hindalcos rationale for the acquisition is

increasing scale of operation, entry into high-end market and enhancing global presence. Novelis

is the global leader (in terms of volume) in rolled products with annual production capacity of 2.8

million tones and a market share of 19 per cent. The acquisition will expose Hindalco to weaker

balance sheet. Besides the company will move from high margin metal business to low-margin

downstream products business. The acquisition will more than triple Hindalcos revenues, but will

increase the debt and erode its profitability. The case study attempts to analyze the financial and

strategic implications of this acquisition for the shareholders of Hindalco. It explains the

acquisition in detail and highlights the benefits of the deal for both the companies. Some of the

main issues the case tries to discuss and raise are: strategic rationale for this acquisition, emergingfinancial challenges in this acquisition, potential risk to Hindalco from this acquisition and whether

the valuation for this acquisition was correct.

INDUSTRY OVERVIEW

In 2007, the world aluminum consumption stood at 37.8 million tones against production of

38.1 million tones, the consumption was 10 per cent higher than the preceding year. This growth

was primarily led by China, where consumption grew at a phenomenal 37.7 per cent in 2007, more

than compensating for demand weakness in the US. India too registered a strong double digit

growth in 2007 in line with buoyant economic growth. The strong industrial growth, infrastructureinitiatives and electrification drive resulted in good demand for aluminum. Automobile and

transportation sectors also supported the aluminum demand. Globally, aluminum production

increased in line with the consumption. The primary aluminum production for the year was 38.1

million tones. China again led the production growth in 2007 with an increase of 34 per cent over

2006 production. Higher aluminum prices in the early part of the year also led to some capacity

restarts which further supported the production. In 2008 LME aluminum prices fluctuated

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significantly between USD 2400 and USD 3100 per tons. During 2008, crude prices also witnessed

a sharp surge and the rising crude prices resulted in higher prices for its derivatives. The soaring

crude also had a cascading effect in terms of higher transportation costs and higher prices of

alternate energy sources like coal. All these led to a significant cost push for the aluminum

industry. Global production of primary aluminum rose from 30 million tons (m.t.) in 2004 to 32

m.t. in 2005, a jump of 6.9 per cent. In 2006, it further increased to 34 m.t., an increase of 6.3 per

cent Year over Year (YoY). North America, Western Europe and China together accounted for

approximately 56 per cent production, with China alone accounting for 26 per cent of global

primary aluminum production. Asia, once again showed the largest annual increases in

consumption of primary aluminum, driven largely by increased industrial consumption in China,

which has emerged as the largest aluminum consuming nation, accounting for 25 per cent of global

primary aluminum consumption in 2006. As far as global consumption is concerned, it increased

by 5.6 per cent in 2005 and touched 32 MT. In 2006, the corresponding figures were 8.2 per cent

and 34.7 MT. The Indian aluminum industry grew by only 7 per cent YoY during FY07, in quite

contrast to the 20 per cent YoY growth witnessed during FY06. This was mainly on account ofsubdued demand from the power sector, which grew by 7 per cent as opposed to 23 per cent growth

in FY06. However, consumption of the metal continued to be strong in the transportation and

construction sectors with growth rates in the region of 16 per cent and 15 per cent YoY,

respectively. As far as prices are concerned, they rose significantly in FY07, jumping by as much

as 31 per cent YoY. However, they were likely to soften going forward, on the backdrop of slowing

global growth. Alumina prices corrected downwards because of surge in Chinese output. Rupee

appreciation against the US dollar also had an impact on the realizations of domestic companies.

This

Sector is going through a consolidation phase and existing producers are in the process of

enhancing their production capacity so that a demand supply gap expected in future is bridged TheIndian aluminum sector is characterized by large integrated players like Hindalco and National

aluminum Company (Nalco). The other producers of primary aluminum include Indian aluminum

(Indal), now merged with Hindalco, Bharat aluminum (Balco) and Madras Aluminum (Malco) the

erstwhile PSUs, which were acquired by Sterlite Industries. Consequently, there were only three

main primary metal producers in the sector. The per capita consumption of aluminum in India

continue to remain abysmally low at under 1 kg as against nearly 25 to 30 kg in the US and Europe,

15 kg in Japan, 10 kg in Taiwan and 3 kg in China. Even the Worlds average per capita

consumption is about 10 times of that in India. One reason of low consumption in the country

could be that consumption pattern of aluminum in India is vastly different from that of developed

countries. The demand of aluminum is expected to grow by about 9 per cent per annum frompresent consumption levels. The key consumer industries in India are power, transportation,

consumer durables, packaging and construction. Of this, power is the biggest consumer (about 44

per cent of total) followed by infrastructure (17 per cent) and transportation (about 10 to 12 per

cent). However, internationally, the pattern of consumption is in favor of transportation, primarily

due to large-scale aluminum consumption by the aviation industry. The metal has a long working

life due to its propensity for recycling. Recycled metal requires significantly less amounts of

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energy for manufacturing of primary aluminum. Just to put things in perspective, the recycling of

aluminum scrap requires 5 per cent of the energy required for primary smelting, which is

astoundingly lower, considering that power is such a high cost component.

COMPANY OVERVIEW: HINDALCO

A $28 billion corporation, the Aditya Birla Group is in the league of Fortune 500. It is anchored

by an extraordinary force of 100,000 employees, belonging to 25 different nationalities. In India,

the Group has been adjudged 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. Hindalco Industries Limited, a flagship company of the Aditya Birla

Group, is structured into two strategic businesses aluminum and copper with annual revenue of

$14 billion and a market capitalization in excess of $23 billion. In 2007, the acquisition of Novelis

Inc. a world leader in aluminum rolling and can recycling marked a significant milestone in the

history of the aluminum industry in India. With Novelis under its fold Hindalco ranks among the

global top five aluminum majors, as an integrated producer with low-cost alumina and aluminum

facilities combined with high-end rolling capabilities and a global footprint in 12 countries outside

India. Hindalco commenced its operations in 1962 with an aluminum facility at Renukoot in Uttar

Pradesh. Birla Copper, Hindalcos copper division is situated in Dahej in the Bharuch district of

Gujarat. Established in 1958, Hindalco commissioned its aluminum facility at Renukoot in eastern

U.P. in 1962 and has today grown to become the countrys largest integrated aluminum producer

and ranks among the top quartile of low cost producers in the world. The aluminum divisions

product range includes alumina chemicals, primary aluminum ingots, and billets, wire rods, rolled

products, extrusions, foils and alloy wheels. It enjoys a domestic market share of 42 per cent in

primary aluminum, 63 per cent in rolled products, 20 per cent in extrusions, 44 per cent in foils

and 31 per cent in wheels. Hindalco has launched several brands in recent years, namely Aura for

alloy wheels, Freshwrapp for kitchen foil and ever last for roofing sheets. The copper plant

produces copper cathodes, continuous cast copper rods and precious metals like gold, silver and

platinum group metal mix. Sulphuric acid, phosphoric acid, di-ammonium phosphate, other

phosphatic fertilisers and phospho-gypsum are also produced at this plant. Hindalco Industries

Limited has a 51 per cent shareholding in Aditya Birla Minerals which has mining and exploration

activities focused in Australia. The company has two R&D centers at Belgaum, Karnataka and

Taloja, Maharashtra. They one duly recognized by the Government of Indias Department of

Scientific and Industrial Research (DSIR). Most impressively, the company has been able to

reduce the percentage of sales devoted to selling, general and administrative costs from 4.15 per

cent to 2.96 per cent. This was a driver that led to a bottom line growth from 15.8B to 26.9B.

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46 Operations in 13 Countries

Strengths

Global Brand Image, Cost effectiv producer,A high degree quality consciousness, sound

financial posistions, well established

distribution network

WeaknessesPresent prooduction capacity not adequate,

technology is not upgraded to global gains inaluminium industry

Opportunities

R&D collaboration with universities, moreemphasis on on downstream production ofvalue added products, recycling should be

adopted as routine production

Threats

innovative revultion in steel & plasticindustry, reduce in exide duty, fall in price of

aluminium in neighbouring countries

SWOT Analysis

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COMPANY OVERVIEW: NOVELIS

Novelis is the worlds largest manufacturer of aluminum rolled products. It is the leader in Europe,

Asia and South America and a close No. 2 in North America. Novelis is a leading provider of

rolling and continuous casting technology and is also a leader in aluminum recycling. Novelis

produces aluminum flat rolled products for a variety of applications such as beverage and other

packaging, automobiles, industrial, construction, printing and other usages and serves several of

the biggest names in these industries. Novelis has patented the much-acclaimed Fusion

technology, which is a breakthrough approach in multi-alloy casting. Novelis also has some

bauxite, alumina, and aluminum smelting and hydel power operations in South America. Apart

from a global reach and de-risked product portfolio,

Novelis is the world leader in aluminum rolling and recycling of used aluminum beverage

cans, producing an estimated 19 per cent of the worlds flat-rolled aluminum products. The

company recycles more than 35 billion used beverage cans annually.. Novelis represents a unique

combination of the new and the old. Novelis is a new company, formed in January 2005, with a

new vision, a new philosophy and a new attitude. But Novelis is also a spin-off from Alcan and,

as such, draws on a rich 90-year history in the aluminum rolled product marketplace. Novelis has

a diversified product portfolio, which serves to the different set of industries vis--vis it has a very

strong geographical presences in four continents.

Strong Growth for flat rolled ProductsNovelis a market Leader

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Deal Value Analysis

FUNDING STRUCTURE OF THE DEAL

The funding structure of this deal is remarkably different from the leveraged buyout model that

Tata Steel used to fund for the Corus buy. The Tataswere to buy 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

will be raised (as debt) and repaid on the strength of the Corus balance sheet. Effectively, the

Tatas are paying only a third of the acquisition price. 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 cant borrow any more. So, theBirlaswere unable

to do a leverage buyout. To buy the $3.6 billion worth of Noveliss equity, Hindalco was

borrowing almost $2.85 billion (of the balance, $300 million was being raised as debt from group

companies and $450 million was being mobilized from its cash reserves). That was almost a third

of the Rs 2,500 crore net profit Hindalco may post in 2006-07 (It has reported a net profit of Rs

1,843 crore for the first three quarters of this year.). The second part of the deal is the $2.4-billion

debt on Noveliss balance sheet. Hindalco will have to refinance these borrowings, though they

will be repaid with Noveliss cash flows.

STRATEGIC RATIONALE FOR ACQUISITION

This acquisition was a good strategic move from Hindalco. Hindalco would be able to ship primary

aluminum from India and make value-added products. The combination of Hindalco and Novelis

establishes an integrated producer with low-cost alumina and aluminum facilities combined with

high-end rolling capabilities and a global footprint. Hindalcos rationale for the acquisition isincreasing scale of operation, entry into high-end downstream market and enhancing global

presence. Novelis is the global leader (in terms of volume) in rolled products with annual

production capacity of 2.8 million tones and a market share of 19 per cent. It has presence in 11

countries and provides sheets and foils to automotive and transportation, beverage and food

packaging, construction and industrial, and printing markets. Acquiring Novelis provides Aditya

Birla Groups Hindalco with access to customers such as Generals Motors Corp. and Coca-Cola

Co. Indian companies, fueled by accelerating domestic growth, are seeking acquisitions overseas

to add production capacity and find markets for their products. Tata Steel Ltd spent $12 billion to

buy U.K. steelmaker Corus Group Plc. Novelis had capacity to produce 3 million tons of flat-

rolled products, while Hindalco had 220,000 tons. Hindalco plans to triple aluminum output to 1.5million metric tonsby 2012 to become one of the worlds five largest producers. The company,

which also has interests in telecommunications, cement, metals, textiles and financial services, is

the worlds 13th-largest aluminum maker. After the deal was signed for the acquisition of Novelis,

Hindalcos management issued press releases claiming that the acquisition would further

internationalize its operations and increase the companys global presence. By acquiring Novelis,

Hindalco aimed to achieve its long-held ambition of becoming the worlds leading producer of

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aluminum flat rolled products. Hindalco had developed long-term strategies for expanding its

operations globally and this acquisition was a part of it. Novelis was the leader in producing rolled

products in the Asia-Pacific, Europe, and South America and was the second largest company in

North America in aluminum recycling, metal solidification and in rolling technologies worldwide.

The potential benefits from this acquisition are:

Post acquisitions, the company get a strong global footprint. After full integration, the joint entity becomes insulated from the fluctuation of LME

aluminum prices.

The deal gives Hindalco a strong presence in recycling of aluminum business. As per

aluminum characteristic, aluminum is infinitely recyclable and recycling it requires only 5 per

cent of the energy needed to produce primary aluminum.

Novelis has a very strong technology for value added product 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 $12 billion, hence consideringthe time required and replacement value; the deal was worth for Hindalco.

The takeover of Novelis provides Hindalco with access to the leading downstream aluminum

player in western markets. The purchase structurally shifts Hindalco from an upstream aluminum

producer to a downstream producer. This is reflected in Novelis downstream product capacity of

3.0 MT compared to Hindalcos existing primary capacity of 500 KT. Even with Hindalcos

expansion plans to take primary production to 1.5 m.t. by 2011, the Group will remain a

downstream aluminum producer. Novelis shareholders are required to approve the deal which the

companies expect to be completed by 2007.

Maintain Growth momemtum

Build new Assets

Realise Novelis Synergies

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IMPORTANT FACTS ABOUT DEAL

Hindalco acquired Novelis in an all-cash transaction, which values Novelis at enterprise value

of approximately $6.0 billion, including approximately $2.4 billion of debt.

Both organic and inorganic strategies have worked for companies worldwide. However, in the

process of global expansion inorganic growth strategies have always been the first preferencefor the companies global strategies. The following points underscore salient points of this

acquisition by Hindalco.

Combination of Hindalco and Novelis establishes a global integrated aluminum producer with

low-cost alumina and aluminum production facilities combined with high end aluminum rolled

product capabilities.

Post-acquisition, Hindalco will emerge as the biggest rolled aluminum products maker and

fifth-largest integrated aluminum manufacturer in the world.

Novelis is the global leader in aluminum rolled products and aluminum can recycling, with a

global market share of about 19 per cent. Hindalco has a 60 per cent share in the currently

small but potentially high - growth Indian market for rolled products.

Hindalcos position as one of the lowest cost producers of primary aluminum in the world is

leverageable into becoming a globally strong player. The Novelis acquisition gives the

company immediate scale and strong a global footprint.

The company reported net turnover of $7.4 billion and net loss of $170 million in nine months

during 2006, on account of low contract prices. Some of these contracts are expected to

continue for next years also.

Novelis is expecting the full year loss to be $263 million in 2006, however the company was

expecting to be in back with $68 million profit in 2007. The total free cash flow is expected to

be $175 million in 2006.

By January 1, 2010, all the sales contracts will get expired and profitability may increase

significantly from then onwards.

Novelis will act as forward integration with Hindalco as the company is expected to ship

primary aluminum to Novelis for downstream value addition.

Novelis has a rolled product capacity of approximately 3 m.t. while Hindalco at the moment is

not having any surplus capacity of primary aluminum.

Hindalcos Greenfield expansion will give it primary aluminum capacity of approximately 1

m. t., but this will take a minimum 3-4 years to all the capacities to come into operation. Novelis

profitability is adversely related to aluminum prices and higher aluminum prices on LME in

near future cant be ruled out. However, it is expected the aluminumprices shall be softening

in long term and this would be positive aspect for Novelis.

Debt component of Novelis stood at $2.4 billion and additional $2.8 billion would be taken by

Hindalco to finance the deal. This would put tremendous pressure on profitability due to high

interest burden.

Hindalcos existing expansion will cost Rs. 25,000 crore and as a result debt and interest

burden of the company will increase further.

CRISIL placed its outstanding long-term rating of AAA/Stable on Hindalco Industries

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Limited (Hindalco) on Rating Watch with Negative Implications. The short term rating of

P1+ had been reaffirmed. This would lead to higher interest rate for the company.

VALUATION FOR ACQUISITION

The big concern is Noveliss valuation. Analysts believed that Birlaspaid too high a price for a

company that had incurred a loss of $170 million for the nine months ended September 30, 2006.

In the subsequent guidance, the Novelis management indicated a loss of $240 million 285

million for the whole of 2006. Even in 2005, when Novelis had made a $90-million net profit, its

share prices had never crossed $30. Thus, why Hindalco paid $44.93 a share for a loss-making

company? In its guidance, the Novelis management had indicated a pre-tax profit of $35 million-

100 million for 2007. Going by the optimistic end of the guidance, the price Hindalco paid

translated to a market capitalization/profit before tax (PBT) multiple of 36 on Noveliss 2007

forecast. Hindalco has long held an ambition to become a leading (top 10) player across its 2 key

business segments, aluminum and copper. The acquisition of Novelis should achieve part of thisgoal by propelling Hindalco to the worlds leading producer of aluminum flat rolled products.

With capacity of nearly 3.0 m.t. of flat rolled aluminum products, Novelis takes Hindalco down

the value chain to become a downstream aluminum producer, versus its current upstream focus.

At a price of $44.93/ share and assuming $2.4 billion of debt, Novelis did not come cheaply. Based

on Novelis guidance and consensus forecasts for 2007, was estimated that Hindalco would pay

11.4 x EBITDA, 20.7x EBIT or 53.4x PE. At a total enterprise value of $6 billion, Novelis was

nearly 50 per cent larger than Hindalcos current market capitalization. The concern was the

severity of the earnings and value dilution that would result. Assuming synergies are minimal and

based on Novelis guidance for 2007; it was estimated that Hindalcos EPS would be diluted by

18 per cent. At Novelis long term annual free cash flow target of $400m (using a real WACC of 9

per cent), it was estimated the acquisition would lower value by Rs. 60/share. To put it another

way, Hindalco would need to improve annual free cash flow by 35 per cent to $540 million for the

acquisition to be net present value (NPV) neutral. Perhaps the greatest issue with the Novelis

acquisition was Hindalcos balance sheet position post acquisition. Having already committed to

significant expansion projects, Novelis will push Hindalcos high gearing levels even further.

Hindalcos gearing (ND/E) would reach 236 per cent, with its Net Debt/EBITDA ratio reaching

over 5.0x. As per company assessment, an equity raising was highly probable in short to medium

term. A key factor behind the losses suffered in 2006 was price ceilings contracted to Novelis

long-term can-making customers, which impacted revenues by $350m. Novelis expected that theirexposure to these types of contracts would reduce to a maximum of 10 per cent of sales in 2007.

While this was comforting, the Novelis still posed challenge for turnaround. Based on Novelis

guidance for 2007 and assuming this was also expected relevant to Hindalcos FY08 period,

Hindalcos EPS was further expected to be diluted by 18 per cent.

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Post Deal Analysis

POST ACQUISITION SCENARIO

The acquisition exposes Hindalco to weaker balance sheet. Besides the company moves from highmargin metal business to lowmargin downstream products business. The acquisition more than

triples Hindalcos revenues, but also increases the debt and erodes its profitability. The deal also

creates value only after the Hindalcos expansion completion, and due to its highly leveraged

position, expansion plans may get affected. Some of the customers of Novelis are significant to

the companys revenues, and that could be adversely affected by changes in the business or

financial condition of these significant customers or by the loss of their business. (The companys

ten largest customers accounted for approximately 40 per cent of total net sales in 2005, with

Rexam Plc and its affiliates representing approximately 12.5 per cent of companys total net sales

in that year). Novelis profitability could be adversely affected by the inability to pass through metal

price increases due to metal price ceilings in certain of the companys sales contracts. Adversechanges in currency exchange rates could negatively affect the financial results and the

competitiveness of companys aluminum rolled products relative to other materials. The

Companys agreement not to compete with Alcan in certain end-use markets may hinder Novelis

ability to take advantage of new business opportunities. The end-use markets for certain of Novelis

products are highly competitive and customers are willing to accept substitutes for the company

products. Though the Hindalco-Novelis acquisition had many synergies, some analysts raised the

issue of valuation of the deal as Novelis was not a profit-making company and had a debt of $2.4

billion. They opined that the acquisition deal was over-valued as the valuation was done on

Novelis financials for the year 2005 and not on the financials of 2006 in which the company had

reported

FUTURE OUTLOOK

High prices and buoyant demand outlook in the domestic as well as international markets

prompted aluminum companies to undertake huge expansion plans. Huge quantity of aluminum

will come into the market in the coming years. All the three major companies Nalco, Hindalco and

Vedanta Group have drawn up plans to increase capacities. At the end of January 2007, investment

in hand in the aluminum anti aluminum products sector amounted to Rs.59, 81800 million and are

spread across 35 projects. Most of the major projects, amounting to over 60 per cent of theaggregate investment in value terms, are under implementation. If all the projects are successfully

implemented, aluminum smelting capacity would increase from 11.8 lakh tones to 18 lakh tones.

Of this, about 1.6 lakh tones would come on stream in 2007-08 and five lakh tones each in 2009

and 2010. Hindalco initiated massive plans to increase its capacities through capacity expansion

as well as by setting up Greenfield plants. Hindalco increased its capacity at Hirakud plant by

35,000 tones to one lakh tons. When Hindalco completes all its project, smelting capacity would

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increase by about 10 lakh tones. Along with smelting capacities, the companies are expanding

alumina capacities and setting up captive power plants. Domestic alumina capacity is set to

increase by 9.5 million tones when all the outstanding projects are completed. In 2007-08 itself

about 1.23 million tons of capacity was to come on stream, pushing aggregate capacity to 4.23

million tones. Large alumina capacities would not only feed captive aluminum smelters, but would

also leave surplus alumina to be exported to lucrative markets like China.

CHALLENGES FOR THE ACQUISITION

Quick completion

Integration

Retaining cutting edge

Identifying and realising synergies

Improving Novelis financialperformance

Approvals from governmentagencies, company boards,lenders and courts

Integration of companies withdiverse cultures nationalitiesacross various levels and

functionsSpirit and capability ofinnovation, key customerrelationships, people skills to beexpanded across greater Hindalco

IT and risk managementskills,jointly realisingdownstream vision, andinternational marketing

Focus on costs, operations,pricing and working capital

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REFERENCES

ABG Annual Report of Hindalco (2007-08) & Annual Report Aditya Birla Group.

Chatterjee, S. (2007) Birlas Hindalco BuysAluminum Giant Novelis for $6.4 billion,

http://in.ibtimes.com, February 13.

Hindalco(www.hindalco.com) & Aditya Birla Group(www.adityabirla.com.).

Iyengar, S.P. Hindalco Deal May Not Impact aluminumPrices, The Hindu Business Line, Feb 13.

Timmons, H. (2007) Indian Metals Company to Buy Canadian Rival, www.iht.com, February 11.

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Exhibit 1 - Financials of Hindalco

Date End 31-Mar-07 31-Mar-06 31-Mar-05 31-Mar-04

Net Sales 183130 113965 95233 61909

Other Income 3701 2439 2700 2446

Total Income 186831 116404 97933 64355

Expenditure -142980 -87914 -72467 -47113

Operating Profit 43851 28490 25466 17242

Interest -2424 -2252 -1700 -1612

Gross Profit 41427 26238 23766 15630

Depreciation -6381 -5211 -4633 -3174

Profit before Tax 35046 21027 19133 12456

Tax -9403 -4502 -5748 -4067

Profit after Tax 25643 16525 13385 8389

Extraordinary Items - 30 -91 -

Net Profit 25643 16555 13294 8389

Equity Capital 1043 986 928 925

Reserves 123137 95077 75738 67654

EPS 26 16.8 143 91

Nos. of Shares - 845583773 847818402 68706740 69941039

Percent of Shares - 72.94 73.78 74.06 75.63

Exhibit 2 Stock Price/Volume Movement at a Glance (All figures in )

Indicator Exchange/ Latest 30 days 90 days back 1 yr. back

Price (Rs.) BSE 161.30 147.60 134.20 160.25

Price (Rs.) NSE 161.00 147.65 133.95 160.25

Volume (in Mn.) BSE 1.78 0.52 1.23 1.55

Volume (in Mn.) NSE 4.55 1.48 2.43 4.30

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Exhibit 3 Stock Price Volatility to Some Recent News Headlines

Headline Price Price +/-

Before After

Hindalco completes acquisition of Novelis 16-May-2007 IRIS 147 148.85 +

Novelis shareholders approve Hindalcosbid 12-May-2007 IRISNEWS DIGEST

147 148.85 +

Novelis shareholders approve Hindalcos bid 12-May-2007 IRIS147 148.85 +

LIC picks 2 per cent stake in Hindalco, hikes stake to 9 per cent10-May-2007 IRIS

145.5 146.6 +

Karvy rates Hindalco as Underperformer 09-May-2007 IRISExclusive

145.4 144.4 -

Result Analysis: Hindalco net up 15 per cent for Mar 07 qtr. 04-May-2007 IRIS

147 148.15 +

Hindalco net rises 15 per cent for Mar07 qtr. 04-May-2007 IRIS147 148.15 +

Hindalco may buyout Alcan in Utkal Alumina 17-Apr-2007 IRIS145.1 143.3 -

Hindalco allots shares on preferential basis 12-Apr-2007 IRIS142.4 140.1 -

125

130

135

140

145

150

155

160

165

170

21-Mar-07

28-Mar-07

04-Apr-07

11-Apr-07

18-Apr-07

25-Apr-07

02-May-07

09-May-07

16-May-07

23-May-07

30-May-07

06-Jun-07

0

1

2

3

4

5

6

7

21-Mar-07

28-Mar-07

4-Apr-07

11-Apr-07

18-Apr-07

25-Apr-07

2-May-07

9-May-07

16-May-07

23-May-07

30-May-07

6-Jun-07

Volume(in mn)

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Exhibit 4 Peer Group Comparison(F igures in mi lli on )

Company name Sales Rank PAT RankMarket

CapRank

Hindalco Industries

Limited110807.76 1 16555.50 1 197576.78 1

National AluminumCompany Limited

48460.70 2 15622.00 2 167520.50 2

Madras AluminumCompany Limited

4513.23 3 831.35 3 9585.00 3

Associated Profiles& Aluminum

Limited1662.98 4 43.58 5 2130.09 4

P G Foils Limited 1018.31 5 17.30 6 0.00 5

Exhibit 5 Financial Analysis of Novelis Acquisition

CY07 Low High Mid-Point

Total Regional Income 575 625 600

Corporate Costs -80 -70 -75

EBITDA 495 555 525

Interest Expense -235 -235 -235

EBIT 260 320 290

Net Interest @7.0% 420 420 420

Pretax Profit -160 -100 -130

Tax (@25%) -40 -25 -33

NIPAT -120 -75 -98

NIPAT (INR) -5280 -3300 -4290

Current FY08 estimate (HSBC) 23553 23553 23553

Issued number of shares 1159 1159 1159

EPS (post Novelis) 15.8 17.5 16.5

EPS (HSBC FY08 current) 20.0 20.0 20.0

EPS Change -22% -14% -18%

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Exhibit 6 Brief Financials of Novelis as on December 31

Item 2005 2004 2003

Total Regional Income $620 $654 $508

Interest expense and amortization of debt and fees (203) (74) (40)

Unrealized gain due to changes in the fair 140 77 20

Depreciation and amortization (230) (246) (222)

Impairment charges on long-lived assets (7) (75) (4)

Minority interest share (21) (10) (3)

Adjustment to eliminate proportional consolidation (B) (36) (41) (36)

Restructuring charges (10) (20) (8)

Gain on disposals of fixed assets and business 17 5 28

Corporate Costs (72) (49) (36)

Litigation settlement-net of insurance recoveries (40)

Gains on the monetization of cross-currency interest rate swaps 45

Provision for taxes on income (107) (166) (50)

Net income before cumulative effect of accounting Changes 96 55 157

Cumulative effect of accounting change-net of tax (6)

Net Income $90 $55 $157

Exhibit 7 Summary of Financial of Novelis ($million)

Item Jan-Sep 2006 Jan-Sep 2006 FY 2005 FY 2004 FY 2003

Net sales 7,377 6,337 8,363 7,755 6,221

OperatingExpenses

7,224 5,938 7,962 7,145 5,737

EBIDTA 153 399 401 610 484

Interest 149 148 194 48 33

Net Income -170 32 90 55 157

Documents

M&A_Group 3