Hindalco has displayed marked strength of late, even though the overall market declined under selling pressure, especially in tech stocks.
The scrip of the Aditya Birla group aluminium major has risen by 13.61 per cent to Rs 602.35 on April 17, 2003 from a recent low of Rs 530.15 touched on 31 March this year. The 30-share BSE Sensitive Index (Sensex) has lost 64.22 points, or 2.10 per cent, in the same period. Daily volumes on the Hindalco counter have remained erratic, from as low as 1,800 shares to over 1 lakh shares since April 1, 2003.
While the market slide is largely due to the crash in tech stocks, old economy stocks have also accounted for the weakness. However, the Hindalco stock has bucked the trend on sustained buying support from institutions.
The strength on the Hindalco counter was attributed to bargain hunting. The stock seems to be cheap considering the bright outlook for the metals sector globally as well as in the domestic market. Analysts said the demand for the white metal will rise in the near future, and this should be followed by a rise in prices as well.
In the January-March 2003 period, copper and aluminium prices on the London Metal Exchange rose by 6.8 per cent and 1.1 per cent, respectively.
Meanwhile, prices of alumina, the raw material for the manufacture of aluminium, have risen substantially in the last few months.
The demand for aluminium in the second half of the current calendar year may increase from the the electrical and automobile sectors.
Recently, Hindalco announced that it has merged Indo Gulf Corporation's copper business with itself. The merger took effect from 12 February 2003. The swap ratio was fixed at 1:12 - one share of Hindalco for every 12 shares of Indo Gulf Corporation. The equity of Hindalco increased from Rs 73.71 crore to Rs 92.48 crore following the share swap scheme with Indo Gulf Corporation.
Analysts said the merger move a sensible one, as it will make Hindalco a bigger entity with a larger balance sheet. It should help Hindalco in garnering large loans in its bid to acquire state-run aluminium major Nalco, whenever the company is put on the block. Hindalco had said earlier that it would bid for the government's 60 per cent equity stake in National Aluminium Company.
For the third quarter (ended 31 December 2002), Hindalco registered a 39 per cent fall in net profit to Rs 101.1 crore, compared to Rs 165.5 crore in the corresponding period of the previous year. Net sales declined by 9.68 per cent to Rs 521.5 crore from Rs 577.4 crore in DQ 2001.
Hindalco had issued an outlook stating that even as its long-term fundamentals remain excellent, it continues to be cautiously optimistic in the near-term. The long-term outlook remains extremely encouraging, it said, even in the face of a temporary setback in the company's operations on account of disruption of its activities in September 2002.
Hindalco expects its branding of foil products to progressively yield results by way of higher sales in the packaging sector. In addition, Hindalco expects to gain from a substantial increase in sales volumes of aluminium alloy wheels. The company said that the completion of the ongoing brown-field expansion projects, and cost reduction measures as well as other initiatives will enable it to make a strong comeback.
The promoters hold 23 per cent stake in Hindalco, while the public and institutions hold 13 per cent and 40.5 per cent, respectively.
