Hindalco looking dull and cold

Hindalco is the top loser on the BSE currently, down almost 3.5%, at an intra day low of Rs.74.40. Its 52-week low stands at Rs.67.55.

Two reasons for this cloud over Hindalco. Firstly, there has been a change in the BSE Sensex composition – with effect from December 21, Adani Ports and Special Economic Zone and Asian Paints will be added to BSE’s benchmark index S&P BSE Sensex while Vedanta and Hindalco Industries will be excluded.

Changes will also be made to five other indices — S&P BSE 100, S&P BSE Carbonex, S&P BSE 200, S&P BSE 500 and S&P BSE Teck. There will however, be no changes in S&P BSE Bankex and S&P BSE Oil and Gas indices.

The other reason for the drop in Hindalco, as per our editor Mr.SP Tulsian in the Market Whispers column is that the stock is seeing Fund selling, after company announced the plans to raise $ 1.5 billion, close to Rs. 10,000 crores. Mr.Tulsian has explained that the company already has net consolidated debt of over Rs. 70,000 crores and is now seen heading into the debt trap. Novelis having acquired by the company in 2007, for US $ 6 billion remains a big drag on the working of the company, with capital employed of about Rs.50,000 crores now, yielding, EBIT of just 4%, even after 8 years.

Even the scene on the domestic aluminium front is not good wherein EBIT fell to 3.5% in H1 FY16, against 10% seen in FY15.  Mr.Tulsian does not expect any ray of hope for its aluminium business , at least for the next 6 months.