Hindalco wants to expand its downstream segment by bringing Novelis to India

Hindalco Industries, an Aditya Birla Group company, recorded a historic profit of INR 13,370 crore in FY2022. The company has decided to expand its downstream segment with the aim of bringing Novelis (the world's largest aluminium firm) in India by reinvesting the profits for the same. This year, the corporation has set aside a capital budget of 3,000 crore, which will be spent mostly on the continuing downstream growth.

Given the downstream expansion, Hindalco aims to provide all high-end value-added goods to customers across the globe. Compared to the upstream capacity of Hindalco Industries, which may remain unchanged at 1.3 million tonnes, the downstream output of the company may increase from 400,000 tonnes to 700,000 tonnes in the next five years, says Satish Pai, the Managing Director of Hindalco Industries.

Hindalco has opted not to grow upstream capacity because it wants to be known as a green firm, and the focus currently is on lowering rather than adding to carbon emissions. Alumina capacity will be increased if Hindalco can secure another bauxite mine, according to Pai. Novelis, a Hindalco subsidiary, recently announced a $3 billion capital expenditure plan in several nations where it operates.Despite the tight supply scenario, demand for aluminium and copper remains high. Although LME prices have fallen due to China's economic downturn, he believes they would rebound once the global economy shows signs of recovery.

Satish Pai stated that the shortage of coal remains a big worry and that inventory levels have been cut in half to ten days. He anticipates consumer electricity demand to fall as the monsoon season approaches, resulting in greater coal supplies for industrial usage. Ebitda margins are at a relatively comfortable level, allowing the corporation to weather any cost increases.

“The operational cost in Q4 has gone up by 9.5 per cent as compared with Q3, but it is very difficult to predict cost increase in Q1 and Q2 of this fiscal due to coal availability concern and volatile prices, he said. The company cannot substitute domestic coal supply with imports as the international prices are very high,” added Satish Pai.  

When asked if the firm expected an export levy on aluminium similar to the one imposed on steel, he said that the company has been obliged to export aluminium since imported recycled scrap meets 40 per cent of local demand. He believes the government should impose import duties on scrap rather than metal exports if at all possible.