CLSA on Hindalco. Buy.

CLSA on Hindalco. Buy.

CLSA Asia Pacific Markets, in a note released recently, has recommended a buy. Some of the highlights of the report are:

• Bridge loan refinancing safe
• Hindalco has secured a 5- year loan of US$1.0bn from a consortium of banks at LIBOR+280bps, which will partially replace the US$3.03bn Novelis acquisition bridge loan.
• CLSA sees a high likelihood of Hindalco successfully refinancing the Novelis acquisition bridge debt, which should remove an overhang from the stock. Long-term debt secured at L+280
• Rights issue underwritten by promoters and investment banks
• Hindalco has appointed ABN AMRO, Citigroup Global Markets, Deutsche Equities, DSP Merrill Lynch and State Bank of India as the underwriters to the rights issue. In the event the issue does not receive minimum subscription of 90%, the promoters will subscribe to any unsubscribed portion such that the total subscription of promoters (including their rights entitlement) shall not exceed 50% of the issue size.
• Hindalco's consolidated net debt/equity will improve to 0.5x post the rights issue and refinancing of the bridge debt