Hindalco to invest $4-5 billion over 3 yrs in upstream operations

Hindalco Industries plans to spend $4-5 billion on brownfield and greenfield projects in India over the next three years, the company's management said. Ninety per cent 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 kilo tonne copper smelter in Dahej, Gujarat," Satish Pai, Managing Director, Aditya Birla Group said while discussing the company's Jul-Sep 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 in 2025-26, 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 raise up to Rs 8,000 crore over the next few years.

Hindalco also plans to spend Rs 2,000 crore 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 Rs 6,000 crore in FY25 to complete its downstream projects – flat rolled products project in Odisha, the copper inner groove tube project, and the aluminium foil project.

Novelis IPO Plans

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 per cent scrap in their mix. So their profitability is going to get impacted when those scrap spreads tighten,” said Pai.

Impact of Trump as US President

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.

Aditya Birla Group Chairman Kumar Mangalam Birla has earlier said his group is looking forward to investing even more in the United States under the presidency of Donald Trump. “Donald Trump is pro-industry. We are already the largest Indian investors in US with $15 billion invested,” said Birla when asked about his opinion of the new Republican administration. “We look forward to investing even more,” Birla said, adding, “Going by his past record, Trump is very positively inclined towards India and has a great bond with the Prime Minister.” Kumar Mangalam Birla also said the recycling and rolling plant in Alabama, which was announced in May this year, will commence operations in 2025-26. “It is on time. It will be a high-technology, high-precision rolling mill and a first-of-its-kind facility,” he said, adding “We can only look to better times ahead.”

Aluminium industry outlook

In October-December, Hindalco expects aluminium prices to inch up by 1-1.5 per cent on quarter. In July-September, the cost of producing aluminium was down 1 per cent on a sequential basis. On the demand front, Pai said domestic demand remains strong with 66 per cent of sales coming from India and the rest from exports.

Hindalco clocked a consolidated net profit of Rs 3,909 crore for the September quarter, representing a growth of 78 per cent on year, and a top line of Rs 58,203 crore, up 7.5 per cent on year.