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Informist, Monday, Nov. 11, 2024

 

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--Hindalco: To spend $4 bln-$5 bln over 3 yrs, mostly on upstream operations 
--Hindalco: Upstream capex to start from FY26 
--Hindalco: Funds for capex to be raised via loans, internal accruals 
--Hindalco: Plan capex for brownfield projects in Aditya Aluminium, Dahej 
--Hindalco: Capex for upstream ops also for greenfield project in Dahej 
--Hindalco: Novelis IPO on hold till market conditions improve 
--Hindalco: Targeting premium valuations for Novelis IPO 
--Hindalco: See next few quarters tough for Novelis as scrap spreads tight 
--Hindalco: Plan to spend INR 60 bln on downstream ops in FY25 
--Hindalco: To spend INR 20 bln to build copper foil plant 
--Hindalco: Cost of producing aluminium down 1% in Jul-Sept from Apr-Jun 
--Hindalco: Demand for aluminium strong in India, 66% sales from domestic mkt 
--Hindalco: Expect aluminium prices to inch up by 1.0-1.5% QoQ in Oct-Dec 
--Hindalco: Expect Trump administration to be good for Novelis US ops 

 

By Darshan Nakhwa and Aman Aryan 

 

MUMBAI – Hindalco Industries Ltd. plans to spend $4 billion-$5 billion on brownfield and greenfield projects in India over the next three years, the company's management said on Monday. The 90% of these funds will be utilised to grow the company's upstream operations.

 

"Hindalco is now going to go on a growth path on the upstream side...Besides the alumina refinery that we declared, we are now going to do a smelter expansion in Aditya (Odisha). Besides the copper recycling project, we are going to do a 300 KT (kilo tonne) copper smelter in (Dahej) Gujarat," the Aditya Birla Group company's Managing Director Satish Pai said while discussing the company's Jul-Sept performance in a media conference. 

 

According to Pai, the copper and aluminium smelters will be brownfield projects, and the alumina refinery and the copper recycling plant will be greenfield projects. Hindalco will start upstream operations related spending from 2025-26 (Apr-Mar), starting with an alumina refinery, followed by investments in a copper recycling plant in the subsequent year, and then in brownfield projects. The Aditya Birla Group will raise funds for capital expenditure through a mix of loans and internal accruals. It plans to INR 70 billion-INR 80 billion over the next few years.  

 

Hindalco also plans to spend INR 20 billion to build a copper foil plant in Odisha. The work on this project is expected to start in FY26, Pai said. The company will also spend INR 60 billion in FY25 to complete its downstream projects--flat rolled products project in Odisha, the copper inner groove tube project, and the aluminium foil project.

 

Responding to a question about the initial public offering of its US-based subsidiary Novelis, Pai said the company was going to wait for market conditions to improve as it wants to get a premium valuation. "Next few quarters are going to be tough for Novelis as scrap spreads have tightened. So for the IPO we will wait till we are happy with market conditions and Novelis performance is also at a level that we can get premium valuations that we want," Pai said. 

 

"Since China has taken off restrictions on the type of scrap that can go into the country, they are sucking up a lot of scrap from the rest of the world. So the scrap spreads are tight and Novelis uses 63% scrap in their mix. So their profitability is going to get impacted when those scrap spreads tighten," said Pai.

 

Novelis reported a fall of 18% on year in net income to $128 million in the September quarter. However, the net income, after excluding special items, was $179 million, down 1% on year. The net sales of the company increased 5% on year to $4.3 billion, and the volume of shipments of flat rolled products went up slightly by 1% on year to 945,000 tonnes. The company contributes more than half of Hindalco's consolidated net profit and over 60% of the consolidated revenue.

 

On the impact of the US Presidential election results on Novelis' business, Pai said the new US administration will be good for Novelis as the company produces metal in the US for the US market. Novelis manufactures and sells rolled aluminium products to the beverage, packaging, automotive, aerospace, and other industries, across North America, South America, Europe, and Asia.

 

In Oct-Dec, Hindalco expects aluminium prices to inch up by 1.0-1.5% on quarter. In Jul-Sept, the cost of producing aluminium was down 1% on a sequential basis. On the demand front, Pai said domestic demand remains strong with 66% of sales coming from India and the rest from exports. 

 

Hindalco clocked a consolidated net profit of INR 39.09 billion for the September quarter, representing a growth of 78% on year, and a top line of INR 582.03 billion, up 7.5% on year. On Monday, shares of the company closed 0.8% higher at INR 655.35 on the National Stock Exchange.  End

 

Edited by Akul Nishant Akhoury

 

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