Hindalco Industries Postpones Novelis Inc’s $945-Million IPO Amid Valuation Concerns

Hindalco Industries, the metals flagship of the Aditya Birla Group, has delayed the proposed $945-million initial public offering (IPO) of its US subsidiary Novelis Inc. Experts attribute the postponement to concerns that potentially below-premium valuations for Novelis could negatively impact the valuation of the consolidated Indian entity listed in Mumbai.

Novelis cited "market conditions" as the reason for postponing its IPO. "Novelis will continue to evaluate the timing of the offering in the future," the company said in a statement.

Acquired by Hindalco just before the global financial crisis, Novelis was intended to bolster Hindalco's global business in metal cans and automotive components. The valuation range for the IPO was estimated at 7.5-8.2x FY26 EBITDA, a significant premium compared to peers. However, investors during roadshows were reportedly uncomfortable with the multiple it was seeking, leading to the decision to postpone the IPO to avoid risking Hindalco's valuation.

Last week, Novelis announced a price band of $18 - $21 per share for its public offering, implying a market value of $12.6 billion at the upper end and a valuation of over 8 times on an enterprise value to EBITDA (EV/EBITDA) basis. Comparable peers, such as Japan-based UACJ Corp and France-based Constellium, are valued at 6.5 times and less than 6 times their FY26 EBITDA, respectively. Kaiser Aluminium is valued at more than 8 times its EV/EBITDA.

Satyadeep Jain, a research analyst at Ambit Capital, noted that Novelis was likely testing the waters regarding price discovery. Given the existing holding company discount in Hindalco's valuation due to tax leakage, an IPO could have resulted in an even higher discount unless Novelis secured a premium valuation.

Hindalco, as the sole shareholder, was aiming to raise up to $1.09 billion from the sale of up to 8.6% stake in Novelis, including a green shoe option. However, the indicated price band offered little reason to cheer. At the upper end of the price band at $21 per share, the valuation of around 8.3 times EV/EBITDA was high relative to its global peers. Ritesh Shah of Investec Capital noted that even with the upper end valuation, the price for Hindalco shares could have decreased from ₹750 to ₹715 due to the 20% holding company discount and the value of cash.