Hindalco defers Novelis’ $945 mn US listing

Novelis was acquired by Hindalco just before the global financial crisis to expand beyond its home bailiwick in a deal that sought to bolster its in and automotive components.

"The valuation range it was estimating for the was decent, at 7.5-8.2x FY26 EBITDA, at a significant premium to peers," Satyadeep Jain, research analyst at , told ET. "However, it would seem to us that during roadshows, investors may not have been comfortable with the multiple it was seeking. There was likely no point going ahead and risking Hindalco valuation, hence the decision to postpone," he said.

Stretched Valuations?

Novelis, last week, announced that it is looking at a price band of $18 - $21 per share for its public offering. This implied a market value of $12.6 billion for the company at the upper end, and a valuation of over 8 times on an to EBITDA basis.

Among the comparable peers for Novelis include Japan-based , which is valued around 6.5 times its FY26 EBITDA and France-based , which is valued at less than 6 times its EV/EBITDA, Jain said.

, also a peer, is valued at more than 8 times its EV/EBITDA, he said.

"We believe Novelis was likely testing waters with respect to price discovery. In our view, there is already an inbuilt holding company discount for Novelis in current Hindalco valuation given tax leakage," Jain said. "However, IPO could have meant even higher discount - Novelis needed a premium valuation in order to offset higher holding company discount," he said. As its sole shareholder, Hindalco was looking at raising up to $1.09 billion from the of Novelis. The company was looking to offload up to 8.6% stake in Novelis, including a green shoe option.

Peers Cheaper

"The price band indicated for Novelis offered little reason to cheer. At the higher end of the price band at $21 per share, the company was looking at a valuation of around 8.3 times its EV/EBITDA, which is high relative to its global peers," Ritesh Shah of Investec Capital said. Even assuming that the company got the upper end of the valuation, with a 20% holding company discount and the value of cash, the price for shares of Hindalco would have decreased to ₹715 from ₹750 earlier, he said.