HINDALCO INDUSTRIES LIMITED Vs. STATE

JUDGEMENT

(1.) This is a composite Petition by the Company to obtain sanction to the scheme of arrangement involving financial restructuring of Hindalco Industries Ltd. (hereinafter referred to as HIL or the Company) and its Equity Shareholders under Section 391, read with Section 100 of the Companies Act, 1956 (hereinafter referred to as the Act).

(2.) The Company is the flagship Company of the Aditya Birla Group and a leading manufacturer of aluminium and copper. It is stated that over the years, the Company has grown into the largest vertically integrated non-ferrous metal company in the country and among the largest primary producers of aluminium and copper in Asia. It is further stated that in 2007, the acquisition of Novelis Inc., a world leader in aluminium rolling and can recycling, marked a significant milestone in the history of aluminium industry in India. It is the case of the Company that an important element of HIL's growth strategy has been to seek out opportunities for acquisitions and strategic partnerships in India as well as overseas with a view to diversify its product portfolio, consolidation of customer base and to extend the presence of the Company in overseas markets. It is stated that such an endeavour by the Company would not only provide the Company with an opportunity to widen its international footprint but also enable the newly acquired companies to increase their margins through reduction of labour and other costs. It is further stated that the Company has been successful in enhancing its presence in the international markets. However, this has resulted in HIL incurring various costs relating to organic as well as inorganic growth projects. It is also stated that in its endeavour to grow further, HIL would continue to incur these costs in the future. It is the case of the Company that the present global economic scenario especially in the commodity space has had an adverse impact on HIL's domestic and overseas operations, which may result in impairment/diminution in value of assets/investments of HIL and its subsidiaries. It is the case of the Company that these expenses/costs are inevitable for the growth of the Company and its shareholders. The Company now proposes to undertake the Financial Restructuring Exercise on terms and conditions spelt out in the proposed scheme, which is presented to this Court for approval with a view to provide greater level of transparency and openness and to secure full involvement of all the shareholders/stakeholders.

(3.) The composite scheme of arrangement is for undertaking financial restructuring exercise whereby HIL would create a "Reconstruction Reserve Account" from its Securities Premium Account balance to adjust expenses as defined in Clause 1.4 of the Scheme. It also provides that as and when the Board of HIL determines that a part or whole of the balance remaining in the Reconstruction Reserve Account is no longer required, the same can be transferred to the Securities Premium Account of the Company as per the terms and conditions of the Scheme.