Q1 21/22

Aug 6, 2021

A very good evening or morning, everyone. I hope you all are safe. On behalf of Hindalco Industries, I welcome you all to the earnings call for the 1st quarter of the financial year FY 'twenty 2. In this call, we will refer to the Q1 FY 'twenty 2 investor presentation available on 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 number 2 of the set presentation. 1st. In this presentation, we have covered the key highlights of all the businesses for the Q1 of financial year to review and a segment wise comparative financial analysis of India Business and our overseas subsidiary, Novelis. Please note, in this quarter, un allocable corporate AS and G expenses, with you simply apportion to our individual business segments on certain basis. So far, we are now clubbed under unallocated expense or income in order to truly reflect India's individual business segment EBITDA in India operations. The corresponding segment information for the prior periods also being restated accordingly for a comparative analysis. First. We have with us from Hindalco's management Mr. Satish Bhai, Managing Director Mr. Praveen Maheshwari, Chief Financial Officer. From Novelis' Management, we have Mr. Steve Fisher, Executive and CEO Mr. Dave Ahuja, Chief Financial Officer. Following this presentation, the call first questions you may have. An audio replay of this call will also be available on our website. Now let me turn this call to Satish. 1st quarter. Yes. Thank you, Subin. Very good afternoon and morning, everyone. Quarter. Thank you for joining today's conference call for Hindalco Q1 earnings. I hope you and your families are safe and vaccinated as we continue to manage through this challenging pandemic situation. Let me start with a short update on COVID-nineteen and our preparation. 1st. Hindalco's management is fully prepared to tackle a 3rd wave of COVID by fortifying its efforts to protect employees and the community. First. Hindalco has already vaccinated 93% of its employees and families with at least one dose, including including third party partners. 1st. In some states, the government is collaborating with Hindalco to vaccinate the local population at the company's own hospitals and health centers. 1st. Hindalco's dedicated team of 77 doctors, 245 paramedics is working round the clock to serve its employees and the community. First. Hindalco has boosted medical infrastructure and equipment in its own hospitals and health centers with critical care equipment such as first CT scan machines set up oxygen lines in remote locations to serve parents patients needing ICU care and enhanced its lab testing facilities. Hindalco has also strengthened its medical teams, including adding pediatricians quarter and upscaling its paramedics. Let me now take you through Hindalco's progress across various sustainability metrics Q1 FY 'twenty two on Slide 5 and 6. On the environment, there's a strong focus on water, waste, air emissions and biodiversity. First. Fresh water consumption was at 18,400,000 cubic meters in Q1 of FY 'twenty two with a continuous reduction in the consumption of water at call locations over the years. Hindalco is adding one site each year to the 0 liquid start quarter to achieve water positivity at mines and downstream units. This has been done along with the development of healthy watersheds and rainwater harvesting and moving towards its target of all worksite zero water discharge by 2025. Quarter. We are committed to 100% waste recycling in terms of all waste that are hazardous, non hazardous 1st and bulk waste such as fly ash and bauxite residues. We have achieved 82.7% recycling first and reuse of waste in Q1 FY 'twenty two. We have been consistently achieving 100% of waste residue utilization quarter at 3 out of the 4 alumina refineries. Puskal alumina refinery is currently running several research projects to reuse 1st box type residue, combined backfilling and road construction. We are committed to reducing landfill usage by 5% every year quarter, while moving towards our target of 0 land sale by 2,030. On green cover and biodiversity, the company continues to do well quarter to increase green cover with the scientific biodiversity management plan. Our Green Belt Enhancement Program developed for 10 1st non biodiversity management plant sites based on revised forest department SOPs for flora and fauna conservation. First. Our Aditya Srivastelcom power plant has implemented its 1st Miyawaki branch, a 3 tiered scientific evoked afforestation 4 100 meter square area with the laid down SOPs under biodiversity management plan by the IUCN. Q1. Our cumulative green belt at all our sites is now spread over 2,682 Acres. On Slide 6, the Renewable Energy and Safety update. We have assessed the potential on-site solar projects across all our units to be around 246 megawatts. We are committed to a hit in our target of 100 megawatt quarter. Of this 100 megawatts planned for FY 'twenty two, 49 megawatts have been implemented first half of the balance 52 megawatts are now currently under implementation and expected to come up by FY 'twenty two end. Quarter. We have so far identified and are in the process of finalizing 32 megawatt solar projects to be executed in FY 'twenty three. Quarter. We are also in discussion with developers of renewable hybrid with pumped hydro storage for 100 to 150 megawatt power for our Aditya unit. The exploration and evaluating evaluation of emerging technologies in the space of quarter. Energy storage, carbon capture and utilization and hydrogen to be used as a fuel is also being done. 1st fiscal quarter. This is expected to improve with technology maturity and time. Currently, the cost is high and utilization areas are easy. Quarter. We are planning pilot projects in FY 'twenty three. The specific energy consumption in aluminum was recorded at 84.6 at the end of Q1 fiscal year of FY 'twenty two on the base year of FY 'fifteen. The LTI par was recorded at 0.35% this quarter. 1st quarterly recorded in Q1 FY 'twenty two of a contract workman in the Indian operation. Quarter. We have committed to 0 harm and have been continuously upgrading our safety programs and systems to meet international standards 1st quarter. Turning to Slide 8 on the key highlights of our performance in Q1 FY 'twenty 2. Quarter. Hindalco delivered its best ever financial performance in Q1 across all businesses backed by improved macros, better operational efficiencies, improved product mix and strong market recovery. Novelis recorded quarterly shipments of 973 kt, up 26% year on year quarter and an all time high EBITDA of 5 55,000,000, up 119% year on year on the back of higher volumes, favorable product mix, favorable metal benefits and a €47,000,000 gain related to a favorable decision in a Brazilian tax litigation. EBITDA per tonne also stood at $5.70 per tonne, quarter, up 75% year on year and is $5.22 per ton, excluding the gain related to the Brazilian tax litigation. 1st. Net income from continued operation was at 303,000,000 in this quarter versus a loss of 61,000,000 in the corresponding period last year. 1st conference call. Novalis launched an offering of 2 unsecured senior notes of 7.50 million each at a coupon of 3.25 and 3.875 percent due in 2026 and 2,031, respectively. 1st. Novelis also received credit rating upgrades for S&P Global Ratings to BP for BB- on 22 July 2021. Moving on to Hindalco's India Aluminum business performance in Q1. 1st fiscal quarter. Quarterly business EBITDA for Hindalco India Aluminum was at a record high of INR 2352 crores, up 142 percent year on year. Quarter. The EBITDA margin was at a high of 37.5%. This quarterly margin was the highest in the last 13 years of the company and continues to be the best in the industry. Vessel sales were flat year on year at 303 kt on account of a delayed shipment quarter of around 10 kilobytes Value added product sales were up at 82 kt, up 137% year on year, quarter, supported by a continued revival of the domestic market. Our 530 Utpal Expansion Project commercial production quarter beginning in Q2 of the current financial year. Turning to the quarterly performance of the copper business on Slide 9. Corporate Center 3 ramped up well post the maintenance shutdown during this quarter. First. Leopard production was at 63 kt, up 52% year on year, while CC rod production was at 44 kt, up 67% year on year. First quarter. Total sales was at 80 kt, up 36%, while CC rod sales were at 46%, quarter, up 50% year on year in line with market recovery. Offer EBITDA was recorded at 2.61 crores in Q1 FY 'twenty two. 1st. Coming to the quarterly consolidated performance, the EBITDA was at a record INR6790 crores, quarter, up 188% year on year. Quarterly consolidated cash at for continued operation was at 3,000 2.60 crore versus a loss of INR 5.69 crores in the corresponding period of last year. 1st quarter. Hindalco continues to maintain its strong treasury balance of around $872,000,000 in Novelis 1st 9,425 crores in India at the end of June 2021. The consolidated gross debt was down by about 16,000 INR 345 crores, while net debt was lower by INR10,389 crores from the peak of 30th June 2020, quarter, resulting in a significant improvement in the net debt to EBITDA to 2.36 times at the end of June 'twenty one. First. I'm happy to share the recent credit rating upgrades for Hindalco. July 21, Krissil upgraded Hindalco's credit rating by 1 notch 2 AA plus with stable outlooks for bonds. Care ratings also affirm the AA plus quarter, penetrating with an outlook upgrade from negative to stable for long term loans and bonds of Hindalco. 1st quarter. Turning to the broader economic environment on Slide 11. As per IMSS' latest estimates, first. Global economy is expected to expand by 6% in calendar year 'twenty one after contracting by 3.2% in calendar year 'twenty, quarter, largely supported by post recession reforms in major economies. The deepened divide quarter. Between advanced and emerging economy growth performance is led by defenses in the face of the vaccine rollout and the extent of fiscal policy support provided by the government. Close to 40% of the population in advanced economies has been fully vaccinated quarter compared with 11% in the emerging market economies and an even smaller fraction in low income developing countries. 1st quarter. Growth in advanced economies is firming up, led by large scale fiscal support and the easing of pandemic restrictions, primarily in the U. S. And to some extent, Europe. Recovery in emerging economies is also supported by pent up demand and rising commodity prices to some extent. 1st. On the domestic fund, the momentum in economic recovery in the H2 of FY 'twenty one quarter was interrupted by the second wave. However, recent uptick in indicators like PMI, exports, GST suggests that economic activity is showing signs of recovery in Q2 of FY 'twenty 2. The easing of Q1. Supply side pressures, gradual rise in pent up demand and expected acceleration in the face of vaccination should see improvement in economic activities. 1st. Downside risk in the form of 3rd wave, limited direct fiscal support and rising inflation continued to remain a challenge. First. We believe that the government's targeted fiscal support and the RBI's accommodative monetary policy should support economic recovery. 1st fiscal quarter. The market estimates GDP in the range of 8.5% to 10.5% for FY 'twenty two. Quarter. Now let me take you through the aluminum industry overview in slides 1213. The global production in H1 CY 'twenty one grew by 6% year on year to 34,000,000 tonnes, led by a 9% increase in production in China and a 3% growth in the rest of the world. Global consumption in hycwenty 21 also rebounded sharply by 40% year on year to 34,000,000 tonnes due to the low base effect. First In H1, CY 'twenty one, the Chinese consumption grew by 12% year on year, while the rest of the world grew by 18%. With both production and consumption at 34,000,000 tonnes, the markets were balanced as the Chinese deficit of 300,000 tonnes was offset by a surplus of 200,000 tons in the rest of the world. Over in Q2 CY 'twenty one, the overall world consumption saw a growth of 12% year on year due to the base effect reaching 17,500,000 tonnes, while production expanded by 7% year on year 16,900,000 tonnes. Hence, in Q2 calendar year 'twenty one, the markets were in a deficit of 600,000 tonnes. 1st fiscal quarter. In the world, excluding China, consumption grew sharply by 33% year on year to 6,500,000 tonnes primarily due to the base effect. First. The production grew by 4% year on year to 7,200,000 tonnes, leading to a marginal surplus of 300,000 tonnes. In China, consumption grew by 1% year on year to 10,600,000 tonnes. Demand for first time. ICE vehicles in the auto sector has softened due to the shortage of semiconductors and the withdrawal of some of the subsidies offered by local governments. 1st quarter. However, the Chinese government's encouragement for EV and Renewables, especially solar, is expected to boost Chinese consumption. 1st quarter. Production increased by 9% year on year at 9,700,000 tonnes and the consumption of 10,600,000 tonnes quarter. In Q2 calendar year 'twenty one, the Chinese markets were actually in a deficit of 900,000 tonnes. With the market's balance and improvement in global consumption, aluminum prices continued to grow by 14% year on year to 2,399 per tonne in calendar year 2021 from an average of 2,096 per tonne Q1 of calendar year 'twenty one. On a quarter to date basis, the Q3 CY 'twenty one global aluminum price is continued to rise and have reached $2,487 per tonne. Coming to Slide 12. Quarter. In Q1 FY 2022, the domestic demand is estimated at 884 PT, a 54% growth year on year on account of the low base effect. However, if you compare Q1 acquired 2022 sequentially, the consumption dropped 18% year on year due to the COVID second wave. Lower automotive production has led to a 10% drop in the quarter compared to Q4 of FY 'twenty one. Furthermore, with lockdowns and faced unlocking in the country, first. Trade markets were also soft during the quarter. Consequently, Electrical, Digging and Construction, Consumer Durables, Industrial Machinery 1st were also affected in this quarter. However, the bright spot in this quarter was a strong demand in Food and Pharma Packaging. 1st quarter. Hence, sequentially, the sales of domestic primary producer was lower by 19% year on year at 173 kt. The 1st quarter. Due to the weak due to weak demand sentiment, imports excluding scrap also sharply degrew by 27% year on year in this quarter. Going forward, with declining COVID cases, economic sentiments are likely to revise. Moving to Slide 14, the global FRP demand is expected to grow by 9% in calendar year 2021 versus the contraction of around 4% in calendar year 2020 on account of recovery in demand based effect. You must have gone through the details of the segment wide end market outlook in Novelis in the Novelis presentation. I will just quickly refresh some specific end market outlook of calendar year 'twenty one. The overall market demand for beverage can sheet is estimated to grow by approximately 3% to 6% in calendar year 2021 as beverage can continues to show its resiliency with increased demand for sustainable and medium can across all regions. Due to the higher segment demand in this segment, significant hand making expansions have been announced in the next 2 to 3 years. The automotive segment is estimated to grow between 20% to 25% stage is expected to have a short term impact on OEM production and demand. The overall demand in the aerospace sheet 1st quarter is expected to grow in the range of 5% to 10% in calendar year 2021 as air travel starts to normalize. First. As vaccine rollouts and deposits led towards increasing consumer air travel, demand for premium aerospace from OEMs is expected to remain at cylinder levels at fiscal 2021 with an uneven recovery to follow. India FRP demand will grow year on year due to the low base effect, while it is expected to decline sequentially quarter due to the impact of lockdowns in the country in Q1 FY 'twenty two. Demand is strong in Pharma and Food Packaging Industries, quarter, whereas certain segments including consumer durables, automotive, P and C sector faced headwinds this period. Quarter. Domestic demand of FRP is estimated to recover in Q2 FY 2022 in a phased manner with unlocking in the country. 1st quarter. Turning to the copper industry globally on Slide 15. In H1 CY 'twenty one, global consumption of copper quarter. Increased by 9% year on year due to the base effect. China production and consumption both grew by 9% year on year. 1st quarter. World ex China production grew by 2.5% while consumption grew by 9% year on year. The economic rebound week. The push in demand for EVs and green energy has also boosted the global process of copper lifetime global prices of copper to a lifetime high of $10,700 a tonne in year 'twenty one. 1st In Q2 calendar year 'twenty one, global production of copper grew by 6%, whereas the consumption increased by 5% year on year to 6,100,000 tonnes as compared to the corresponding period last year. This was mainly on account of recovery in the world ex China, where consumption grew quarter at a faster pace by around 22% year on year. Chinese demand grew by 6% during the same period quarter on account of lower physical demand for copper in China due to the steep rise in global prices of copper. 1st. On concentrate supply side, there were major disruptions at the mine in Chile and Peru, which contributes about 40% of global production of copper. The first. The COVID situation as well as the community unrest in Kelu has caused several mine disruptions in the 1st few months of the year. 1st quarter. The spot TCRC was very tight during Q2 challenge year 2021, reaching a level of $0.09 to $0.10 per pound. First. However, Chinese smelters advancing their maintenance shutdown plans and replacing the concentrate with Vistra quarter has led to an improvement in the spot TCRC to reach $0.15 to $0.15 of prong level during July of 'twenty one. The first time. The GCRC is expected to improve further from these levels in the second half of calendar year 'twenty one first time that some new copper mines are being commissioned in the South American region. Moving to Slide 16 on the domestic side. The overall domestic market grew by 30% year on year at 118 KT versus 91 KT in the corresponding period of last year. 1st quarter. On a sequential basis, the domestic refined copper demand degrew by 27% quarter 2018 KT compared to 161 KT in Q4 due to lower demand on account of COVID related lockdowns in the country. First. This demand is expected to improve steadily to a normalized level in the next few quarters due to the declining COVID cases and the phased unlocking in the country. Praveen will now take you through the performance highlights of each of the business segments. Thanks, Adesh. In this part of the presentation, I shall take you through the operational and financial performance of each of our businesses. Starting with Novelis on Slide 19. Novelis clocked our record quarterly financial and operational performance. First. Novolus recorded shipments of 97,380, up 26% Y o Y compared to the corresponding quarter of the last year. Quarter. On the shipment mix in quarter 1, cans were about 58%, auto was about 17% of total volume, quarter. Specialties were 23% and payroll was about 2%. We are doing equally well on the various ongoing expansion projects. First. Automotive Finishing Lines in Luxury U. S. And Changzhou, China were commissioned last year and now are ramping up in line with expectations along with customers' qualifications. The recycling, casting and rolling expansions in Brazil 1st are on track and are likely to commission in the current quarter. Our expansion project in Xinjiang, China, quarter, which is a part of our overall Asia Group strategy, is expected to begin in the current year. This will entail an investment of about $375,000,000 Q1 and is expected to take about 3 years to complete. This project will include a new coal mill, automotive casting house, recycling capabilities and hot mill upgrade in China. On Slide 20, you can see the competitive financial performance trend of Novelis, quarter reflecting its record quarter performance in terms of revenue, EBITDA and year over year. This is on the back of higher volumes, product mix, favorable metal benefits and a $47,000,000 gain related to a favorable decision in a Brazilian tax liability. Quarter. Excluding this one off gain, the EBITDA was $5.22 per tonne in this quarter. Q1. Slide 22 shows a few details of the performance of the Indian Aluminum Business segment. The aluminum metal production was Q1 2019 KT, up 9% YOY and 1% sequentially. The production of both new products was also higher by 150 percent YOY at 86 kt in this quarter. Alumina Production stood at 718 kt in quarter 1, 15% y o y and 3% sequentially with the ramping of a foothold post implementation shutdown in the previous quarter. 1st. On the market front, the domestic market was rather soft due to the 2nd wave of pandemic, although it shows a huge growth compared to the current earning quarter of the last year, quarter, which was even more impacted by the 1st wave and the lockdowns. The share of domestic sales in this quarter was 44%. First. VMP sales were at 82,000,000, which was 27% of the total metal sales in quarter 1. 1st quarter. Moving on to the financial performance of the Indian Aluminum business on Slide 23. This segment posted a revenue of INR6267 crores in this quarter, quarter reflecting growth of 41% y o y on account of higher global aluminum prices. Aluminum EBITDA was at a record high of INR2,352 crores, quarter of 142% YOY on account of favorable macros, better efficiencies, improved product mix and a strong market recovery. 1st fiscal year. The EBITDA margins in this quarter was highest in the last 13 years at 37.5%. 1st. Moving to Slide 25, the overall copper cash flow production was at 3 kt in this quarter, up 52% y o y. Quarter. Relative to the capacity, cathode production was low due to maintenance shutdown in Smelter 3 during the quarter. This smelter has now successfully ramped up and is performing well. 1st fiscal quarter. On a competitive basis, production of CC Rods was higher by 67% year on year at 44% basically, while sales stood at 46.18, higher by 50% Y o Y for the corresponding period of last year. Quarter. Sequentially, overall metal and PC record sales were low due to lower production and costing of the domestic market in this quarter. The financial performance of the copper segment is on Slide 26. Revenues were up 134% yoy@7,094 crores because of higher global prices of copper. EBITDA was at INR 2.61 crores in this quarter compared to INR 66 crores in quarter 1 of FY 'twenty 1. 1st. Let's turn to consolidated financial numbers for quarter 1 on Slide 28. Hindalco reported an outstanding consolidated financial performance in this quarter with revenues of INR41,358 crores, INR6,790 crores and back from continuing operations at INR3,254 crores. 1st quarter. Detailed quarterly comparative financial numbers are attached as an annexure through this presentation on Slide 34. First. The Indian businesses of Hindalco also reported a remarkable performance in this quarter with revenues of INR 13,349 crores, EBITDA of INR 2,500 INR 13 crores and profit after tax INR 10.37 crores. These details are also provided as an extra to this presentation on Slide 35. 1st. Slide 29 shows the reduction of over INR 16,000 crores in our consolidated gross debt and over INR 10,000 crores in our consolidated net debt from the peak in June 'twenty levels. This, along with increasing EBITDA, has led to a substantial improvement quarter. The net debt to EBITDA ratio from a peak of 3.83 times in June 2020 to 2.36 times at the end of June 2021. 1st quarter. The improved performance and strong balance sheet has resulted into a rating upgrade of both Novalis and Hindalco by their respective segments. First. Let me now hand over this call back to Satish to summarize and take you through our key focus areas. Yes. So let me conclude today's presentation with our key focus areas. We continue to deliver a strong performance across all our business segments while maintaining safe and stable operations, supported by improved macros and operating efficiencies. Our focus on cost optimization has helped the company to position itself the first and the first quartile of the global cost curve. With the prime driving force towards stakeholder value enhancement, 1st. Hindalco continues to focus on profitable growth through its investment in recycling, debottlenecking and organic expansion in the stable and predictable downstream businesses in India and Novelis. Hindalco's product mix diversification will help enriching its product portfolio by increasing the share of high end value added products in the overall product mix quarter so as to strengthen its position as the world's largest aluminum downstream company. Another critical area where Hindalco has done quarter. The market is well over the last few years is on the ESG front. Hindalco continues to focus on its ESG commitment while creating a sustainable, greener, stronger and smarter world together and strive to be the most sustainable aluminum company in the world. Quarter. Lastly and most important, Hindalco is focused on strengthening its capital structure with a strong balance sheet accelerating the pace of deleveraging 2 robust cash generation in line with its capital allocation framework. Thank you very much for your attention, and we will now open up for questions. 1st first. We have the first question from the line of Thomas Singhal from Bank of America. Please go ahead. So, yes, thank you very much for the opportunity. Good evening, everyone. So, few questions are there. I don't know why quarter. And on a Q2 basis, there seems to be buildup of around 4,500 crores. Q4. Yes, you're right. So in the Indian operations, the main reason is the proper requirement of working capital. And this is largely driven by the higher LME in copper. You remember that it's really gone up very high. This has resulted into extra working capital blockages. But you must remember that copper working capital is funded by a very low cost highest credit and dollar denominated working capital loans. So really speaking, it doesn't really matter much for us. And this is working capital requirements are transitory. We move up and down with the LME movements. So it is not really a cause of major worry for us. Okay. So if I were to exclude this, will it be feasible on a debt side, using this buyer first. When you look at it in rupee terms, you see Novalis debt is the same as before. But time. When you convert this into rupees, there's a little bit of a dollar rupee exchange impact as well in the on the rupee side. There's a 1,000 crores coming purely arising from that. So first, that's the other part of it. Okay. Secondly, one data reconciliation. So So you mentioned in the presentation on the first line that the business is 2.13 crores. But when I'm is the segment deliveries for aluminum and copper. It's also 2.1 per row. So can you help me I think probably it includes other income as well call, which is a Yes, yes. So really speaking as we mentioned at the beginning of this call, one change that we have made in the definition of segment EBITDA is quarter. That corporate overheads that were earlier apportioned between the two businesses in India, they are no longer apportioned there. So it comes as a kind of unallocable expense below the segmental EBITDA line. That minus the treasury income. So for example, in this quarter, we had about INR 200 crores of the corporate overheads, which is coming below and INR 100 crores of treasury income, which is coming in there. Quarter. There's a net of INR 100 crores, which is a negative net unallocated expenses, which has to be reduced from the overall segment EBITDA. First question. Given the cost pressures and the inflationary concerns, can you talk about how should we look at cost of production in aluminum Q1 over the next quarter. And given the alumina prices are also high, can you change your hedging strategy here? Thank you, Ven. First. So if you remember last quarter's guidance, so Q1 to Q4, the cost was up 4%. First and what we are seeing is Q2 to Q1, the cost will be up 5%. First. And because inflation is starting to kick in because coal is sequentially up by 8%, CT COVID is the biggest culprit up 25%. So we are seeing Q2 at 5% more than Q1 cost of production. First part. 2nd part, hedging, as I said, this year, we don't intend to do any more. Last time, whatever I had said for this year, which was 32% at an average of 19, 13%. We have not done anything. Next year, first. We were at 18%. We have now done 5% more at the in fact, we just did it last few days. It got about 2,560. Week. So we are 23% hedged at 22%, 29%, next year. So we have more or less reached our insurance level for next year. Thank you very much. Yes. Thank you. First. So copper, you see, is driven by many value drivers. And therefore, sometimes some of the things like sulfuric acid prices, what is happening on the DAP side. All these things also sometimes make a difference. But you're right, we in a broad sense, you should first. See a sustained performance now. Looking at what has happened in July, we are expecting Q2 to be a reasonably operationally a strong quarter. First On the other hand, of course, the market has been a little soft, as we mentioned in the call earlier. Going forward, again, market is likely to improve. First let's wait and watch how much does it improve. The more the domestic market improves, the more is the profitability for us. First. Exports are less profitable in copper business. So really speaking, it's driven by many of these factors. If you want the kind of guidance quarter. On the new definition of copper segment, as we have called it out now, you should expect INR 300 crores or thereabouts to be the normal level of reported EBITDA now, maybe a little higher or lower depending upon how these things work. Some of the accounting noise also comes in copper business reporting. Quarter. So really speaking, in some cases, you will see derivative accounting playing some role there. But if the LME and the rupee remains stable, first. Yes, yes. Roughly about main KK is the quarterly production that we target. But we also do some kind of additional sales from So the sales is around 100, production is around 90, yes. Okay. First. Pani, a quick start on that. Just want to understand on medium to long term and what sort of statistical stability level would first. So I think that on the debottlenecking side, even we had one line in Renukot shutdown. We have quarter. P. Vijay Kumar:] So we are working on all those. I think from a longer term sustainable strategy, I think you have asked me this question before. We stick to our capital allocation to value added downstream for now. The issue, Sumangal, is not just the LME, it's the source of power and the cost of power as well. Because LME today is at 2,600. I keep reminding people the last expansion was done In 2008, when LME was at the same 2,600. So in 3 to 5 years, when the projects come, LME could drop. So I think we will stick with our strategy of putting most of the CapEx that we will generate during this high end of the period into our downstream value 1st. And just one last question. You've seen some additional update quarter. Our current loans are mostly bank loans, project loans. 1st We are not impacted directly by this credit rating upgrade. Our existing bond is actually due to recommence next year, first. How it can help us in case we decide to raise any money through bonds and refinance 1st, depending upon the cost, etcetera. And those can be availed at a much cheaper rate. So that is how it can help. 1st Thank you. The next question is from the line of Sachin Bari from JPMorgan. Please go ahead. Thank you very much. So my first question is on coal. First. We have recently seen Tumorcoal auction, auction state trade from new blocks. From Hindalco's perspective, sir, is it fully covered on quarter. Any aggressive participation of the company in the Goldblock auction? No, Rakim, we participated in Burafar and we were the only bidder. That's why it does happen. But if you know the process, the government will bring it back. First and then if that is the only one we'll get the cold block. So in Chapala, we got for 5,000,000 and Burapar is also another 4,000,000, 5,000,000. So we would love to get majority of our coal, 75% to 80% in house now of the presentation on the consolidation business online. Can you please relook spending specific question? First. So all I can tell you is Pinakin, we will continue to evaluate. First. And I'll tell you that it's not related to coal. It is very unlikely we will put new first. We are actually if you look at even my remarks, which we are talking about in Aditya, We can get now 130, 150 megawatts of power from pumped hydro. So first. We would like to have to put some additional thoughts and all in Aditya. We will try to do it as a cleaner source of energy. So that's what we are evaluating was coal based. So are these looking at other energies so that we can put more smelting? Aditi and Mahan, yes. First time. It's not related to coal based. So my second question is on copper. Now quarter. Cost of smelting over the years has been, I won't use the word difficult, but it has been a volatile business in terms of quarter to quarter. First and from what is your question, it is volatility. How do you see the future of the compulsory business within the overall Hindalco framework? Will it grow, if it won't grow, will it remain within the company or do you think that at some point of time divestment is positive in the future? So Pirakin, let me just tell you what our next 3 to 5 year plan for copper is. I think that in the next 3 to 5 years, we are going to add further downstream capacity in copper, in copper rod, in copper dew. We are going to add about we are looking at about 100 kt of copper cathode production coming from the scrap route to be added. First. These are the 2 things that we are going to do. So I think that the part of our sustainability strategy. Both aluminum and copper fit in quite well. Both are in high demand for the electrification. First. So this is why we think at least in the next 3 to 5 years, our strategy is to expand copper downstream as well as copper production. So that CapEx should happen over the next 18 to 24 months or is it slightly more to give down? First. I think that we will probably finalize that the copper rod one you are going to see fairly quickly. Thank you. Moving to the next question from the line of Amit Dixit from EDWISE. Please go ahead. First question. I have two questions. First one is on the first. So what kind of digital EBITDA do you expect from this? Look, Ayu, I'm not going to give you our RSA details, but it's 170 kt of high end FRC products that are going to come out of the Hirakud Deepgram complex. What can we do with FRP product lines, if you can scale those products? Yes. So mostly, we are going to do a combination of hard alloys which go into defense and industrial. It's going to do ACTs that go into BNC. It's going to be certain amounts of Canbody stock. So these are probably the 3 major products that it's going to do. Certain amount of price stock is right. First By the way, one thing I wanted to tell you guys in general is that we are flat out on the SRT side trying to meet the local demand. First. Look, this what we announced, which I think I've been talking about good you passed the Board approval today, 1 is the 2nd phase of Girakul, which is 170 kilograms That will take us 2 to 3 years to execute. Simultaneously, the first. The exclusion expansion in Silvana is going on. So I think the next 2 to 3 years, we are going to focus on implementing these 2. And then, of course, the K3 will come as well because the hot mill in Hirakul is about 4.50 K2. So with this expansion, we would have reached 270. So we still have more space to expand in Iraku. Q1. Understood. Very helpful. The second question is on also booking mix, if you can, let me talk about this quarter. How much was Linkage, your own coal and chip factory. And what is the likelihood of Hitmex in 5Q going ahead? This quarter was linkage was 69, e auction was 22, own mine was 5. I think that going forward, the online part will go up a little bit because we are getting now coal from Katokia as well. So that's why may become 10 percent in Q2, Q3. Okay. Thank you very much. And on the 1st quarter. Thank you. Next question from the line was from Hrith Shah from Investec. Please go ahead. First and incremental spill of smelting capacity. Sir, is it possible can you detail more on the first part. Yes. So the first part, I think you should check out companies like Greenco, which I think you probably are following in India. First. In Andhra, they have pumped hydro, so basically to pump the water up and then use it to generate energy. Quarter. And we have been trying to work with them to see if they can at least replace one full unit of Asithia, which is 130 to 150 gigawatts. First. And if we can get that at a reasonable economics, that is the project that we have been discussing with you. And on the second part on carbon capture and sequestration, the fact that makes coal first Dirty is the high CO2 emission. So there is a lot of work going on in seeing how you can capture the carbon and sequestered. It's not a new concept. The cost of sequestration should be quite high with any Western projects going on. But first. As those things pick up momentum and the technology evolves, we are trying to work with some companies to see if that we can do a pilot in India as well. That's so sweet. Just as a general question, Hydro, any specific numbers on the commodities you are looking at for a hurdle rate for us to shift 1st So look, our something around INR 4 to INR 4.5 rupees first first question. What sort of IRR are we looking at over here? Announcement to 2 70. So can you help reconcile the second half of the year's issuance of the recent announcement And finishing the first was quickly. So there is some lifting leg over there, if you could help me to sell that from a base. They don't mix extrusion with rolling extrusion is completely a different process from billet. So the hot mill is for rolling products, so 3.50, 4.50, we are at 100, 100 and 70,000,000 added, you're at 270,000,000. So you have another 180,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000 to do for another cold bill further down the road. That's the reconciliation to the Hiraku document. 2 major measures. So the IRR of the project with the current forecast, we are looking at should be around north of 15%. Sir, is this Hindalco Incorporated? You could say because it depends On the pricing and the product mix, but IRR of 15% on a base case, I think we're quite happy to launch the project. First. Yes. There are 3 trade cases going on right now. So the first one is under 1st Malaysia for Wire Rod, Oil Stock from ASEAN as well as FRP from China. So all 3 are in fairly advanced stages. So I guess we'll just have to wait and see the government is quite serious about these cases. First. The next question is from the line of first question. So I think the presentation you have mentioned, it has been commissioned in this quarter, the 16th quarter. So have you tied up buyers for alumina or quarter. 1st. So as I had mentioned before, some part of it will be internal, some part we are talking to 1 domestic user of alumina quarter. Sir, what is that? So it will be sold in the margins? By the way, this week, it is already starting to produce. I think that we will sell it initially to a domestic user of alumina. I don't know if I can be more clearer than that. First question. My second question is actually for Steve. One clarification from the earlier novelists 1st call. I think in 3 years' time, we will be at $20,000,000 plus annualized run rate of synergies from Alaris. And I think you highlighted that we will achieve $60,000,000 annualized EBITDA run rate again in 3 years' time. So how should we look at it? The first trial without synergy EBITDA will be just about $130,000,000 or Actually, beta could be much higher including the synergies for Alaris. Yes, yes. Question. I don't know whether I'm helping with your question. No, no, that's helpful. Thanks. Week. I don't know if the operator dropped off. First. Yes. We were waiting, wondering whether you dropped it off, operator. First question. I think go to the next one. There's a problem on this line. First. The next question from the line of Vishal Chandra from GAM Capital. Please go ahead. Yes. Just to make sure that we understand, we had an agreement to sell first couple of months for €310,000,000 And then there was a dispute over €100,000,000 quarter. We closed the transaction, received the $207,000,000 and $100,000,000 is what's left to be paid through arbitration. We feel very comfortable with our what we can foresee would be the outcome in arbitration 1st quarter. Based on the merits and facts of this case, and we continue to feel very good about that. With that said, that process takes And so, while we did have some discussions with the party to quarter. And if you're going to settle this today or in the very near future, dollars 45,000,000 and we think that would be 1.5 to 2 year timeframe. So nothing from a factual standpoint of exchange. Quarter. It's just more it was a way to move on and follow-up at a level that you feel very comfortable with today. First. So this sounds very convincing honestly. Just to tell you, is that if we have a very strong case, why you lead that €1,000,000, number 1? First. Number 2, if we have a weak season, eventually what we expect is that the entire transaction of LLL, Net op divestment has been very expensive. Sudhuk, maybe I can I think that the issue that Steve is trying to outline is that the time value of the money? So If they do the arbitration which lasts over 2 years with an entity that is facing, as you know, some pretty first clear financial stress versus if they are trying to do a settlement, sell Adafell assets to someone else and we can The emphasis on what Steve is saying is in the very near short term, we can get $45,000,000 Then to our stakeholders, that may be a better option Then trying to wait and fight an arbitration with the company that we are not sure will how strong they are going to be or survive going forward. So that's the sort of judgment call we are taking. So if we don't get the $45,000,000 in the next very short term, we will proceed with the arbitration. First. So this is not a sort of this is a receivable that we will be sort of taking a call on it at the end of every quarter. First question. The next question is from the line of Gopalan from MDI Life. Please go ahead. First. I'm sorry, you're saying that the realization seems better than what you have calculated, is it? First. Remember that we have about 80 kt of downstream product as well that gets an additional EBITDA. I was just sequentially, I was checking. So is there any change in the mix sequentially? No, actually, see, sequentially, because in this quarter, we had to do a the sales have been a little bit lower, if you notice at 303 year. Because we had 10 ks stuck at the port. So and the domestic market was weak, so we expected a little bit more. So really, the discount in this quarter has been little bit higher than the discounting in Q4. So any higher realization has been purely because of LME. Thank you. The next question is from the line of Sathir Jain from Amex Capital. Please go ahead. Coal mill is already there. This is adding casting capacity, remelt, Coal mill and some finishing equipment. Okay. Hot mill is already there, you said? Yes. I mean, the hot mill that we got from Novelis right at the beginning of the Hirakut project, first. It's a 450, KT hot mill. So the first phase of the project was about 100 and KT of rolled products that we set off the ground. And now with the help of Novelis experts, we are now launching the next 170 ks, and we are going up the value added product level. I keep saying there is a third coal pit that will come in after this one finish. Okay. And we when you look at question. That is basically applying EBITDA a ton close to what you see in your Nobel laureate bookings. First. Is that are you pricing in increased pricing in India or is it just the advantage of having a lower cost base in Middle East? So the cost actually is quite favorable. But I think the real first. The differentiator here is the type of products we are selling. So this 170 kc, nearly 50% of it will be exported. So it is a much higher end product with higher EBITDA per ton. In fact, For the first time, we're going to be selling Canbody stock as well, which is a quite much higher EBITDA per tonne than what we are normally used to in India. First. It seems that the volume mix, I mean utilization was close to 90% first. On the second question, did you see any material decline in autobody sheet first No, we do not see any material decline at all. In fact, first time. The semiconductor shortage is actually not going to be as bad as it was 1st In the quarter that we have just reported, things will get better. Remember, we are now starting commercial shipments from the new lines that have been commissioned. Customers are actually very eager to qualify the line soon, so we will start having first. P. Vijay Kumar:] The line there is wide, I think your calculation of 95%, I hope you're taking into account that the China line is producing commercial coin now the new one. Yes. Because I was just trying to say that we are starting to have shipments From the new line, so right now, I mean, we are already we are also starting to see the impact of the 300 kt capacity expansions. First. So we are in a good place. I mean if you are pointed that we are seeming very rapidly constrained on the cash side. I mean Thank you. The next question quarter. Congratulations on all time high numbers and also recently hitting a 1 last row market share. I think a lot of shareholder wealth, I think management team has done a fundable job first question. So a few questions on obviously the future growth from year on. You mentioned on upstream capacity expansion by adding costs, where you are adding suitable capacity. So Will this model will be applicable for your other smelters also and you will keep evaluating this first. Okay, because I think there's a lot of demand and you are already operating full on the upstream capacity and there lies an opportunity in the integration side. First. So what is the road map for next 3, 4 years for an upstream capacity? Look, honestly, I'm saying again, our majority of the management bandwidth is focused on downstream expansion. I think on the upstream side, Jetiya and Mahan, the 2 new splinters, we have enough land and we have enough water. And these are the places we will evaluate whether We get like pumped hydro or something or some gas, natural gas pipeline coming in, and we will evaluate it at that time. But 2. Please, I want to repeat that majority of our bandwidth is focused on this downstream expansion. First. Sure. 2nd one on the tool price which recently has seen a sharp increase. So what kind of cost P. Vijay Kumar:] I said next quarter 5% more than quarter 1. First. And the last one on the net debt increase you mentioned mainly driven by copper working capital requirements. So Now since the coffee price is adjusted to a high level of $10,000 odd chance, we do see some unwinding 1st. Over next few quarters, does your EBITDA and rates remain strong? No, no. So in copper, AC, LED remains where it is. First. You will not see a further drain on the working capital, but it will remain at that high level. But as I mentioned in copper, 1st. It is funded by Bayer's Credit, which is available at a sub-two percent kind of a funding. And it is because we don't have to really hedge or anything. It's an offset which is available. So really speaking, the cost of the extra working capital is not very high for us. I mean, it's counted in our debt numbers is what Praveen's point is, but it's not really dead that way because we have a very cheap working capital working quarter first. So again, see, there are 2 key aspects to it. Traditionally, we are generating good cash flow both in Novelis and India. So typically, this cash flow is not fully utilized for CapEx, etcetera, should reduce our debt, at least net debt, even if it is non cross debt. Now in quarter 1, what has happened is both in Novelist and in copper business in India, working capital requirement has gone up because of the LME of both copper and aluminum going up. Q1 cash flow has largely been consumed by the working capital requirements at both. In fact, it has added to our net debt. 1st. Going forward, if the LME doesn't move up from here and if we keep generating the kind of cash we are generating, obviously, you will see some net debt reduction. And if the LME comes down again for whatever reason, let's say Hindalco, that will help in blocking the cash within the already sharing the copy. Is there any fixed number for INR52? INR 2700 crores. First. And what was the MJP premium realized in Q1? Realized is a difficult one, depends on many things, But NJP is running, I think, currently at 100 and 60, 170. So when we export 1st most of our contracts will get the full NJP. Domestic is different because it's a net realization. But of course, we are getting the full NJP. 1st quarter. Thank you. Ladies and gentlemen, this time constraint with your last question. Quarter. I would now like to hand the conference over to Mr. Sai for his closing comments. Yes. So thank you, everyone. And I think, as you know, we are in a very Favorable environment, both in Novelis and in the Indian business. And I think that first. As long as we can take care of our employees and handle this COVID situation, which has not really gone away. And I think that the people that can manage the situation properly are going to benefit. So the market will be there and the demand will be there. So I think that that is our focus to make sure that we keep our employees and our plants safe and operating and then take advantage of the very favorable macro environment that exists. So thank you very much for your attention. Thank you. 1st quarter. Thank you very much, Mr. Kumarajan. Ladies and gentlemen, on behalf of Hindalco Industries, I conclude this conference call.