Hindalco's Acquisition of Novelis

After the deal was signed for the acquisition of Novelis, Hindalco's management issued press releases claiming that the acquisition would further internationalize its operations and increase the company's global presence. By acquiring Novelis, Hindalco aimed to achieve its long-held ambition of becoming the world's leading producer of 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.

Though the Hindalco-Novelis merger 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 US$ 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 losses (Refer to Exhibit IX for Novelis P&L statements and balance sheets). They said that Hindalco might have to collect a huge amount of resources to revive and restructure Novelis...