Hindalco: Capex to remain in Rs 6,000-7,000 crore range in coming years: Satish Pai, Hindalco

“I think that in Q1, we should probably do better than that because our cost of production is going to be a couple of percentage points lower than Q4,” says Satish Pai, MD, Hindalco.

Let us first talk about the India operations. Your aluminium upstream shipments were flat on a sequential basis, but downstream and the copper segment have reported strong volume growth and EBITDA per tonne expansion as well. What is the demand on ground and what kind of volume growth do you anticipate for your India operations for the full year?
I think that for both aluminium and copper the market demand in Q4 was exceptionally strong, that is why you will see that copper had a record EBITDA and a record sale of 135 KT and the aluminium downstream also picked back up sharply to 105 KT from the 90 level. So, I think that going forward in Q1 we are already seeing the market demand to be very strong and the downstream aluminium should go to more than 450 KT this year and the copper side as well we will have another repeat of over 500 KT of sales.

But all sectors, especially driven by the strength in the Indian economy, the demand for both aluminium and copper in India is very strong.

Coal prices, we have seen e-auction premiums which have fallen significantly in the last few months. Given then the impact of coal prices gets reflected with the lag, how much could India operations margin expand in this first half of FY25?
As you said, if we look at Q4, we did a record 32% EBITDA margin on our aluminium business.

And I think that in Q1, we should probably do better than that because our cost of production is going to be a couple of percentage points lower than Q4.

But that being said, I have to caution that it is very hot. Power demand is going up. We are going into the monsoon period. So, we will have to wait and watch and see how the coal prices respond. Right now, there is sufficient availability of coal and as you said, the prices are also under control.

Now, that you are sitting on net cash, what is the plan to capitalise this balance sheet position and what are the domestic capex plans, backward integration plans, any inorganic acquisitions?
We have quite strong organic capex plans, both in aluminium and copper going forward. I think this year our capex guidance is about Rs 6,000 crores. And I would like to say for the next couple of years, it is going to be in that Rs 6,000-7,000 crore range.

We are doing an alumina refinery, a copper recycling plant, copper foil, aluminium foil. We are going to open two mines. So, we are going to have a very strong capex programme over the next few years and that is going to be possible because of the strength of our balance sheet and hence we will not need to borrow, but we will do it with internal accruals.

Apart from coal, how have the pricing trends been and is cost of production likely to come down further you think?
I think apart from coal, if I can say if you take CP coke, pitch, all of these on a year-on-year basis are nearly 28% down. So, certainly the input costs, coal and non-coal input costs have all come down sharply on a year-on-year basis which is why there is a margin expansion in our business, both in aluminium and copper.

Margin expansion, do you expect it to continue going forward as well?
Yes, we do expect it to continue this year.

What is the outlook on Novelis’ operations and the upcoming IPO? What kind of volume growth are you pencilling in?
As you said, unfortunately, due to the federal securities regulations and the quiet period, I cannot comment on Novelis on this call.