The A V Birla Group is reviving the mega greenfield aluminum project that was earlier to be executed by Hindalco Industries. The plan had been shelved as the group was of the view that it will not add shareholder value. The new project will now be implemented through a new company.
The Rs 100 bn project that was to be earlier executed under Hindalco, has been scaled down to Rs 40 bn. The reduction in cost has been achieved by doing away with plans to set up or purchase a bauxite mine, refinery and captive power plant. The company plans to source alumina from National Aluminium and power from the Central Electric Supply Company (CESC).
Although, the plan is to be executed by a new company, the equity will have to be sourced from group companies. Infact, it is likely that the initial equity contribution will come from Hindalco only as it is shares the same business interests. The other companies may not invest in the venture, as it will lead to diversification of business interests. But due to the smaller size of the project and the fact that it is being promoted under a new company it is likely that the cash flow pressures will be substantially reduced for Hindalco.
The newspapers report that there are only indications that the project is being revived. The exact implications will be known only when the final details are revealed.
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