Hindalco loses its shine

Hindalco is extremely volatile today. After closing on Friday at Rs.184.55, it opened in the green today at Rs.186, but soon sunk to an intra day low at Rs.181 and is currently at the same low levels, down around 2%.

The stock has gone into the red after the company announced that its Board of Directors, at a meeting held on 18th July 21, 2014, approved raising of funds for an amount not exceeding Rs 5000 crore through issuance of securities including equity shares or equity linked securities, including through a QIP and/or issuance of equity shares through convertible bonds, depository receipts and/or any other instrument convertible or exchangeable into equity shares, and/or other securities with or without warrants, to eligible investors subject to the approval of the members of the company. The company has called a meeting of the members of the company on 14 August 2014 to approve the aforesaid.

Basically, what this means for sure is that it will dilute stake to raise funds to the tune of Rs.5000 crore and the market is perturbed on account of equity dilution. As such promoter holding in the company is pretty low; as at 30th June 2014, it stood at 36.99%, while FIIs held 27.63% and DIIs held 14.13%.

Our Editor, Mr. SP Tulsian expects the stock price to correct to Rs.178 levels in the near term.