Hindalco Industries Ltd is on a mission to lower debt, using funds from equity-raising and internal accruals to repay borrowings. That’s a sensible strategy as its expansion is done and it can lighten its balance sheet till the next expansion comes calling. Lower interest cost allows more of its operating profit to flow to its earnings.
The company has prepaid Rs5,536 crore of debt so far, of which Rs4,505 crore was in April, which should result in further interest cost savings in the June quarter. This is important as interest alone ate away two-fifths of its operating profit in the March quarter. At the group level, debt refinancing by its subsidiary Novelis Inc. is expected to lower interest by $79million annually. Read more
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