Why Hindalco Share Price is Rising

Indian benchmark indices are witnessing a surge of optimism with rising expectations of interest rate cuts in the United States boosting global markets.

Tracking this rise, are metal stocks whose performance can be attributed to the cooling in US dollar index, which is leading to a buying interest in metal stocks globally.

While this rally has lifted the entire sector, some metal stocks are also in focus due to individual developments.

Hindalco Industries, one of India's leading aluminium producers, is experiencing a notable surge in its share price.

The company's shares are up more than 13% in the last five days and up more than 18% in the last month. They also touched their 52-week high today.

Let's find out why.

#1 Acquisition of 26% Stake in Seven Renewable Power

Shares of Hindalco Industries were locked in an upper circuit today to hit their 52-week high after the company announced that it will acquire a 26% stake in Seven Renewable Power (SRPPL).

This would help it develop and operate a captive power generation plant to supply 100 MW (megawatts) round-the-clock renewable energy to company's smelter located in Odisha.

However, the management said that the connectivity start date for the proposed power plant (solar component) under SRPPL is now expected to be delayed.

It has decided to substitute the SPV by executing the project with Ayana Renewable Power Four Private Limited (ARPFPL) instead of SRPPL. ARPFPL is engaged in generation and supply of power.

Both SRPPL and ARPFPL are subsidiaries of Ayana Renewable Power Private Limited. Hindalco has accordingly signed agreements wherein SRPPL has novated the previous shareholder's agreement and power purchase agreement to ARPFPL.

The indicative period for completion of the acquisition is 1-3 months. According to the details of the acquisition, a total of 1.6 m shares of face value of Rs 10 each of ARPFPL are to be acquired at par to gain 26% shareholding in ARPFPL.

#2 MoU with American Battery Manufacturer Charge CCCV (C4V)

The company signed an MoU with American battery manufacturer Charge CCCV (C4V) for the supply of coated battery foils and structural components for the manufacturing of lithium-ion batteries.

As per the agreement, Hindalco will supply up to 2,000 tons of battery-grade aluminium foils to C4V for a period of five years.

The strategic collaboration also includes joint development of material technologies and related know-how.

Note that Hindalco is all set to commission a state-of-the-art battery foil manufacturing facility in the Indian state of Odisha, with a production capacity of 25,000 tons at an investment of Rs 8 bn.

In close collaboration with OEMs, the company aims to co-develop critical components for energy storage, marking a significant shift to high-tech metal solutions.

To enhance sustainable production, the upcoming factory will also be powered by a 25 MW solar power plant.

The management has said that it is witnessing fast traction in battery materials demand, driven by an impressive outlook for EV and grid-based energy storage sectors.

Raw material localization is critical in such strategic sectors. Investment in its new battery foil factory is a step in this direction.

The new plant, to be set up near Sambalpur in Odisha, will be commissioned by 2025. The investment will be funded through internal accruals.

What next?

By 2030, the demand for battery-grade aluminium foil in India is projected to surge dramatically to 40,000 tonnes.

This will be mainly fuelled by the rapid expansion of gigafactories dedicated to advanced cell production. High-performance aluminium foils serve as crucial current collectors for cathode materials used by cell manufacturers.

Industry reports indicate that India has spent approximately US$ 1.8 billion (bn) to import 548.6 million units of kWh-grade lithium-ion batteries in the first seven months of 2022-23 (April-November 2022).

This shows significant growth compared to the import of 616.7 m units for US$ 1.83 bn in the entire financial year 2021-22.

Apart from Hindalco, Shyam Metallics and Energy has announced its foray into the manufacturing of battery-grade aluminium foil.

Hindalco achieved a significant technological breakthrough by producing high-quality battery foils at its Mouda unit in Maharashtra. Currently, these foils are undergoing qualification processes with lithium-ion cell manufacturers in India, Europe, and the US.

The company's new unit in Odisha is poised to bolster its capacity to supply materials to gigafactories worldwide, as highlighted in their official statement.

Moreover, the company is collaborating closely with original equipment manufacturers (OEMs) to jointly develop critical components such as battery enclosures, motor housings, busbars, structural and safety elements, and lightweight load bodies.

Many of these innovations mark pioneering efforts within India's industry landscape.

How Hindalco Share Price has Performed Recently

In the past month, shares of the company have gained 18.6%.

The stock has gained 45.5% in the past six months and around 31% in the year gone by.

The stock touched its 52-week high of Rs 614 today on 28 December 2023 and a 52-week low of Rs 381 on 20 March 2023.

At the current price, the company trades at a price to earnings multiple of 49 and price to book value multiple of 2.25x.

About Hindalco

Hindalco Industries is an Indian aluminium and copper manufacturing company. The company is a subsidiary of the Aditya Birla Group.

Hindalco is the largest aluminium rolling and recycling corporation in the world, as well as a major copper player. It is also one of Asia's top primary aluminium producers.

Building and construction, auto-motives, packaging, electrical, consumer durables, refractories, and ceramics are some of the industries it serves.

Along with its global subsidiary Novelis Inc., Hindalco has a presence in 12 countries. From bauxite mining to alumina refinement, aluminium smelting, rolling, and extrusions, the company engages in a wide range of operations.

For more details about the company, you can have a look at Hindalco's Fact sheet and its quarterly result.

You can also compare Hindalco with its peers.

Hindalco vs Starlit Power

And to know what's moving the Indian stock markets today, check out the most recent share market updates here.

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