Birla defends Hindalco rights price...

Hindalco Industries Ltd unveiled plans to invest nearly Rs 20,000 crore over the next three years to set up aluminium plants and augment capacities.

The company will spend Rs 6,000 crore in the current financial year, Rs 7,800 crore in 2009-10, and Rs 6,000 crore in 2010-11 to wrap up expansion and set up new plants in Orissa, Jharkhand and Madhya Pradesh, the Chairman, Kumar Mangalam Birla, said at the company's annual general meeting here on Friday.

He said the company has already raised the money for the plan.

The rights issue, which opens on Monday and closes on October 10, will be sold at a ratio of three shares for every seven held at Rs 96 per share.

The company is raising $1 billion to repay part of loan that it raised to fund $6 billion acquisition of Novelis Inc 15 months ago.

Some shareholders said the pricing was inadequate. Others feared the issue may be under-subscribed due to the current market milieu.

"Will the promoters buy the unsubscribed lot, if any?" asked a grieved shareholder.

Birla replied the rights have been priced attractively. "And I don't see prices of our shares falling to these levels again."

On the Novelis acquisition, Birla assured shareholders it was a good investment.

"The cost of building a Novelis is about $12-13 billion compared with the $6 billion we paid to buy it. Also, it's not possible to build a company with the kind of technology it has. That is the advantage of Novelis. And practically, they are market leaders wherever they are in," he said.

Birla said an investment of Novelis' size takes at least three years to show on the EPS (earnings per share).

The company has nearly trudged half that route.

"The turnaround is already being seen. Novelis has reported profits for the first quarter against a loss in the previous year."

The aim is to create synergies between Hindalco and Novelis, Birla said.