Hindalco ups the ante: More metal, stronger margins
- The metals giant is going all in on scale and efficiency, with a $10 billion capex plan split between India and subsidiary Novelis Inc. over FY24-29.
Hindalco Industries Ltd’s investor day made one thing clear—the metals giant is going all in on scale and efficiency. With a $10 billion capex plan split between India and subsidiary Novelis Inc. over FY24-29, Hindalco is working towards sustained growth, with a sharp focus on margins and cash flows.
Novelis will chase the long-term $600 per tonne adjusted Ebitda mark versus $406 and $525 in Q3 and Q2 of FY25, respectively. The roadmap involves scale benefits from the Bay Minette project, pricing gains from beverage can contracts, a richer product mix leaning on auto sheets, and operational efficiencies.
To bring in cost efficiency, the underwhelming Richmond plant will be phased out, selling, general and administrative (SG&A) savings will contribute, and recycling content will rise to 75% by 2030 from 63% now. The company is banking on technology to offset rising scrap costs.
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Back home, Hindalco is doubling down on its core strengths—expanding capacity across smelting, refining, and rolling. The aluminium business’ capacity will grow across smelting (180ktpa), fibreglass reinforced plastic (170ktpa), and alumina refining (850ktpa).
Captive coal security is another lever, with the Meenakshi and Chakla mines expected to improve cost efficiency. The copper segment isn’t sitting idle either, with a 300ktpa smelter expansion on the cards.
The company targets incremental Ebitda per tonne gains of $200 in primary aluminium, $100 in copper, $120 in downstream aluminium (extrusions/ fibreglass reinforced plastic), and $50 in speciality alumina from FY24 numbers. It helps that domestic aluminium demand is expected to grow at a 7-8% CAGR over the next decade.
Debt in control
Despite the huge capex plans, Hindalco’s debt is expected to stay in check.
“While capex is expected to increase, we believe earnings would be robust enough to maintain consolidated net debt/Ebitda at <2x," said ICICI Securities.
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Hindalco’s net debt-to-Ebitda was comfortable at 1.3x as at December-end, with long-term guidance of 2x for the consolidated entity and 2.5x for Novelis.
The stock has gained about 10% so far in 2025. Valuations at 6.2x EV/Ebitda based on FY26 Bloomberg consensus estimates appear reasonable.
Investors will closely track if the margin expansion story at Novelis and India’s downstream push plays out as expected. Here, execution would determine the success of its strategy.
“Major earnings growth shall resume FY28 onwards; until then profitability mainly depends on prices," Nuvama Institutional Equities said in a report. “Near-term earnings shall be robust at both Novelis and India, supported by higher volume and elevated prices."
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