Hindalco Industries said on Tuesday that its U.S. subsidiary Novelis has postponed its initial public offering (IPO) due to weak market conditions, causing the stock price of chairman Kumar Mangalam Birla's company to drop by up to 6.5%.
In May, aluminum recycling company Novelis announced its goal of reaching a $12.6 billion valuation in the U.S. IPO. Hindalco planned to raise up to $945 million by selling 45 million shares at a price range of $18 to $21 per share.
Sneha Poddar, Vice President at Motilal Oswal Financial Services, said the delay could have a short-term negative impact on Hindalco. However, she added that the company remains a good choice among metal stocks due to strong performances in its domestic and U.S. businesses last quarter.
"Novelis will continue to evaluate the timing of future issuance," the company said in a statement without providing further details. Despite a stock market open to new listings, Novelis' IPO attempt failed to clarify why the company chose not to proceed.
Last month, Novelis reported a rise in its fourth-quarter core profit, driven by strong aluminum demand and higher prices. Analysts expect the company's long-term earnings outlook to further improve.
AJ Bell analysts pointed out that the unpredictability of commodity prices might make Novelis "difficult to sell."
Hindalco's stock recovered after an initial drop, eventually closing down 1.8%. It was the second-biggest decliner on the Nifty 50 index, which rose by 0.7%.
