This document analyzes the financial performance of Hindalco Industries Limited following their acquisition of Novelis Inc. in 2007. Some key points: - The acquisition made Hindalco the largest aluminum rolling company in the world with 19% market share. It was an all-cash deal of $6 billion for Novelis. - Ratios like return on assets increased after the acquisition but decreased from 2010-2013. Inventory turnover doubled from 2007 to 2013 but days inventory decreased, improving working capital. - Leverage ratios like debt-to-equity were high post-acquisition but decreased from 2009-2011 as the company integrated Novelis. Current and quick ratios remained stable.

1. Financial Analysis of
Hindalco Industries Limited
(Including Acquisition of Novelis Inc.)
Group – 8, Section – B
Ajeet Singh (PGP13067)
Ankit joshi (PGP13070)
Gurpreet Singh (PGP13089)
Nikhil Kejriwal (PGP13099)
Sahil Dhingra (PGP13112)
Samarjyoti Das (PGP13113)
Rakesh Sukumar (PGP13134)

2.  Turnover of USD 14 billion, employs nearly 19500
employees
 Chairman – Kumar Mangalam Birla, himself a
Chartered Accountant by qualification.

3. Vision
To be a premium metals major, global in size and reach, excelling in everything we do, and
creating value for its stakeholders
The strategic acquisition of Novelis, Inc. was done keeping in view the overall vision of the
conglomerate.
Mission
To relentlessly pursue the creation of superior shareholder value, by exceeding customer
expectation profitably, unleashing employee potential, while being a responsible corporate citizen,
adhering to our values.
Values
Integrity - Honesty in every action.
Commitment - On the foundation of integrity, doing whatever it takes to deliver, as promise
Passion - Missionary zeal arising out of an emotional engagement with work.
Seamlessness - Thinking and working together across functional silos, hierarchy levels,
businesses and geographies.
Speed - Responding to stakeholders with a sense of urgency

4. • Novelis is a globally positioned organization,
operating in 11 countries with approximately 12,500
employees.
• In 2005, the company reported net sales of US $8.4
billion and net profit of US $90 million.
• In 2006 (till Q3) reported net sales of US $7.4
billion and net loss of US $170 million
• Market leader in aluminium rolled products

5.  Made Hindalco the largest Aluminium Rolling Company in
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
the world – 19% share in downstream rolled aluminium
products
Strategic acquisition started in Jan 2007.
Rolling sheets for most car manufacturers and bottle cans
Acquisition was an all-cash transaction
Novelis shareholders received $44.3 per outstanding share
of common stock
Novelis - $6 bn enterprise value, US $2.4 bn debt
All debt was transferred to Hindalco
The transaction done through wholly owned subsidiary of
Hindalco, AV Metals Inc.

6.  Gross profit Margin = (Revenue-COGS) /Revenue
= Gross Profit / Revenue
 Operating Profit Margin = Operating Income / Sales Revenue
= EBIT / Sales revenue
 Pre-tax Margin = Income before tax / Sales Revenue
 Net profit Margin = Net income / Sales Revenue

7. Return on assets
Return on equity
ROA = Net Income
Total Assets
ROE =
How profitable a
company’s assets are in
generating revenue
Net Income
Shareholder’s equity

8. Ratio
formula
2009
2010
2011
2012
2013
Return on Net
0.0054 0.0606
Assets
Income/Tota
l Assets
0.0283
0.0335
0.0251
Return on Net
0.0220 0.1869
Equity
Income/Shar
eholder
Equity
0.0786
0.1010
0.0816
Return on assets increased in 2010 but then remained nearly constant.
Return on Equity continuously decreased throughout the period.

9. Ratio
formula
2009
2010
2011
2012
2013
Gross
Profit
Margin
Gross
profit/Revenue
0.0874
0.1324
0.0986
0.3066
0.3213
Operating
Profit
Margin
Operating
Income/Reven
ue
-0.009
0.1017
0.0533
0.0661
0.0481
Pretax
Profit
Margin
Income Before
Tax/Revenue
-0.009
0.1017
0.0533
0.0537
0.0487
Net Profit
Margin
Net
Income/Reven
ue
0.0053
0.0716
0.0340
0.0420
0.0377
Increase in Gross Profit Margin and Operating Profit Margin

10. Ratios
Inventory turnover
Formula
COGS/Average
Inventory
2007-03 2008-03
2009-03 2010-03 2011-03 2012-03 2013-03
2.45
6.11
5.32
5.12
4.1
3.95
5.1
Days Of Inventory on 365/Inventory
Hand(DOH or DIO) Turnover
148.98 71.57
59.74
68.56
71.27
89.05
92.48
Revenue(Credit
Sales)/Average
Receivables turnover Receivables
13.54
14.52
9.8
9.19
9.91
10.09
9.45
Days of Outstanding 365/Receivables
Sales(DOS)
turnover
26.96
25.14
37.24
39.72
36.83
36.17
38.62
6.12
6
5.5
5.72
4.66
5.27
59.68
60.83
66.35
63.83
78.27
69.3
37.03
36.15
41.92
44.27
46.95
61.8
Purchases(Credit
purchases)/Average
Payables Turnover
trade payable
4.28
365/Payables
Days Payables(DPO) Turnover
85.3
Cash Conversion
Cycle
DOH + DSO – DPO 90.64

11.  COGS doubled from 2.45 in FY 2007 to 5.1 with
acquisition of Novelis.
 Days of inventory on hand has come down drastically
from 148.98 to 92.48, which is a healthy sign for the
company
 Also, the inventory levels were high in 2007-08 due to
the effect of the acquisition

12.  Short term
 Current Ratio = Current Assets
Current Liabilities
 Quick/ Acid test Ratio= Current Assets – Inventory
Current Liabilities
2004 2005
Current
Ratio
Quick
Ratio
2006 2007 2008 2009 2010
2011
2012
2013
2.5
1.78
2.02
1.97
1.25
1.19
1.29
1.29
1.63
1.69
0.68
0.47
0.6
0.59
0.49
0.55
0.49
0.49
0.56
0.69

13.  Debt-equity ratio
D/E ratio = Total debt
Total equity
 Financial Leverage
Financial Leverage = Average total assets
Average total equity
 Debt-asset ratio
D/A ratio = Total debt/Total asset
2009
2010
2011
2012
2013
debt/asset
0.439135
0.334435
0.31915
0.366138
0.411374
debt/equity
1.785702
1.030792
0.886422
1.104306
1.337505
3.480895
2.907579
2.90115
3.139474
financial leverage
NA

14. Debt-Equity Ratio
2
1.8
1.6
1.4
1.2
1
Ratio
0.8
0.6
0.4
0.2
0
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014