Hindalco's market capitalisation became lumpier after a merger with group company Indo Gulf Corporation's copper business, but the scrip's value took a beating during the week.

In fact, some considerable offloading by market players during the week pushed the stock of the A V Birla group aluminium major downward in the four trading sessions between 7 and 13 March 2003, when the scrip lost 1.28% to Rs 565.95 from Rs 573.30.

The company's market capitalisation got weightier, however, following the amalgamation of the company with Indo Gulf Corporation's copper business. The equity has now increased from Rs 73.71 crore to Rs 92.48 crore.

Earlier this month, Hindalco announced that it merged Indo Gulf Corporation's copper business with itself. The merger took effect from 12 February 2003. The swap ratio was fixed at 1:12 - one share of Hindalco for every 12 shares of Indo Gulf Corporation. The record date for the same was 13 March 2003. The respective boards of the two companies had approved the restructuring scheme at separate meetings on 21 July 2002.

Due to the amalgamation, the m-cap of the strengthened Hindalco increased by Rs 1,008.12 crore (Rs 10.08 billion) or 23.85% to Rs 5,233.91 crore (Rs 52.33 billion) on 13 March 2003 from Rs 4,225.79 crore (Rs 42.25 billion) on March 2003.

The merger should make Hindalco a bigger entity and the larger balance sheet should help the company garner substantial loans for acquiring PSU aluminium company Nalco, whenever the company comes up for divestment. Hindalco had said earlier it would bid for the government's 60% stake in Nalco.

But the company's financial growth may be constrained what with the negative outlook by analysts on the aluminium sector. Prices are not expected to rise due to the huge piling up of the white metal in international markets. Also, after the capacity expansions by Hindalco and Nalco, domestic prices may be put under further pressure.

The only positive trigger for the sector is that demand for aluminium in the second half of the current calendar year may increase from the resurgent electrical and automobile sectors.

For the third quarter (ended 31 December 2002), Hindalco registered a 39% fall in net profit to Rs 101.1 crore (Rs 1.01 billion) compared to Rs 165.5 crore (Rs 1.65 billion) in the corresponding period of the previous year. Net sales declined by 9.68% to Rs 521.5 crore (Rs 5.21 billion) from Rs 577.4 crore (Rs 5.77 billion) in DQ 2001.

Meanwhile, Hindalco has issued an outlook stating that even as its long-term fundamentals remain excellent, it continues to be cautiously optimistic in the near term. The medium- and long-term outlook remains extremely encouraging, it said, even in the face of a temporary setback in the company's operations on account of disruption of its activities in September 2002.

Hindalco expects its branding of foil products to progressively yield results by way of higher sales in the packaging sector. In addition, Hindalco expects to gain from a substantial increase in sales volumes of aluminium alloy wheels. The company said that the completion of the ongoing brown-field expansion projects, and cost reduction measures as well as other initiatives will enable it to make a strong comeback.

The promoters hold 23% stake in Hindalco, while the public and institutions hold 13% and 40.5%, respectively.

BSE code: 500440