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INTRODUCTION:
When a firm aims at substantial growth, it adopts growth strategy. The growth
strategy is also called as expansion strategy. To achieve higher targets and objectives than
before, a firm may enter into new markets, introduce new product lines, serve additional
market segments, substantial increase in market share and/or increase in sales targets. This
strategy involves greater effort and risk as compared to stability strategy.

DEFINITION OF GROWTH STRATEGY:
According to William Glueck a growth strategy is one that an enterprise pursues
when it increases its level of objectives upward in significant manner, much higher than its
past achievement level. The most frequent increase indicating a growth strategy is to raise
the market share and or sales objectives upward significantly.

MEANING OF EXPANSION STRATEGY:
A strategy used at the adapter level to identify whether objects should be loaded or
not in the representation model. The expansion strategy defines how an object is going to
behave when it is expanded. It also indicates whether load on demand is implemented. We
further define an expand strategy as one in which we are growing significantly faster than
the market or market segment is growing overall.

MEANING OF GROWTH STRATEGY:
Growth is a way of life. Almost all organizations plan to expand. This strategy is
followed when an organization aims at higher growth by broadening its one or more of its
business in terms of their respective customer groups, customer functions, and alternative
technologies singly or jointly in order to improve its overall performance.
E.g.: A chocolate manufacturer expands its customer groups to include middle aged and
old persons among its existing customers comprising of children and adolescents.
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NEED AND IMPORTANCE OF GROWTH/ EXPANSION
STRATEGY:
1. Survival:
In the long run, growth is necessary for the survival. If a firm does not grow, new
entrants may push it out of the market. Also, firms adopting growth strategy would be
in a better position to withstand pressures during recession. Growing firms may be in a
better position to face the challenges of business environment.
2. Innovation:
Growth strategy enables innovation in the organization. Due to growth strategy, the
organization gets higher performance. As a result, the employees get higher incentives.
Therefore, the managers and employees come up with innovative ideas in respect of;
new products, new methods, new schemes, etc. innovation gives competitive
advantage in the market.
3. Motivation to Employees:
The growth strategy generates higher performance. The higher performance enables
the firm to motivate employees with incentives: monetary incentives and non-
monetary incentives. Due to motivation the employees work with application and
dedication, which it turn improves efficiency of the organization
4. Customer Satisfaction:
Growth strategy may lead to customer satisfaction. The growth strategy enables the
firm to enhance customer satisfaction by providing quality goods at right prices.
Customer satisfaction takes place when product performance matches with customer
expectation.
When product performance is less than customer expectation; customer gets
dissatisfied.
When product performance is more than customer expectation; customers are
delighted.
5. Corporate Image:
Growth strategy helps to improve corporate image of the firm. Due to the growth
strategy, the firms performance improves. Therefore, the image of the firm improves
in the mind of various stakeholders: customers, employees, shareholders, suppliers,
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dealers, etc. The support of various stakeholders is required for the survival and
success of the organization.
For instance, if the performance of the firm improves, the shareholders may get
higher dividends, employees may get higher wages and incentives, customers may get
quality goods at right prices, dealers may get higher incentives, etc.
Mergers generate goodwill in the market. For instance, the merger of ICICI and
Prudential in the insurance sector has enhanced the image of ICICI-Prudential not only
in the Indian markets, but also in the global markets.
Also Takeover strategy gains goodwill in the market. Large takeovers such as Mittal
Steel of Arcelor Steel, and Tata Steel of Corus gave them a wide publicity in the
markets worldwide. At times, takeover increases the confidence in the shareholders of
the company. Customers may also develop a good image of the company, especially
when the takeover is of reputed firm.
6. Competitive Advantage:
Growth image provides competitive advantage to the firm. Due to growth strategy,
the firm makes every possible effort to face competition in the market. The firm comes
up with proactive decision rather than being reactive. The proactive decisions give
competitive advantage in the market.
Takeover strategy also helps to face competition in the markets. For instance, in
1993, Coca Cola took over Parle Breweries brands of Thums Up, Limca, Mazza, etc.,
in order to consolidate in the Indian market, and to overcome the problem of
competition from Parle Breweries.
Also, Matsushita Electric of Japan took over 80% control of privately held anchor
Electricals (from the Mumbai based Shah Family- now controls only 20%) in order to
overcome the problem of competition from Anchor in India. At the time of taking
control, Anchor was having 33% of the Indian domestic electrical market.
7. Economies of Scale:
The growth strategy enables a firm to take proactive decisions. Therefore, there is
increase in demand for the firms products. Increase in demand results in large scale
production and distribution, which in turn brings economies of scale:
Economies of large scale production such as discounts on bulk purchase of materials,
saving in labour costs due to installation of labour savings devices, etc.
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Economies of large scale distribution such as freight concessions on bulk shipment or
distribution, economies relating to sales force, etc.
8. Efficiency:
The growth strategy generates higher efficiency in the organization. Efficiency is
the ratio of returns to costs. Firms adopting growth strategy may undertake various
activities such as:
Technology up-gradation.
Training and development.
Research & development, etc.
All the above activities result in higher efficiency to the organization, i.e., the firm
gets higher returns at lower cost.
9. Expansion of Business:
The growth strategy facilitates expansion of the business. Due to the growth
strategy, the performance of the organization improves in terms of sales, market share
and profits. Therefore, the firm would expand from local to regional level, from
regional to national level, and from national to international level.
10. Optimum Use of Resources:
Due to growth strategy, the company gets higher demand for the goods/services.
Increase in demand results in large scale production and distribution. Therefore, a firm
can make optimum use of resources such as: physical resources, capital resources, and
manpower.
11. Tax Advantage:
Merger can be used as effective source of tax planning, especially, when one of the
merged entities was having accumulated losses. In such a case, it can result in several
tax savings for the merged entity.
At times, takeover helps a firm to gain substantial tax benefits. For instance, if a
firm takes over a loss making domestic firm, then the firm can claim tax benefits.
Also, a foreign firm acquiring a domestic loss making company, then it can claim tax
benefits in certain countries.
12. Spreading of Risks:
Business growth helps to spread business risks. For instance, a diversified firm can
spread its business risks. If there are losses in one area of business, the losses may be
covered up from profits of other areas or other types of businesses.
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TYPES OF GROWTH STRATEGIES:
The growth strategy can be further classified into:
Internal Growth Strategies: which include diversification strategy and intensification
strategy.
External Growth Strategies: which include mergers, takeovers, strategic alliances and
joint ventures.
I. Internal Growth Strategies:
1 DIVERSIFICATION STRATEGY:
Diversification is one type of internal growth strategy. It involves entry into new
products and in new markets. Diversification can be defined as entry of a firm into new
product or product lines, new services or new markets, involving substantially different
skills, technology and knowledge.
When an established firm introduces a new product which has a little or no affinity
with its present product line and which may be meant for a new class of customers
different from the firms existing customer groups, the process is known as conglomerate
diversification.

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Types of Diversification Strategies:
Diversification can take place in several forms:
i. Vertical Diversification:
It consists of extending the activities of a firm. It can be in two forms:
a) Backward Integration: In backward integration, a company moves one step backwards
from the current line of business. For instance, a firm may tie up with supplier of raw
materials, or take over a firm that supplies raw materials, or may itself decide to
manufacture raw materials and/or components required to manufacture its final
product. For instance, Hero Cycles has set up a subsidiary to manufacture cycle wheels
and tubes.
b) Forward Integration: In this case, the company moves one step ahead of its current line
of business activities. For instance, a cloth manufacturer may enter into readymade
garments business. The company may also diversify into distribution activities by
opening up its own retail shops like that of Bata or Raymonds.
ii. Horizontal Diversification:
When a company enters into a new business which is closely related with the
existing line of business through processes, technology or markets. For instance, a
gents readymade garments manufacturer may enter in the business of ladies
readymade garments.
iii. Concentric Diversification:
It involves diversification into such areas or products, which are indirectly related
to its existing line of business. In concentric diversification, the new business is
linked to the existing business. For example, a car dealer may start a finance company
to finance hire purchase of cars.
iv. Conglomerate Diversification:
It involves entry in a totally new area or business. It is an attempt to diversify
outside the present market or product. In conglomerate diversification, no linkages
exist between the new business and the existing businesses. For instance, a firm may
enter into several types of business such as computer software, banking, insurance,
airlines, etc.

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2 INTENSIFICATION/EXPANSION STRATEGY:
In the case of intensification strategy, the firm pursues growth within the existing
businesses. Intensification strategy involves three alternative strategies:
i Market Penetration Strategy:
In this case, the firm continues with its current products and current markets but it
tries to increase its market share through aggressive marketing in the areas of
advertising, sales, promotion, price cuts, etc.
ii Market Development Strategy:
The firm enters into new markets apart from current markets by offering the existing
range of products. For this purpose, the firm has to undertake market research, right
pricing, effective promotion-mix, and appointment of good dealers network.
iii Product Development Strategy:
The firm may continue with the existing markets but introduces improved products
and substitutes. It may also enter in new markets with the help of improved and new
products.

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II. External Growth Strategies:
1 MERGER STRATEGY:
In merger two firms, agree to move ahead and exist as a single new company. Merger
can be:
Merger of equals: both companies are of equal sizes.
Merger of unequals: large company merges with smaller one.
Voluntary process: consent of both companies. Name of new merged entity is usually a
combination of both parent companies.
Mergers are mostly financed by a stock swap. Both companies surrender their stocks
and stock of the new company is issued as a replacement.
Types of Mergers:
i Horizontal merger:
When two merging companies are of the same industry and produce similar
products. Example: Footwear Company Merging with Footwear Company.
ii Vertical merger:
When two companies are producing the same goods, but are at different stages, it is
a vertical merger. Example: Footwear Company Merging with Leather Tannery.
iii Concentric merger:
When two companies are related to each other in terms of customer functions or
customer groups. Example: Footwear Company merging with another specialty
Footwear Company.
iv Conglomerate merger:
When two companies operate in different industries. Example: Footwear Company
Merging with Pharmaceutical Firms.


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2 TAKEOVER/ACQUISITION STRATEGY:
Acquisition is a deal when one company takes over another company and buyer
becomes sole proprietor. At times takeover occurs when the target company does not
want to be purchased. However with better offering of prices shareholder are attracted
by acquirer. In legal terms, the target company ceases to survive. The buyer swallows
the company and the buyers stock continues to be traded. Unlike mergers which arc
friendly, acquisitions can be friendly and unfriendly.
Advantages of Takeover/Acquisition Strategy:
i It can bring benefits of size and synergy.
ii It may improve operational efficiencies.
iii The firm may enjoy tax benefits, if the taken over firm had accumulated losses.
iv It may facilitate higher growth rate.
v It may generate economies of large-scale production and distribution.
vi It can help to face competition in the market.

3 STRATEGIC ALLIANCES:
A strategic alliance is a form of affiliation that involves a mutual sharing of
resources or partnering to improve efficiency. In strategic alliances, the focus is on
sharing of resources rather than seeking change in control. Equity investment in each
others company is not any focus.
Types of strategic Alliances:
i Pre competitive alliance:
Vertical value chain alliances b/w manufacturers and suppliers. Partnerships which
brings two firms of different industry.
ii Non-competitive alliance:
Intra industry partnerships b/w noncompetitive firms like two firms in same
industry but different geographical locations.
iii Competitive alliance:
Partnerships which brings two rival firms in a cooperative arrangement where
intense interaction is necessary.
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Reasons for strategic alliances:
i Market entry:
A strategic alliance can ease entry into a foreign market. E.g.: strategic alliance
between British Airways and American Airlines.
ii Share risk & expenses:
Firms involved can share risks. E.g.: In early 1990s film manufacturers Kodak and
Fuji joined with camera manufacturers Nikon, Canon. and Minolta to create cameras
and film for an Advanced Photo System.
iii Synergistic Effects of Shared Knowledge and Expertise:
Help a firm gain knowledge and expertise Skills+ brand + market knowledge+
assets= synergizing effect. E.g.: For example, in the early 1990s, Motorola initiated an
alliance among various partners, including Raytheon. Lockheed Martin, China Great
Wall, and Nippon Iridium, to develop and build a global satellite-based
communications network.
iv Gaining Competitive Advantage

4 JOINT VENTURES:
An entity formed between two or more parties to undertake a specified activity
together. Parties agree to create a new entity by both contributing equity, and they then
share revenue, expenses, and control of the enterprise. The venture can be for one
specific project only or a continuing business relationship. E.g.: Sony Ericsson. Unlike
mergers and acquisitions, in joint venture the parent company does not cease to exist.
Types of Joint Ventures
(a) Between 2 Indian org. in one industry
(b) Between 2 Indian org. across different industries.
(c) Between an Indian org. & a foreign org. in India.
(d) Between an Indian org. & a foreign org. in that foreign country.
(e) Between an Indian org. & a foreign org. in third country.

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MC KINSEY GROWTH PYRAMID:
The McKinsey model argues that businesses should develop their growth strategies
based on:
1) Operational skills are the core competences that a business has which can provide the
foundation for a growth strategy. For example, the business may have strong
competencies in customer service, distribution, technology.
2) Privileged assets are those assets held by the business that are hard to replicate by
competitors. For example, in a direct marketing-based business these assets might
include a particularly large customer database, or a well-established brand.
3) Growth skills are the skills that businesses need if they are to successfully manage
a growth strategy. These include the skills of new product development, or negotiating
and integrating acquisitions.
4) Special relationships are those that can open up new options. For example, the
business may have especially string relationships with trade bodies in the industry that
can make the process of growing in export markets easier than for the competition.
Growth can be achieved by looking at business opportunities along several dimensions
which can be summarized in the diagram below:

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The model outlines seven ways of achieving growth, which are summarized below:
i Existing products to existing customers:
The lowest-risk option; try to increase sales to the existing customer base; this is
about increasing the frequency of purchase and maintaining customer loyalty.
ii Existing products to new customers:
Taking the existing product base, the objective is to find entirely new segment of
the customers that might buy.
iii New products and services:
Market development & diversification strategy taking a risk by developing and
marketing new products. Some of these can be sold to existing customers or to
entirely new customers.
iv New delivery approaches:
This option focuses on the use of distribution channels as a possible source of
growth.
v New geographies:
With this method, businesses are encouraged to consider new geographic areas into
which to sell their products. Geographical expansion is one of the most powerful
options for growth but also one of the most difficult.
vi New industry structure:
This option considers the possibility of acquiring troubled competitors or
consolidating the industry through a general acquisition programme.
vii New competitive areas:
This option requires a business to think about opportunities to integrate
horizontally or consider whether the skills of the business could be used in other
industries.
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COMPANY OVERVIEW:
Aditya Birla Group traces its origin back to the tiny village of Pilani in the Rajasthan
desert, where, late Shri Seth Shiv Narayan Birla started cotton-trading operations in 1857.
Then one visionary the late Shri G.D Birla setup Indias first integrated aluminium
manufacturing unit at Renukoot, in1962, backed by captive power plant at Renusagar in
1967.It further evolved under the dynamic leadership of the late Shri AdityaVikram Birla
a prominent figure in the Indian industry, under whose stewardship Hindalco attained its
leadership position in aluminium. Today the Group chairman, Dr. Kumar Manglam Birla
has put together the building blocks to make Indian business a global force.
An industry leader in aluminium and copper, Hindalco Industries Limited, the metals
Flagship Company of the Aditya Birla Group is the world's largest aluminium rolling
company and one of the biggest producers of primary aluminium in Asia. Its copper
smelter is the worlds largest custom smelter at a single location.
Established in 1958, they commissioned the aluminium facility at Renukoot in
eastern Uttar Pradesh, India in 1962. Later acquisitions and mergers, with Indal, Birla
Copper and the Nifty and Mt. Gordon copper mines in Australia, strengthened their
position in value-added alumina, aluminium and copper products.
The acquisition of Novelis Inc. in 2007 positioned them among the top five
aluminium majors worldwide and the largest vertically integrated aluminium company in
India. Today they are a metals powerhouse with high-end rolling capabilities and a global
footprint in 13 countries with a consolidated turnover of USD 14.8 billion (Rs. 80,193
crore).
Hindalco is one of the leading producers of aluminium and copper. Their aluminium
units across the globe encompass the entire gamut of operations, from bauxite mining,
alumina refining and aluminium smelting to downstream rolling, extrusions, foils, along
with captive power plants and coal mines.
Their copper unit, Birla Copper, produces copper cathodes, continuous cast copper
rods and other by-products, such as gold, silver and DAP fertilizers.
Their units are ISO 9001:2000, ISO 14001:2004 and OHSAS 18001 certified. Several
units have gone a step further with an integrated management system (IMS), combining
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ISO 9001, ISO 14001 and OHSAS 18001 into one business excellence model. They have
been accorded the Star Trading House status in India. Hindalco's aluminium metal is
accepted for delivery under the High Grade Aluminium Contract on the London Metal
Exchange (LME). Their copper quality standards are also internationally recognized and
registered on the LME with Grade A accreditation.

VISION:
To be a premium metals major, global in size and reach, excelling in everything we
do, and creating value for its stakeholders.

MISSION:
To relentlessly pursue the creation of superior shareholder value, by exceeding
customer expectation profitably, unleashing employee potential, while being a responsible
corporate citizen, adhering to our values.

VALUES:
i Honesty in every action.
ii On the foundation of integrity, doing whatever it takes to deliver, as promised.
iii Missionary zeal arising out of an emotional engagement with work.
iv Thinking and working together across functional silos, hierarchy levels, businesses
and geographies.
v Responding to stakeholders with a sense of urgency.




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BUSINESS SEGMENTS:

I. Aluminium:
Hindalco's major products include standard and speciality grade aluminas and
hydrates, aluminium ingots, billets, wire rods, flat rolled products, extrusions and foil.
The integrated facility at Renukoot houses an alumina refinery and an aluminium
smelter, along with facilities for the production of semi-fabricated products; namely,
redraw rods, flat rolled products and extrusions. The plant is backed by a co-generation
power unit and a 742 MW captive power plant at Renusagar to ensure the continuous
supply of power for smelter and other operations.
A strong presence across the value chain and synergies between operations has given
us a dominant share in the value-added products market. As a step towards expanding the
market for value-added products and services, we have launched various brands in recent
years ever last roofing sheets, Freshwrapp kitchen foil and Freshpakk semi-rigid
containers.


Aluminium
Mines Copper
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II. Copper:
Birla Copper, Hindalcos copper unit, is located at Dahej in Gujarat, India. The unit
has the unique distinction of being the largest single-location copper smelter in the world.
The smelter uses state-of-the-art technology and has a capacity of 500,000 tpa.
Birla Copper also produces precious metals, fertilizers and sulphuric and phosphoric
acid. The unit has captive power plants for continuous power generation and a captive
jetty to facilitate logistics and transportation.
Birla Copper upholds its longstanding reputation for quality copper cathodes and
continuous cast copper rods by assuring its management processes meet the highest
standards. It has acquired certifications such as ISO-9001:2000 (Quality Management
Systems), ISO-14001:2004 (Environmental Management System) and OHSAS-
18001:2007 (Occupational Health and Safety Management Systems).
III. Mines:
Hindalco acquired two Australian copper mines, Nifty and Mt. Gordon, in 2003.
The Birla Nifty copper mine consists of an underground mine, heap leach pads and a
solvent extraction and electrowinning (SXEW) processing plant, which produces
copper cathode. Hindalco's two Australian copper mines, Nifty and Mt. Gordon, were
acquired in 2003
The Mt. Gordon copper operation consists of an underground mine and a copper
concentrate plant. Until recently, the operation produced copper cathode through the
ferric leach process.
In 2004, a copper concentrator was commissioned to provide concentrate for use
at Hindalco's operations in Dahej.
Both Nifty and Mt. Gordon have a long-term life of mine off-take agreement
with Hindalco for supply of copper concentrate to the copper smelter at Dahej.

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MANAGEMENT TEAM:
Hindalcos management team consists of experienced individuals with strong
credentials.
Board of Directors:
i Mr. Kumar Mangalam Birla, Chairman.
ii Mrs. Rajashree Birla.
iii Mr. C. M. Maniar.
iv Mr. M. M. Bhagat.
v Mr. K. N. Bhandari.
vi Mr. A. K. Agarwala.
vii Mr. N. J. Jhaveri.
viii Mr. Ram Charan.
ix Mr. Jagdish Khattar.
x Mr. D. Bhattacharya, Managing Director.
xi Mr. Satish Pai, Deputy Managing Director.
Chief Financial Officer:
Mr. Praveen Maheshwari.
Head Corporate Projects & Procurement Cell:
Mr. B.B Jha.
Company Secretary:
Mr. Anil Malik.
Chief People Officer:
Mr. Vineet Kaul.
Business / Unit Head:
Mr. Dilip Gaur, Group Executive President, Copper
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Mr. Sachin Satpute, Chief Marketing Officer, Aluminium.
Mr. Satish M Bhatia, Advisor, Foil and Packaging.
Mr. Sanjay Sehgal, President, Chemicals.
Mr. D. K. Kohly, Chief Officer Operations, Renukoot Unit & Renusagar Units.
Utkal Alumina International Ltd:
Mr. Rajesh Jha, CEO.
Novelis Inc.:
Mr. Philip Martens, President and Chief Executive Officer.
Aditya Birla Minerals Limited:
i Mr. D. Bhattacharya, Chairman.
ii Mr. Sunil Kulwal, CEO and MD.
iii Mr. Peter Torre, Company Secretary.
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AWARDS AND ACHIEVEMENTS 2011-2006:
Hindalco has won several awards for community welfare, environment protection,
and also for quality and export performance.
2011:
i Hindalco bagged the prestigious CII EXIM Bank Business Excellence Award 2011
for its "strong commitment to excel on the journey towards business excellence".
ii Birla Copper, a division of Hindalco, won the IMC Ramkrishna Bajaj Quality Award
Commendation Certificate.
iii Hindalco Renusagar won the Greentech Safety Gold Award 2011 in power sector for
outstanding achievement in safety management, by Greentech Foundation, New
Delhi.
2010:
Renukoot:
i "NIPM Gold Award for Best HR Practices" for the year 2010 by National Institute of
Personal Management (NIPM).
ii Greentech Gold Safety Award 2010 for Occupational Health and Safety Management
in the Mining & Metals sector by Greentech Foundation, New Delhi.
iii Greentech Environment Excellence Gold Award 2010 in the metals sector for its
efforts towards environment management, by Greentech Foundation, New Delhi.
iv The Golden Peacock Award for Corporate Social Responsibility for the year 2010.
v National Energy Conservation Award (Second Prize) 2010, in the metals sector,
presented by the Ministry of Energy, Government of India.
vi Silver Certificate of "Indian Manufacturing Excellence Award 2010" by Economic
Times and Frost & Sullivan.
Quality Circle Awards:
i Gold Awards to four Hindalco Renukoot Quality Circle Teams Kushal, Vaibhav,
Pragati and Nirantar at the International Quality Circle Competition (IQCC 2010)
held at Hyderabad.
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ii Silver and Bronze Awards to Hindalco Hirakud Power Quality Circle Teams
Aryan and Power respectively at the International Convention on Quality Concept
Circle (ICQCC 2010) held at Hyderabad.
iii Quality Circle teams from Renukoot, Hirakud and Birla Copper Dahej Units excelled
at the National QC Convention (NCQC 2010), winning Par Excellence, Excellence,
Distinguished and Runners-Up Awards.
2009:
Hindalco Renusagar's power division bagged the Golden Peacock Environment
Management Award during the Global Convention on Climate Security. The convention
was held at Palampur, Himachal Pradesh from 12 to 14 June 2009. Dr. Madhav Mehra,
President World Council for Corporate Governance honored Renusagar's power division
with the award in the services category.
2008:
i Greentech Safety Gold Award 2008 for outstanding achievement in safety
management in coal based power sector.
ii Hindalco Hirakud Systems ranked runners-up at the state level IT Competition 2008
organised by CII in association with the department of information technology,
Government of Orissa.
iii Hirakud smelter was awarded the state level safety award for Best Occupational
Healthcare 2006 presented in February 2008 at Bhubaneswar.
2007:
i The Golden Peacock Award 2007 by the World Environment Foundation for its
remarkable achievements in occupational health & safety.
ii The Safety Innovation Award 2007 for excellence in the field of occupational
health, presented by The Institute of Engineers India.
iii The National Energy Conservation Award 2007, second prize, awarded by the
Ministry of Power and Energy, Government of India.
iv Hindalco won the prestigious D.L. Shah National Award for Economics of
Quality given by quality council of India. Chief manufacturing officer, Mr. R. P.
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Shah and Mr. Arun Kumar received the award from the President of India, H.E.
Dr. A.P.J. Abdul Kalam on 9 February 2007 at New Delhi.
2006:
i The prestigious National Energy Conservation Award-2006 was awarded to
Hindalco by Ministry of Power, Government of India.
ii The IT department of Hindalco received prestigious IT certificates BS15000 (IT
services), ISO 9001 (Software development) and BS7799 (Information security).
Hindalco Renukoot IT department is the first in our group as well as in India to be
recommended for all these certifications in an integrated manner.
iii Hindalco received the Integrated Management System Certificate from D.N.V.
certification agency. This certificate was for ISO-9001, ISO-14001, OHSAS-18001
in an integrated manner.
iv Hindalco, Renukoot has won the National Award for Excellence in Water
Management 2006 organised by CII.



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HINDALCO-NOVELIS ACQUISITION:
When asked whether Hindalco is paying a higher price,
K.M.Birla, Chairman, Hindalco Industries said,When you are acquiring a world leader
you will have to pay a premium. We look upon the aluminium business as a core
business that has enormous growth potential in revenues and earnings,' 'Our vision is to be
a premium metals major, global in size and reach .... The acquisition of Novelis is a step in
this direction
THE THREE STATGES:
I PRE-ACQUISITION:
Hindalco was the first company to surpass 0.5mT of production in a fiscal year. On
February 11, 2007, the company entered into an agreement to acquire the Canadian
company Novelis for US$6 billion, making the combined entity the worlds largest
rolled-aluminium producer.
Novelis Inc. is a global aluminum company headquartered in Atlanta, Georgia;
Novelis is a leading producer of rolled aluminum and the global leader in beverage
can recycling. The company serves customers in sectors including beverage cans,
automotive, consumer electronics, construction, foil and packaging.
The Novelis company was spun-off from Canadian mining and aluminum
manufacturer, Alcan Inc. and incorporated in 2005. The company was acquired by
India's Hindalco Industries for $6 billion in 2007. The acquisition made Hindalco one
of the world's top integrated aluminum players. This makes Novelis a member of the
Aditya Birla Group.
Novelis is the worlds largest producer of rolled aluminum sheet, with operations
spanning 11 countries and nearly 11,000 employees. The company divides its
operations into four regions: North America, Europe, Asia, and South America. The
regional headquarters are Atlanta, Zurich, Seoul, and Sao Paulo. Novelis also has
operations in UK, Germany, Italy, and Canada. Demand for aluminum is increasing
with the continued development of emerging nations, urbanization, and the increasing
substitution of aluminum for other materials, making expansion a key consideration.
The company is investing $100 million in its first manufacturing facility in China set
to open in 2014. In response to global demand for aluminum sheet for automotive,
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electronics and beverage cans, the company has announced capital investments
including a $400 million expansion in Asia, a $300 million expansion in Brazil
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Is It a Merger or an Acquisition?
i A merger is a combination of two or more corporations in which only one corporation
survives and the merged corporations go out of business.
ii Under AS-14, if all of the following conditions are satisfied, then this would be a
considered a merger-
Equity shareholders holding at least 90% of equity share capital should agree to
become shareholder of the company.
Such shareholders should be paid equity shares only and cash to settle fractions.
All assets and liabilities should be taken over by new company.
Such assets and liabilities should be taken at book value.
New business should carry on some old business of old company.
iii However, since this deal did not involve any payment in equity shares to the
shareholders of Novelis, to be swapped for shares for Hindalco, and instead it was an
all-cash deal structure, this exercise cannot be said to be a merger.
iv This exercise was an acquisition of Novelis by Hindalco, where a company
(Hindalco) buys most, if not all, of the target companys (Novelis) ownership stakes
in order to assume control of the target firm. Like in most acquisition deals, it was
paid for in cash.




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II ACQUISITION:
Deal Structure:
i It was an all cash-deal (hence, no exchange ratio).
ii Hindalcos AV metals have acquired all of the Novelis outstanding 75,415,536
common shares at price of US$44.93 per share.
iii Thus, Novelis equity was acquired for a sum of $3.6 billion against a book value
of $195 million (=$0.195 billion).
iv Out of $3.6 billion, $2.85 billion was raised by borrowing, $300 million as debt
from group of companies and $450 million cash reserves.
v The other leg of the transaction entailed paying a debt of $2.4 billion which
existed in the balance sheet of Novelis. For this Hindalcos Dutch subsidiary, AV
Minerals, raised bridge loan of $2.13 billion and $900 million.



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III POST-ACQUISITION:
Post-Acquisition Strategic Benefits to Hindalco & Novelis:
i This acquisition of Novelis by Hindalco established the latter as a global integrated
aluminium producer with low-cost alumina and aluminium production facilities
combined with high-end aluminium rolled product capabilities. Hindalco emerged
as the leading rolled aluminium products maker and the fifth -largest integrated
aluminium manufacturer in the world. Acquiring Novelis also provided Hindalco
ready access to its existing customers such as General Motors Corp, Aston Martin,
Coca-Cola Co., etc.
ii Novelis gave Hindalco an entry into the down-stream value addition business of
rolled aluminium products. Earlier, Hindalco was limited to the upstream business
of mining bauxite and converting it into alumina, and then smelting it into
aluminium. Also, Novelis had built a unique fusion technology that helped in
increasing the formability of aluminium and products like sheet metal. The low
weight to-strength ratio had many applications in the auto industry, which was
now advantageous to Hindalco.
iii About 35 mT of aluminium was consumed in 2006. About 40% of this was rolled
aluminium products, where Hindalco had no presence. However, Novelis had a
19% world share, which was now acquired by Hindalco. It would have costed
Hindalco US$12 billion to build assets that match Noveliss 29 plants in 4
continents with current production of 3.3 mT in 10 years, if Hindalco had taken the
organic growth route.
iv Thus Novelis acquisition helped Hindalco gain quick access to new technologies
and large production capacities without having made the efforts towards time-
consuming R&D.
v Novelis formed a natural hedge for Hindalco. The latter was charging a higher
profit margin when aluminium prices were high on the LME and vice-versa. Thus,
Hindalcos rise and fall in profits depended directly on the aluminium prices on the
LME. This was not the case with the aluminium rolling business of Novelis, which
usually has a constant margin. After its loss-making can contracts expired in 2010,
the Novelis business model and profitability became LME independent and a
steady cash flow was earned.
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vi Novelis was the global leader in aluminum rolled products and especially,
aluminum can recycling, with a global market share of about 19 %. The deal gave
Hindalco a strong presence in the business of aluminium recycling as it is infinitely
recyclable and requires only 5% of the energy needed to produce primary
aluminium.
Post-Acquisition Strategic Challenges to Hindalco & Novelis:
i Novelis profitability was significantly affected by the inability to pass through
metal price increases due to metal price ceilings in certain of the companys sales
contracts till 2009. But by January 2010, all the sales contracts got expired and
profitability will increase substantially from then onwards, due to new contracts.
ii The debt component of Novelis stood at US $2.4 billion and additional US $2.8
billion was taken by Hindalco to finance the deal. This will put tremendous
pressure on profitability due to high interest burden, in light of Hindalcos
expansion plans consisting 9 of various Brownfield & Greenfield projects costing
Rs. 25,000 crore.

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PRESENT AND FUTURE GROWTH PLANS OF NOVELIS:
FY13 Highlights:
Two years ago, Novelis laid out an ambitious vision aimed at strengthening the long-
term competitiveness of their business through sustainability and innovation. They are still
in the early stages of their sustainability journey, with many hurdles yet to overcome, but
their efforts are already beginning to bear fruit. In FY13, They:
i Achieved 43% recycled inputs, up from 33% two years earlier and on track to meet
their goal of 80% by 2020.
ii Improved their energy efficiency by nearly 20% and reduced their absolute GHG
emissions by 14%, water intensity by 16%, and waste by 11% since their baseline.
iii Launched a highly successful inaugural global month of service for employee
volunteering.
iv Held the most global World Cup employee soccer and volleyball tournament to
date.
v Continued to engage employees in sustainability through talent development
programs and increased performance reviews.
vi Began operations at a new can recycling facility in Yeongju, South Korea, the
largest fully integrated beverage can recycling system in Asia.
vii Broke ground on a plant in Nachterstedt, Germany, that will be the largest
aluminum recycling facility in the world.
viii Introduced the evercan, the first-of-its-kind, independently certified, high-recycled
content aluminum beverage can sheet.


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CONCLUSION:
A key growth driver for Hindalco is the commissioning of a new project this fiscal
after a long delay. Additionally, Novelis, its international subsidiary, with its high-value
added products and increased focus on recycling will drive earnings in the event of falling
aluminium demand.
The Mahan project is scheduled to be commissioned this fiscal and will achieve
capacity utilization levels of 45-50% by FY14. The plant will be operated with better
technology, which will reduce power consumption from 14,000 units per tonne now to
around 9,000 units per tonne.
REFERENCES:
i www.hindalco.com
ii www.novelis.com
iii www.indiatimes.com
iv www.studymode.com
v www.business-standard.com
vi www.livemint.com
vii www.wikipedia.com