Hindalco Industries (NSE:HINDALCO) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Earnings Conference Call of Hindalco Industries First Quarter Results for FY 'twenty seven. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Subir Sen, Head of Investor Relations at Hindalco. Thank you, and I'll introduce you, Mr. Sen. Thank you, and a very good morning and evening, everyone. On behalf of Hindalco Industries, I welcome you all to the earnings call for the first quarter of financial year twenty twenty seven.

0:49 In this call, we'll refer to the first quarter financial year 'twenty seven investor presentation posted on our company's website. Some of the information on this call may be forward looking in nature and is covered by the safe harbor language on Slide two of the said presentation. In this presentation, we have covered the key highlights of our consolidated performance for the first quarter of financial year 'twenty seven versus the corresponding period of the prior year. A segment wise comparative financial analysis of Novelis and Indian aluminum and copper business is also provided. The corresponding segment information of prior periods have also been reinstated accordingly for a comparative analysis. Today, we have with us on the call from Hindalco's management, Mr. Satish Pai, Managing Director and Mr. Bharat Goyinka, Chief Financial Officer.

1:38 From Novelis' management, we have Mr. Steve Fisher, President and CEO and Mr. Dev Aujar, Chief Financial Officer. Following this presentation, this forum will be opened for questions and answers. Post this call, an audio replay will also be available on our company's website. Now let me turn this call to Mr. Pai to take you through the company's performance and key highlights in the first quarter of financial year twenty twenty seven. Thanks, Subir. Good morning, and good evening, everyone. Thank you for joining Hindalco's earnings call today. On Slide five to nine of this presentation, you can see our achievements and progress across quarterly metrics of safety and sustainability for this quarter versus prior periods. I will now take you through the key highlights of these initiatives. At Hindalco, safety is always our highest priority, and I'm pleased to report that there were no fatalities this quarter across all our Indian operations.

2:30 Our LTIFR for this year stands at 0.21, showing significant improvement over the prior period. As a significant step, we have strengthened our emergency response capabilities through realistic scenario based mock drills conducted in collaboration with key agencies, including NDRF. These exercises help our team sharpen their response, coordination and decision making during critical situations. We also took a proactive step towards preventing incidents by implementing the Risk AI Advisor, which helps us identify potential serious incidents at an early stage. By combining technology with on ground vigilance, we are improving our ability to anticipate risks, intervene early and create a safer working place for everyone.

3:21 At Hindalco, we continue to make strong progress on circularity and responsible waste management. This quarter, 80% of all total waste generated was recycled or reused, indicating strong waste management performance. We achieved 142 recycling of bauxite residue, excluding Utkal, 95% recycling of ash and 127% recycling of copper slag this quarter. Let me briefly touch upon our circularity initiatives. Demand for fly ash and bauxite residue remains strong across cement, road construction and quarry backfilling applications, although fly ash dispatches were temporarily impacted by the rail rake availability. A key milestone was the Dala stone quarry backfilling project, the first initiative of its kind in India supporting degraded forest restoration while contribution to the creation of additional carbon sinks.

4:17 In our copper business, recycling of copper slag continues to gain traction, driven by demands from the abrasives and ready mix concrete industries. Together, these initiatives demonstrate how we are turning industrial byproducts into valuable resources while advancing our sustainability goals. We have made consistent progress in improving water efficiency across our operations through a series of focused interventions, such as adoption of zero liquid discharge systems, optimization of cooling tower operations and reuse practices. These initiatives have helped us significantly reduce dependence on freshwater sources while improving overall process efficiency. In our aluminum business, higher recycling rates of 29% this quarter, up from 27% a year ago, along with focused optimization initiatives at our Aditya and Utkal operations helped us reduce freshwater consumption on a year on year basis.

5:19 Sequentially, water consumption was higher in this quarter, mainly due to the seasonal impacts of the summer months. In our copper business as well, specific water consumption improved year on year, largely due to lower freshwater requirements during the plant shutdown. These efforts reflect our continued focus on improving resource efficiency and reducing environmental footprint of our operations. Together, these efforts score our strong commitment to sustainable water stewardship and resource conservation across the value chain. We remain deeply committed to preserving and enhancing in and around our areas of operation. Biodiversity conservation remains an integral part of our sustainability agenda.

6:06 As of the end of Q1 FY 'twenty seven, our cumulative tree plantation has crossed 6,300,000 trees with nearly 80,000 samplings planted during the quarter to strengthen green belt coverage and enhance local biodiversity around our operations. We launched the Madhu Palanam initiative at our Baprimali bauxite mines to promote apiculture, support pollinator conservation and further enrich local ecosystems. In addition, at our Aditya Aluminum Biodiversity Park, we have created artificial islands within a water body to support avian conservation and provide a conducive habitat for bird life. These initiatives reflect our commitment to go beyond compliance and actively contribute to ecosystem restoration and biodiversity enhancements in the region where we operate.

6:58 Renewable energy remains a key pillar of our decarbonization strategy. As of the end of Q1, we have four seventy megawatts of renewable energy capacity across solar, wind, hydro resources, along with 35 megawatts of pump storage tie ups under our round the clock renewable energy program. We remain on track to add another four fourteen megawatts of solar and wind capacity as well as 90 megawatts of RERTC pump storage capacity during the year. With these additions, our renewable portfolio is expected to reach eight eighty four megawatts of solar wind high D capacity, along with 125 megawatts of RERTC capacity by the end of FY 'twenty seven. These investments underscore our commitment to reduce carbon intensity, strengthening energy security and building a more sustainable and future ready Hindalco.

7:54 Our aluminum specific greenhouse gas footprint stood at 19 tons of CO2 per ton of aluminum in Q1, lower than the comparable period last year. What is encouraging is this is not a onetime improvement but a part of a sustained structural reduction in our emission intensity. This reflects the progress we are making through our decarbonization initiatives, greater use of renewable energy, improved recycling and ongoing operational efficiency. As we move forward, we remain focused on building a globally competitive low carbon aluminum business that meets the evolving expectations of our customers while creating long term sustainable value. Let me now give you a glimpse of the current broader economic environment on Slide 11.

8:41 IMF projects global growth at 3% in 2026, moderating from 3.5% during 2025. A significant drag is arising from the Middle East and Central Asia region, which is expected to witness slowing growth down to 0.7% in 2026 from 3.7 a year ago due to the direct disruptions associated with the conflict. While the war has created a negative supply shock through higher energy and commodity prices, its impact has been partially offset by strong technology led investments and demand. The U. S. Economy is projected to grow by 2.3% in 2026 versus 2.1% in 2025, supported by favorable financial conditions, fiscal support, technology investments and its net energy exporter status.

9:34 China is expected to slow from five to 4.6 as higher energy prices, persistent uncertainty and structural headwinds weigh on activity. Global growth remains vulnerable to renewed geopolitical escalation, commodity price volatility, tighter financial conditions, trade fragmentation and a possible correction in the technology related expectations. Global inflation is projected to rise from 4.1 in 2025 to 4.7 in 2026, reflecting higher energy, food and fertilizer prices and signaling a temporary pause in the global disinflation process. Indian economy continues to navigate this challenging global environment.

10:20 RBI projects GDP growth in FY 'twenty seven at 6.7% against 7.7% in 2025. The performance of high frequency indicators suggests that growth momentum remains buoyant. Industry activity continues to hold, driven by strong progress in manufacturing. Sustained momentum in the service sector continues to support economic activity, while agriculture remains on a stable footing. Domestic demand conditions remain healthy with both rural and urban consumptions showing steady growth. Investments remain stable, led by government CapEx. However, downside risk persists particularly from geopolitical uncertainties, volatility in global financial markets, external headwinds and weather related disruptions.

11:10 Inflation is expected to rise to 5% in FY 'twenty seven from 2.1% in FY 'twenty six, with upside risk emerging from global commodity price shocks, uncertainty around the monsoon and El Nino conditions. Reflecting this balance of opportunities and challenges, the RBI has retained a neutral policy stance, allowing it the flexibility to support both sustainable growth and price stability. Moving on to the industry outlook on Slides 12 to 14. On Slide 12, from a pricing perspective, the quarter was marked by significant volatility. Even before the Middle East conflict escalated, aluminum prices had strengthened to around $3,150 per ton, largely due to the closure of the Mozal smelter.

12:03 Heightened concerns over potential supply disruptions then drove prices sharply higher, peaking at nearly $3,850 per ton before moderating down to $3,200 following the ceasefire. Looking ahead, we remain constructive on aluminum. The market is expected to have a deficit of 1,000,000 tons in calendar year 'twenty six compared to pre conflict expectations of about 300,000 tons. While demand remains relatively subdued, supply side constraints continue to support market balances and prices. That said, higher prices are likely to incentivize the supply response, including smelter restarts in Europe and West Asia and faster ramp ups in Indonesia and Southeast Asia, which should help rebalance the market over the medium term.

12:51 Looking at the global aluminum market in quarter one of calendar year 'twenty six. Chinese aluminum production grew about 3% year on year to nearly 11,000,000 tons, supported by capacity additions in regions such as Yunnan and Inner Mongolia. This was partially offset by capacity rationalization in Shandong. Outside China, production declined by around 8% to 7,000,000 tons, largely due to disruptions related to the Middle East Conflict and the closure of Mosul, although higher outputs from Indonesia and Europe provided some support. As a result, global aluminum production stood at 18,000,000 tons, down 1% year on year. On the demand side, China continues to see healthy growth with consumption up 2% to around 12,000,000 tons, driven by strong demand from new energy vehicles and robust exports of semi fabricated and finished products.

13:46 However, the property sector remains weak. Outside China, demand declined by around 2% as softer conditions in Europe, North America and Middle East more than offset growth in India. Overall, global aluminum consumption increased 1% year on year to approximately 19,000,000 tons. While demand is continuing to outpace supply, the global aluminum market remains in deficit by roughly 1,000,000 tons this quarter, providing continued support to market fundamentals. Turning to India. Demand continues to be relatively resilient and remains ahead of most global markets. We estimate aluminum demand in quarter one of FY 'twenty seven at around 1,500,000 tons, representing growth of approximately 3% year on year.

14:36 The key growth drivers were automotive demand supported by GST 2.0 related benefits and continued vehicle production growth. Along with stable demand from the packaging, industrial machinery and consumer durables segments. The only area that saw some moderation was the electrical segment, where certain contractor led projects were deferred due to price volatility during the quarter. Overall, India continues to outgrow global aluminum demand and remains one of the most attractive long term growth markets for the industry. Within domestic products, flat rolled products performed particularly well with demand growing by more than 10% year on year, driven primarily by strong demand from packaging and consumer durables.

15:25 Turning to the Indian copper industry on Slide 14. In India, refined copper demand remained somewhat subdued during the quarter, driven by inventory optimization by customers and a more cautious purchasing approach amid uncertainties arising from the West India conflict. Total demand, including domestic supplies and scrap in quarter one of FY 'twenty seven, stood at three fifty nine Kt compared to three ninety six Kt in the same period last year, reflecting a 9% year on year decline. In quarter two of calendar year 'twenty six, the global copper production grew 2.6% year on year to 7,200,000 tons, while consumption increased more modestly to 7,500,000 tons, resulting in a net global deficit of around 300,000 tons for the quarter.

16:17 On the copper concentrate side, the quarter remained quite challenging. Availability of concentrate was tight across the industry, and treatments and refining charges stayed at historically low levels and at times even negative levels at the range of minus $0.26 to minus $0.30 per pound. This reflects a broader trend where global smelting capacity continues to grow faster than the availability of mine supply. While stronger byproduct credits provided some support to smelter economics, concentrate supply remains a key constraint. Looking ahead, we expect these tight market conditions to persist with concentrate availability and TCRCs likely to remain under pressure throughout the rest of this year.

17:05 Continuing coming to Slide 16. Our consolidated business segment EBITDA was up 58% year on year at INR13481 crores this quarter. The consolidated profit after tax was up 75% on a year on year basis at INR 7,013 crores this quarter. At Hindalco India business, our business segment EBITDA was up 73% year on year at INR 8,606 crores this quarter, whereas our quarterly profit after tax was INR 5,301 crores, up 86% on a year on year basis this quarter. Before we get into the details of our quarterly segment wise performance, I would like to highlight two structural tailwinds that we believe will provide incremental support to our profitability and long term growth trajectory.

17:55 In India, our move to the new tax regime is a structural benefit that permanently lowers our effective tax rate to 26%, creating an uplift to profitability ratios of EPS and return on equity. Secondly, Novelis' dollar denominated earnings get a significant uplift in CONSOL financials in an environment where the rupee depreciates against the U. S. Dollar. Together, these advantages improve the quality, predictability and growth potentials of our earnings, supporting long term shareholder value creation. Coming to our business wide performance this quarter on Slide 17. The India upstream aluminum shipments were up 3% year on year, and revenues were up 44% year on year. Our quarterly EBITDA was a record INR 7,390 crores, up 81% year on year, backed by favorable macros and our strong performance across the value chain.

18:51 This delivered an all time high EBITDA of INR 2,331 per ton this quarter. EBITDA margins were at a record 55% and continue to be amongst the best in the global industry. Our hedging positions in aluminum for the rest of FY 'twenty seven stands at around 29% on the commodity at INR 3,004 per ton and 18% in the currency at INR 91.63 per dollar. Our Indian downstream aluminum business continued to deliver a strong performance where quarterly shipments were up 3% year on year at 104 Kt. Aluminum downstream delivered a quarterly EBITDA of INR $2.98 crores, up by 30% year on year this quarter versus INR $2.29 crores in the prior period.

19:40 This was driven by higher volumes, product mix and premiumization. The resulted EBITDA per ton stood a little more than $3.00 $3 a ton this quarter. On India's copper business performance, this quarter, our overall metal shipments were at 105 Kt, down 16% year on year due to the planned maintenance shutdown. The CCR volumes were at 96kt, down 8% year on year due to tighter market conditions. Our quarterly copper EBITDA stood at a record INR918 crores, up 36 year on year on account of better realizations in byproducts and operational efficiencies. Our planned maintenance shutdown during the quarter impacted anode production through the concentrate route.

20:27 Excluding the shutdown effect, our EBITDA per ton this quarter would have been around $1,000 reflecting the underlying strength of the business. Novelis recorded shipments of nine sixteen Kt, reflecting a decline of 5% year on year over nine sixty three Kt shipments in the same period last year. Adjusted EBITDA for the quarter stood at $516,000,000 or $563 per ton, reflecting a 2430% increase, respectively, year on year. This includes an $18,000,000 net positive impact from the Oswego fires and is inclusive of $47,000,000 insurance proceeds received during the quarter. With another quarter of solid execution behind us, that run rate cost savings are now at $225,000,000 as we accelerate all cost efficiency initiatives.

21:23 Looking ahead, we remain committed to our three year goal of permanently reducing our cost structure by $350,000,000 to $400,000,000 by FY 'twenty eight exit. Additionally, scrap prices continue to move in a positive direction, supporting margin improvement. Turning to Slide 19. We continue to maintain a strong and resilient balance sheet. As of June 2026, our consolidated net debt to EBITDA stood at 1.95x below our stated threshold of 2x. Despite the temporary impact of the Oswego fire incident, our businesses continue to generate healthy cash flows demonstrating the strength and resilience of our portfolio. We remain disciplined in our capital allocation approach and committed to maintain net leverage at around 2x on a consolidated basis.

22:12 At the same time, we continue to strike the right balance between investing in high growth opportunities that enhance our long term value and deliver attractive returns to our shareholders. Details of the operational and financial performance in each of our business segments this quarter compared to the corresponding period of last year as well as the previous quarters are covered in further slides and annexures to this presentation. Now let me conclude today's presentation with some key takeaways. At Novelis, our first quarter performance once again demonstrated the strength and resilience of the underlying business despite the temporary impact of the Oswego fire last year. We have successfully restarted the mill in June, and it is now ramping up steadily towards normal operating levels.

23:00 We view the impact of the outlets largely as a timing issue rather than a structural one, with significant portion of the current year's headwinds expected to be recovered over the course of the next fiscal year. Importantly, our long term EBITDA per ton guidance of 600 remains unchanged. This confidence is supported by the accelerated execution of our $350,000,000 to $400,000,000 structural cost reduction program, which is delivering sustainable improvements in productivity, efficiency and margins across the businesses. At the same time, we continue to make significant progress on our growth agenda. The 600 Kt Bay Minute greenfield rolling and recycling facility, which is on track for completion this year, represents a transformational milestone for Novelis.

23:48 With the initial commissioning of key assets already underway, Bay Minute will further strengthen our operating footprint, expand our recycling capabilities and position Novelis for its next phase of long term profitable growth. Coming to our India business, we have once again delivered an exceptional quarter, achieving record and industry leading EBITDA per ton and margins across both our upstream and downstream aluminum businesses, alongside a record EBITDA performance in copper. This reflects the strength of our integrated business model, relentless focus on operational excellence, disciplined cost management and consistent execution across market cycles. On the growth front, all our key upstream expansion projects, including the Aditya alumina refinery and aluminum smelter expansions are progressing well and remain on track.

24:41 These projects are integral to our strategy of doubling upstream capacities while strengthening our integration and cost leadership. We are also making steady progress on our captive coal mine development projects, including Chakla, Banda and Minasity. As these mines become operational, they will strengthen our resource security, lower production costs and support margin expansions and further enhance the earnings profile of our upstream business. On the downstream side, we continue to make good progress on our growth projects. The Aditya FRP plant is ramping up well and is already making a meaningful contribution to overall production. We also commissioned Aditya battery foil and the Taloja AC Fin facilities last quarter, and both projects are progressing well with customer qualification process currently underway.

25:31 In Specialty Alumina, our precipitated hydrate facility is advancing through customer approval stages, bringing us closer to commercialization. In copper, the business continues to demonstrate resilience and strong execution. Our copper smelter expansion, e waste recycling projects and other sustainability led initiatives are progressing as planned. In addition, the inner group tubes project will further strengthen our downstream portfolio and enhance our value added product capabilities. Looking ahead, our strategic priorities are clear in India. We are accelerating our upstream expansion in both aluminum and copper, while building a significantly strong downstream portfolio with the ambition of delivering a fourfold increase in EBITDA downstream EBITDA by FY 'thirty. At Novelis, we remain focused on executing the mid to long term threethirty strategy, which is aimed at driving sustainable growth, higher profitability and stronger returns.

26:31 Overall, Hindalco is exceptionally well positioned for the future, backed by our integrated business model, strong resource base, disciplined capital allocation and growth investments across the value chain. We remain committed to our purpose of engineering better futures while creating long term sustainable value for our stakeholders. Thank you very much for your attention, and the forum is now open for questions. Thank you. We will now begin the question and answer session. Session. The first question comes from the line of Satyadeep Jain with Ambit Capital.

27:25 Hi. Thank you. Mr. Pai, just wanted to check on, if you can clarify. In the Novelis 10 Q, it is mentioned that Novelis will pay up to 0.25% of revenue as royalty to an entity. I'm not sure if it's a promoter entity. Can you clarify what that is and why is that royalty being paid from Novelis? So I think that as far as the brand royalty is concerned, let me just give you an update. I think the ownership of the Aditi Bidla brand has remained with the Bidla Group Holdings Private Limited. And in the past, this VGH has not charged any royalty for the use of ABG marks all these years, making it one of the exceptions among large Indian conglomerates.

28:14 So what is happening is that this brand royalty, this framework is marks a transition from family driven stewardship to structured governance. So I think investing in the brand, keeping it better for the future. So I think Novelis declared it in its 10 Q. Hindalco comes under SEBI regulation. So under SEBI LODR, all our related party transactions will be disclosed biannually through exchange filings due in October. So I think even Hindalco will be paying that same type of royalty to Birla Group Holdings private limited. So, Hindalco would also be 0.25%. Yes. And it's capped at INR225 crores. And I think it's important to note for us this royalty amount is below what we say is our materiality threshold.

29:09 That INR $2.25 crore is for six months for this year, right? But otherwise on a sustained No, for the year. For this year, because it's starting from September, but otherwise for next year, should we would that INR $2.25 crore cap? It's for twelve months capped at INR $2.25 crore. Okay. For Novelis, you're saying, right? And Hindalco will be exactly the same. Okay. So this is going to apply I'm sure you can't talk about other entities, but it's going to apply, Jaren, to all the other entities also. I cannot yes. So the other one was just I know Novelis again. We thought we'll get more clarity on... There have been many investor questions on these $17,000,000 of tariff impact at Novelis.

30:05 I know the team tried to clarify that on the call, but we... That's... If we exclude the $70,000,000, it looks like EBITDA per ton would have been more than $600 per ton for Novelis. Just trying to understand what... Why did the tariff impact increase so significantly from $24,000,000 last quarter to $70,000,000? And why is that not excluded from EBITDA to report an adjusted EBITDA? Steve, Dave, you Okay. Want So yes, Sattri, no, we cannot take it out of adjusted EBITDA, number one. Number two, Kartiri, I mean, can basically just amplify what I said at the call the other day. You have to think about this as related to the fact that we are not able to produce enough yet in The U. S.

31:00 We have to depend on more imports. As far as capacity is concerned, theoretically, if all the assets start running optimally, we will have enough onshore capacity. But given the fact that we have had to reconfigure so many things post the Oswego fire and particularly in this quarter, we have had to really keep our customers. So this is related to keeping customers as much as we can fully serviced. So net net, this is an impact that will stay with us for some time. Now be careful about literally sort of adding that back and taking the EBITDA per ton at over 600. I mean, would not recommend you do those kind of adjustments.

31:45 There are many moving parts on a macro level, metal prices and so on. I mean, we just need to be careful. For the next couple of quarters, there will be some level of tariffs. I cannot say exactly how much. I mean, we still need to work on reconfiguring our supply chain. So be careful about just literally adding it back. All that I'm telling you is that it's not like the 70, unfortunately, will go to zero until the time we have just set all our supply chains back in order. That's really the best answer that I can provide to you. So just let's say once Oswego is up and running in two quarters from now, so this $70,000,000 basically, when Oswego production was impacted, some of it was being fulfilled by procuring metal from the competitors in US. It seems like this quarter, you used some of the other facilities to bring more imports into US. Is that correct? And so the impact was mainly to fulfill Oswego shipments in one in 1Q? And what about the other also and all other material that you were seeing tariff impact in the previous quarters? That impact was not there at all this quarter.

33:09 Yes. Always stepping back. I mean, this is Sachin, if we are really getting into the weeds and to explain the entire supply chain is really complicated. I think let's just bring this back into sort of why this quarter, why not so much earlier quarter. Look, as much as possible, we are trying to sort of cut dependence on third parties and use our own system because there are benefits of of of quality, of reliability, of more consistency. So as much as possible, we are, you know, sort of trying to use our system, our network to bring in materials. Earlier, we had to really get a lot of third party, and that goes in the cost of the fire. So be careful. What we get from third parties goes in the cost of the fire, which is below the line. This is from our own network. We don't basically classify this tariff below the line in cost of fire and that is the difference. So I'm not kind of it's very difficult to explain the entire material flow and the supply chain. I can only sort of give you a direction and guidance to say that we'll have to live with some level of tariffs in the coming quarters.

34:33 And it is not like Osnugo is up and everything sort of just starts going back to normal. No, it takes time. It takes time. There are materials in the pipeline. There production that is already happening. So it is not like you can time things so perfectly, right? So that's why I'm staying away from giving very specific guidance. Let's just take the next quarter. By that time, you will have a little more clarity, and we will talk about it again. So I would for now, I would leave it at this. Thank you. Next question comes from the line of Pinakin with HSBC. Please go ahead. Yes. Thank you very much, sir. Just three quick questions.

35:22 Keeping prices aside for a moment, there was an operational impact in aluminum downstream and copper. Should we expect these volumes to recover from 2Q onwards? Yes. I think the volumes in Q2, both for copper and downstream aluminum will be higher. I mean, as I said in my prepared remarks, the electrical sector was a little bit weak. In copper, we had a planned shutdown of a smelter. So I think for Pinakin, the volumes in two quarter, both for aluminum downstream and copper will be higher. Got it. My second question is, at the console level, we still see an exceptional hit of roughly INR 2,300 crores in this quarter. There was no exceptional onetime impact in Novelis.

36:09 So given Oswego has restarted, should we continue to see exceptional losses from second quarter in the console P and L? How should we look at this? Look, Hinakin, it's a different between U. S. GAAP and India. India, we have to show it as exceptional. I think in U. S. GAAP, it comes in... Unallocated. Unallocated. So we can explain that to you offline. It's a difference between U. S. GAAP and India. So given the Oswego plant is restarted, should we expect this quantum to reduce? Or at the console level, will No, we see a similar no, no. As Oswego plant restarts, then it should go away. It should go away. Got it. And the last question is...

36:55 The insurance recoveries will start to come in then. Okay. Okay. Okay. And the last question is just on the net debt guidance for the year, and we heard from the Novelis call of their expectations of leverage to come down below 4x. At the consolidated level, should we expect the net debt to be steady at these levels as of March and come down because the underlying cash flows are very, very strong? Yes. I think on the India side, Pinakin, this is a high CapEx year for us. So I don't expect our net debt to EBITDA to materially change across the coming quarters. So I think that if Novelis net debt to EBITDA starts to come down in Q4, then the consult should go down.

37:50 You. The next question comes from the line of Sumangal Nevatia with Kotak Securities. Please go ahead. Yes. Good evening. Thanks for the chance. First question on the downstream aluminum business, the $300 margin is multi quarter high. So is it something unsustainable there? Or with the ramp up now of the FRP plant, should we sustainably see these sort of levels in future as well? So, think we have been sort of targeting more around the $250,000,000 There is also with the metal premiums and all going off, we have gone up. We have been able to hold our pricing in the downstream.

38:35 So I think we will have to because the downstream pricing net to the customer is metal plus MJP plus the conversion premium. So high MJP has helped us get those margins on the downstream also up. So I would say more around $250,000,000 is a more sustainable number. Understood. Just a couple of more clarifications. On the royalty, for how long is it fixed? And I mean, will it come for review every now and then in terms of percentage of sales? I don't know, Sumangal. I think that I would expect this to be there for a while at these levels. Okay. Okay. But generally, we've seen there is agreement for three years, five years, and then it is reviewed. So no such time period.

39:26 You have any clarity today? I don't have the clarity. I can check and get back to you. Sure, sure. That's fine. And I just want to understand for next year, say FY 'twenty eight, what sort of domestic coal sorry, captive coal production are we expecting for the full year, say, from Chakla and Banda? So Chakla is start to come in. We are expecting about 1,000,000 tonnes from Chakla. Banda will only start from the middle of the year. So I would say about zero five million tonnes from Banda. So 1,500,000 for next financial year, FY 'twenty eight, I'm asking, sir? Yes. Okay. And just last thing, do we expect any contribution from Aditya refinery and the Phase one smelter anytime next year or it's largely going to be end of year and then FY 'twenty nine contribution? I think FY 'twenty nine because it commissions December to January of this fiscal sorry, next fiscal. So I would put FY 'twenty nine as the full meaningful numbers coming in.

40:32 Got it. And just one large bookkeeping. There's a intercompany profit in the India financials. What exactly is this? It's increased significantly quarter on quarter, INR $7.50 odd crores. I think that's because of intercompany eliminations because when upstream sells to downstream and there is a mismatch between the price at which it was bought and then we have to revalue if the LME goes up. So that is sitting in that correction there. Okay. Better All Subhir will explain to you offline. Sure. Sure. I'll follow-up. All right. Thank you and all the best, Yes. Thank you. Thank you.

41:21 Next question comes from the line of Pallav Agarwal with Antique Stock Broking Limited. Please go ahead. Yes. Good evening, sir. So the first question was, is there any revision to our copper quarterly EBITDA guidance? Do we expect sulphuric acid prices to stay elevated? They are staying elevated. So I think it'd be fair to say a similar number like Q1 for Q2. Okay. And maybe some tapering off from the second half? I hope not. Because with the TCRC so low, we are counting on sulphur. See, sulphur prices are impacted by West Asia crisis. So it's sulphuric acid prices are driven by the sulphur index. So if you follow the sulfur index, it's pretty high right now. Sure, sir. Also, if you could just give us the quantum of external alumina sales this quarter?

42:13 The external alumina sales, we actually missed one ship. So it was 138 Kt. So next quarter, we will be selling about 190 Kt. We missed one ship sale. That's why the volume is 138 this quarter. Sure. And lastly, have you seen an uptick in global alumina prices because of historic lows? So are they picking up? They are slightly picking up. I mean, now, it's around $3.30, $3.40. So yes, it's a slight uptick, yes. Sure, sir. Okay. Yes, thank you so much. Thank you. Thank you. Next question comes from the line of Indrajit Raghavan with CLSA. Please go ahead.

42:59 Hi. First year bookkeeping question, how has the cash cost being quarter over quarter in this quarter? And how do we expect this next quarter? Yes. So I think this quarter, it was up by 5% Q1 versus Q4, actually around 4%. I think I had guided 5%. It came in more or less at that same level. And Indrajit, I think actually, we benefited from some of the low cost inventories during quarter one. And quarter two, the coal prices in the Northern region have gone up in the monsoon period. So we are expecting maybe another five to 6% increase Q2 to Q1. Sure.

43:46 Secondly, if you can help with what is happening in the MJP physical market premium? Yes. Sorry, go ahead. Please finish your question. So that has been elevated for a while, So how do you see that panning out? So the MJP is up because the Middle East supplies to Japan, Korea have been impacted. So I think that as long as that metal is out of the market, the NJP will stay slightly high. And probably next year, it will come down once Middle East smelters are back. So are we changing our domestic and export sales mix because of this or not? No. I think that we certainly are trying to on the exports, we try to get as much as we can. But no, I mean, because of our downstream requirements as well and the Indian market is also still giving us a fairly good return. So I think we will try to catch a bit more exports, but not significantly change.

44:50 No. Thank you. Next question comes from the line of Amit Lahotir with Aditya Birla Capital, Institutional Equities. Please go ahead. My first question is on the copper business. So given that TCRCs continue to remain negative and byproduct prices are also normalizing, especially gold, and then China is not closing its excess smelting capacity, How do we think about the backward integration plan in the medium term? Can we look for more copper deposits within the country and move towards self dependence for the concentrate supply? That's my first question. Yes, we're trying to do that. We have got one copper exploration block that we are actually evaluating and drilling holes right now.

45:42 And we are expecting some more blocks to come. We are looking at copper mines around the country and in the neighboring countries. The copper mine prices, if you go to South America, Australia at these elevated LME levels is very high. And we have got 85% of our concentrate requirements blocked in. So it's not a question of can we get concentrate. We will get the concentrate. So then the question becomes, why would you go and pay money to get an equity in a mine at these elevated prices of LME. There is no problem with the security of supply for concentrate is what I'm trying to say. And the backward integration, we are trying to look for mines, we are exploring mines within the country.

46:35 So any time line when we could have some of the blocks ready with us? Maybe is it two years or is it like five years from now? I think this block that we are evaluating, we'll get to know in another year. The preliminary samples are looking good, but the extent and the volumes, which will probably take more than another year to evaluate it. Sure. My second question is on Novelis. As we target net leverage of 4x, this is essentially a function of either net debt coming down or EBITDA going up. And given that we are close to $2,000,000,000 of EBITDA run rate, which implies that $8,000,000,000 of net debt, we are already pretty likely at four times. So can we rather not expect a level which is well below four times?

47:25 Dev, I think we got the question in your call as well, sir. Yes. Yes. So I've already said that based on all the visibility that I can see right now, we will be below four. Now your other question is about what is it between a function of lower net debt and EBITDA. It's what? I mean, we will be releasing some cash into the system. Why? Because we will get more insurance recoveries. We will release some working capital as our supply chains normalize.

48:11 That basically brings in more cash and reduces net debt offset as well because our short term borrowing facilities like ABL will go down. If it is run rate will go up. So it's not one factor. It is both factors that will help us move in a positive direction. And that's why, I mean, from a level of 4.5, when we are saying it will go and by the way, the peak will be probably a little bit higher at the end of September. That will be the peak net leverage. So from there, for it to come down so sharply, I mean, has to be a function of both. Sure. Thanks, Dave.

49:01 Perfect. Thanks. Next question comes from the line of Ritesh Shah with Investec India. A few questions. First one, one is, would it be possible to quantify the extent of working capital to these over next three quarters? Dev? Sorry, I was mute. Sorry. Yes. I mean, it's difficult to be very precise, but I think that three to 400 Sorry for interrupting. Your voice is breaking. Can you comment the range, sir? Oh, one minute. One minute. Give give me a give me a moment. Let me see. I'll I'll I'll just check my my headphones off.

49:51 One minute. Sure. Thank you. Are you doing better now? Yes. Please go ahead. Okay. Okay. Alright. Yeah. So what I was saying is that... Look, I mean, being very precise right now is a bit difficult. We are working on many fronts. But if you want something directionally, I can see 300 to 400 kind of the system in the next couple of quarters, which is a reduction of inventory, but also set of like a reduction of payables because we have been buying a lot of third party material and as we normalize our working capital cycle, all the payables on that account will go away. So net net, I think for modeling purposes, it can take 300 to 400 over the next couple of quarters. We'll see if we can do better than that.

50:55 Sure. My second question is, I think you had a prior question on tariffs of $70,000,000 If you could put in context, how does USMCA stack up for things? So there's certainly a yo yo going on between the government over there between the Canadian and the U. S. Government. So what is the sort of impact in this $70,000,000 So basically, you did indicate the 70,000,000 can actually go towards nil by end of the fiscal. So what is the underlying assumption with respect to the material which moves to Kingston and back to U. S? Yes. So it has nothing to do with The U. S. MCA, to be clear. But when I say that it will go down as we normalize supply chain is that we will depend less on imports and imports attract two thirty two tariffs, okay? So basically, our two thirty two net tariffs will go down by the end of the year because of less dependence on imports as know, as we will normalize this and post that our supply chains normalize. So it's as simple as that. As far as USMCA is concerned and what is the status, honestly, nobody knows.

52:03 I mean, this is going to be a bit long drawn from the best that we can read in the current environment. So we're not expecting that to be any major impact. If something happens, we'll have to see. But right now, is no basis to believe that anything quite will happen there. Sure. And just third question on payment. We indicated that we have certain contracts until end of the year. We have kept certain contracts open. I just wanted to have your comfort, assuming, say, 99.2% WACC for Novelis, will we be able to cover our cost of capital over here? The ask will be significantly steep upwards of $1,000 So are we still comfortable over here?

52:51 We are very comfortable. We don't agree with the 9% honestly. Our WACC is lower. But I can give you a very confident assurance that we will lower the cost of capital. This project has potential. I mean despite the higher cost that happened, this project has potential to unlock value. So on that front, we are very confident. If you can help me correct on the VAT number, like should we bake in to 8%, 8.5%? Mean, is not nice. It is light in the high we don't do this. But I mean, all that I'm telling you is that our cost of capital is not nice. It is lower than that. If you want to take eight, you're not far off.

53:48 Sure. That helps. My second question is for Mr. Pai. Sir, when we look at the CapEx that we have announced for India operations, when we look at CapEx intensity, specifically for the Sambalpur smelter, on a per ton basis, it looks very steep as compared to the recent announcements in the country. I presume a part of it could be because of RTC facilities that we have or I'm not sure whether we have a couple of downstream assets also inside that CapEx. What is the best way to appreciate this? I think that I think I've answered now to a couple of media people as well. Don't go by CapEx by people announcements, go by CapEx by people who actually have done the projects.

54:35 Think just making an announcement, I'm going to do X in X. I think the reality only happens when you actually place orders and there's been reality on the ground of what has happened with inflation, metal prices and all that. So my only thing is that whatever we say and do, have calculated and we are quite sure of it. What others have claimed and said, those are announcements in my opinion. Fair. Perfect. And just a last question on ESG. There's a recent proposal with respect to a single default value on carbon. This is more to simplify CBAM and avoid distortions. If there is a single default value for, say, India, basically how should one look at it? Specifically, we are focusing on ESG and our CapEx is also high.

55:26 So if something of this sort comes, how should we how are we approaching it? I just wanted to sort of a little bit challenge. I don't think our CapEx is high. If you look at any of the Western world smelter announcements and the cost, think we are highly competitive. The second part, when you say single part, are you talking about the cost of carbon? Yes. Carbon intensity per ton of aluminum. No. Per ton of aluminum, look, there is no single number there. People are have taken like six tons per ton to be sort of the limit at which they will start to say this is low carbon aluminum. But let me be clear that there is no consistency across any of the markets today on what really constitutes low carbon aluminum.

56:18 And if you look at the Platts index, the sort of upside on low carbon aluminum is $15 to $25 which is hard negligible. So I don't think that right now what worries me more is things like CBAM where there is an actual price of carbon, which is found out by trading on the European market or there's a cost of carbon actually that developing in India on the CTS platform. So I think those are the things to watch because in Europe, it's more like EUR80 per ton of carbon, which is pretty high. Sure. Just the last two questions I'd squeeze in. One is outlook on alumina. And secondly, specifically on bauxite, I think, Bapi Mali, have adequate lease life. There were two other blocks, Dhamchua and Surbena.

57:04 Would you like to comment on what the status is over there? And any color on basically participating in the bauxite auctions, which are going on in the country? Have you seen the results of the auction that just finished today? Kartrafat finished at 175 premium, which takes the cost of bauxite like 8,000 a ton. So let me say that we are not new entrants to this field. Again, we have bauxite mines in Chhattisgarh, Jharkhand and Orissa. And we will maintain, I think, a far more prudent financial way of looking at how we participate and what we are prepared to pay. Those two mines you mentioned, I've never heard of them.

57:51 Okay. Sir, I'll send you a mail on that separately. I'll send them out. Things are ongoing right now. So Karla Pat just finished and there are other four more mines that will happen over the next month. Okay. Thank you. And on alumina outlook? So alumina, look, the prices are around $330 $340 now. I think that there is as long as the Middle East smelters are out that alumina because that's the largest third party alumina market because China is more or less self sufficient now. So I think that until the Middle East smelters come back, it will remain in that range. Sure. This is helpful. Thank you so much. All the very best. Thank you. Thank you.

58:44 Next question comes from the line of Rahul Gupta with Morgan Stanley. So if you remember, last year in your Analyst Day, you had guided to four times of your EBITDA for downstream business in India by fiscal thirty. Yes. Now if I look at fiscal twenty five and twenty six, cumulatively is around 36 to 38,000,000,000 rupees of EBITDA. Now can you help us understand how are you planning to get to INR 145,000,000,000 to INR 150,000,000,000 of EBITDA in four years? And to that extent, how should we think about margins for downstream aluminum and copper business? So first, let me clarify what we meant by the downstream. So in that downstream, we include aluminum downstream, aluminum specialty sales as well as the copper downstream.

59:38 So these three put together is what we consider the Hindalco downstream business, and that we said is going to go ForEx, not just the aluminum downstream. No, that's true. I take into account all these three. Yeah. I'm just giving an example that when you talk about $300 are not sustainable for downstream aluminum and maybe $2.50 is more sustainable at least beyond Yeah. The near term volatility, How should we think about it maybe from fiscal twenty nine, thirty perspective? And how should we think copper business ramping up beyond the near term benefits? So again, the $250,000,000 I said was for the remaining quarters of this year because Aditi FRP is just ramping up. So I think the longer term aluminum downstream EBITDA per ton, we have always said is going to be over $300 And I think that what we probably will have to do is to give more clarity on the copper downstream because today, we merge it all together. So I will try to give more clarity on the total downstream probably in the next quarter.

1:00:46 You will see that we are progressing quite well. The margins on that downstream time tend to be much higher than what we were expecting. The real challenge there is getting the products qualified and the volumes going up on the downstream side. That's reassuring. So what the thing that we are trying to understand is that how should we model from, say, 40 odd billion to INR 140 odd billion over the next three, four years. But, yeah, we'll wait for more color on that. Yeah. Yeah. My my my final question is, can you help us understand more in detail how to how to look at the royalty payments that you're talking about? I'm sorry to harp on it again, but just to understand this better, if you have any clarity on this.

1:01:40 No, I don't have any further than what I said. I mean, the brand is held by Builder Group Holdings Private Limited, which has not in the past charged any royalty. Now there's we are putting in a framework where royalties will be charged, investments will be done to enhance the brand. And it's as a percentage of the revenue capped at INR225 crores a year. So Hindalco and Novelis will pay INR295 crores per year. Yes. That I understand. Sorry, one follow-up on this. Does this in any way distort the dividend payout policy for the company? No, no. I mean, just again, I'll repeat, this is significantly below any materiality point, Hindalco.

1:02:26 It doesn't change capital allocation, dividend, nothing. No. Got it. Thank you so much. Wish you all the best. Thank you. Next question comes from the line of Fikar Singh with ICIC Securities. Please go ahead. Good evening, sir, and thank you for the opportunity and congratulation on a very good set of numbers. Sir, my question pertains to the insurance claim in. If I remember, we claimed that at least 75 of all the business losses would be recoverable from the insurance claim. So since we got the first tranche, any idea as to what is the total sum which we will get and how this will be coming to in the next quarter or how this will be spread out in the next few quarters?

1:03:18 Yes. Dev? Yes. So I think that we have explained that. So look, as of the end of this quarter, our cumulative cash flow impact has been of the order of $1,400,000,000 net of all recoveries, which is 300,000,000 so far. We expect steady insurance recoveries. It is almost impossible to exactly time them. It's a process. Net net, what I can guide you is that at the end when all insurance recoveries come, our net loss, cash impact from the fire will be about R600 million right? So the $1,400,000,000 impact so far will keep coming down with insurance recoveries and at the end will be left to bear net about approximately $600,000,000 Now timing, we expect as I said steady recoveries, but a couple of 100,000,000 a couple of 100,000,000 may go into the following fiscal year I. E. Fiscal year 2028, but a good decent recovery will happen within this fiscal year.

1:04:42 Noted, sir. Sir, I probably missed out on our total hedging on the aluminum side as well as the cost inflation in the Q2. If you could repeat that, Hindalco? I'll repeat it. So we are for FY 'twenty seven, we are hedged 29% at $3,004 a ton and the currency 18% at 91.63 Our costs went up by about 5% Q1 to Q4, and we are expecting another 5%, 6% Q2 to Q1 in rupee terms. Sir, just one clarification, if I remember correctly, last quarter, we said that we have stopped hitting once the war has erupted. Why this is still on the bench seems to be on a lower side? So just...

1:05:32 No, no. I think this year, if you take FY 'twenty seven, we stopped because the near it's in a deep backwardation. So this year, we are not adding anymore. The hedging that we are doing from now on is for FY 'twenty eight. FY 'twenty seven, if you take the number that I had last time and now there is no change. Noted, sir. Noted. And for 28%, what's the how much is hedged at what price? So 28% currently now FY 28%, we are at where are we? 21% at 3,160 and we are trying to catch levels at 3,200. Our view on FY '20 is that once the Middle East smelters come back, we think that 3,200 is a good level for FY 2028.

1:06:28 It's a high CapEx year for us, so we want to protect our cash flows for FY 2020. Very well, sir. Thank you and all the best for future. Yes. Thank you. Thank you. Next question comes from the line of Rajesh Majumdar with three sixty one Capital. Please go ahead. Yes. Thanks for the opportunity, sir. My first question is on the copper smelter expansion. With the current crisis going on in the concentrate market, how I mean, bad or good is the timing for the copper smelter expansion? And a related question is that, can we be using scrap instead of concentrating the smelter to get a different product mix as you have the smelter going to be commissioned in FY 'twenty nine, yes.

1:07:14 So really, my theory always has been that you should do a smelter when it's the most adverse condition because by the time the smelter comes up, it will be three years out. So we look at these things in the long term. And I think that if you look at the downstream copper demand in India, you look at supply chain of precious metals and all that, we think it will still give us a good return. And having the capacity in India, where the market demand is very strong, we think, will be economically beneficial. On the scrap, yes, the smelter uses some scrap, but we also have the scrap melting project in Pakajan commissioning this year. So we'll be using quite a lot of copper scrap as well. And that is certainly more financially viable.

1:08:04 And sir, what is the what are the economics of the recycling waste recycling project, which is only commissioned in FY 'twenty seven, a brief idea on that? Actually, we'll have to wait till some of these metals that we are looking at comes out. But on a pure copper term, the terms return right now is quite attractive compared to the copper smelting. And when I say copper smelting, I'm taking the sulfuric acid sale along with it. It's still recycling is quite more attractive than that. If I take you down to a kind of payback here, will it possible for you to give that on the recycling? So the IRR of the project is in the high teens. So that should tell you a payback. That's it. And so my other question is on Aditya alumina refinery because that is already 95% purchase order has been placed, and that will come probably somewhere in the middle of FY 'twenty eight, if I'm not mistaken. So I think... December 'twenty eight, we'll be...

1:09:02 Okay. So and because Ariti aluminum smelter will not come before FY 'twenty nine, so what is the kind of merchant alumina we'll be selling, say, in FY '8 and that kind of figure or FY 'twenty seven, FY 'twenty eight? The first, the 180 parts of Aditya smelter will come at exactly the same time as the refinery coming up. The expansion is in two phases, 180,180. The first 180 will come in December of 'twenty seven. The next 180 will come in December of 'twenty eight. We will still be net long of alumina of about 800, which we will continue, which is just our position today. Okay. So it will remain probably the same amount, not And sir, can you give me the combined impact of the cost savings of the captive coal mines, Chhattla, Banda and Minarshi when fully commissioned?

1:09:58 What is the combined impact of the coal in total basis of aluminum making cost? I think I'll leave it at to say that it will be fairly attractive. I think you will see it in our results as they come in. Thank you. So is it possible to give a per ton cost for FY 'twenty reduction on the coal of 1.5 or whatever 1,600,000 tons you talked about from September and No, no. I can't I won't do that. Thank you. Ladies and gentlemen, due to time constraints, this was the last question. You can connect with IR team for your further questions.

1:10:45 I now hand the conference over to the management for closing comments. Thank you very much for listening. And I think that the important part to note this quarter besides the numbers was that all the sectors of our business, upstream, downstream, Novelis, copper did very well. And I think the significant part for us was the strength of Novelis' performance in Q1, which I think is going to get better as we go forward this year. So overall, I think that Hindalco is poised for a good FY 'twenty seven. Thank you for your attention. Thank you. On behalf of Hindalco Industries Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.