Q4 20/21

May 21, 2021

Ladies and gentlemen, good day and welcome to Hindalco Industries Q4 FY 'twenty one Earnings Conference Call. As a reminder, all participant lines will be in 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 from Investor Relations of Hindalco. Thank you and over to you, sir. Thank you and a very good evening and morning to everyone. I hope you all are safe and in good health. On behalf of Indalco Industries, I welcome you all to this earnings call for the Q4 and financial year 2021. On this call, we will refer to the Q4 investor presentation available on the company's website. Some of the information on this call may be forward looking in nature is covered by the Safe Harbor language on Slide number 2 of the said presentation. In this presentation, we have covered the key highlights of all our business segments Q4 and the financial year 2021 and a segment wise comparative financial analysis of India Business and our overseas subsidiary, Novelis. All prior year financial numbers have been regrouped or reclassified as per the Ind AS. We have with us from Indalko's management, Satish Bhai, Managing Director and Mr. Praveen Maheshwari, Chief Financial Officer. From Novelis's Management, we have Mr. Steven Fisher, President and CEO and Mr. Deva Oja, Chief Financial Officer. Following this presentation, the call will be open to any 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. Yes. Thank you, Sudhir. Good afternoon and morning, everyone. Thank you for joining today's conference call on Hindalco's Q4 earnings. So I hope you and your families are keeping safe as we continue to manage So to start with, I want to give you an update On the actions we are taking to combat COVID-nineteen on Slide 56. With the 2nd COVID wave surging through India, Hindalco's management is fully engaged in efforts to take care of our employees and their families. We have also extended strong support to the communities around our And to various government bodies. So starting on Slide 5, vaccination is the key to protect our employees And Hindalco has facilitated over 200,000 vaccines with 80% of the eligible employees, that's about 45, and families vaccinated, including contract workers. Hindalco has also enhanced the medical coverage to cover Special reimbursements for home care and to meet all hospitalization expenses beyond insurance. This is applicable not only to our employees and families, but also to contract workers, 3rd party employees and their families. Other steps including a dedicated hotline for teleconsultation with Apollo Hospital, a 20 fourseven help for medical and mental health support and a team of 300 dedicated volunteers to help those in need. We have also announced ex gratia benefits for to support families of deceased employees, again, including contractual workers For housing, medical, schooling and other expenses over the next few years, all essential and safety steps have been implemented at our facilities to ensure minimal impact on our operations. Coming to Slide 6, on our actions for helping the community, Novelis has donated 1,000 oxygen concentrators, which by the way have since yesterday already been distributed to various In various cities and villages to government hospitals and Hindalco has procured another 1500 oxygen cylinders that are being distributed to various hospitals and COVID care centers around our plant locations. We have supplied 1600 tonnes of liquid oxygen so far From our copper plant at the age to hospitals in Gujarat, we have revised the defunct Karaya oxygen plant in UP and are now supplying 300 refilled oxygen cylinders daily to hospitals in UT. PSA oxygen plants are also being set up in Utkala and Renukot. We have a dedicated medical team of 77 doctors and 275 paramedics working day in and day out. Over 450 hospital beds equipped with ICUs, ventilators, bypass and oxygen concentrators have been made available for the community across our various locations. We are also setting up RT PCR testing labs And CT scan facilities in Utkal to support the larger community there. So with that, I'm going to switch over on Slide 7 To some key highlights of our business for Q4 FY 'twenty one versus the corresponding quarter last year. Hidalgo delivered a record financial performance in Q4 across all businesses backed by improved macros, thrust on operational efficiencies, Cost optimization, better product mix, higher volumes and strong market recovery. Novelis recorded an all time high quarterly shipment of 9 And an EBITDA of $505,000,000 in Q4 FY 'twenty one. EBITDA per ton stood at $5.14 a ton, up 9%, While net income from continued operations grew 186 percent year on year at $180,000,000 Novelis also successfully placed at €3,375,000,000 senior unsecured green bond in Europe for 8 years due in 2029. Novelis also received credit rating upgrades from Moody's and S and P in March of 2021. Moving on to Hindalco's India Aluminum business performance in Q4 FY 'twenty one. Business EBITDA for Hindalco India Aluminum was at a record high of INR1610 crores, up 54% year on year. The EBITDA margin was at a healthy 27%, up 729 basis points year on year. This margin was the highest in the last 12 quarters. Metal sales were up 5% at 329 kt With record value added product sale at 92 kt, up 21% on a year on year basis, supported by the continued revival of the domestic market. Our 500 KT Utkal expansion project is on track with mechanical completion by this current quarter end and commercial production to begin in Q2 of the current financial year. Turning to the quarterly performance of the copper business On Slide number 8. Catawatt production was at 97 kt, up 28% year on year on account of stable operations. Metal sales was at 107 kt, up 24%, while copper rod sales were in line with the corresponding quarter of the previous year. Copper EBITDA was recorded at INR269 crores in Q4 of FY 'twenty one. Coming to the quarterly consolidated performance, the business EBITDA was up 33% year on year at INR 5,597 crores. PBT from continuing operations before exceptional special items was up 41% year on year at INR 3,134 crores and consolidated pack for continuing operations before tax affected exceptional and special items was up 42% year on year at INR18.66 crores. Hindalco continues to maintain a Strong treasury balance of around INNOVALIS and INNOVALIS INNOVALIS IN INDIA at the end of March 2021. The consolidated gross debt was down by around INR 18,200 crores, while net debt was lower by around INR 14,900 crores from the peak on 30 June 2020, resulting in a significant improvement in net debt to EBITDA to 2.59x at the end of March 21. Cristal upgraded Hindalco's credit rating outlook to positive while reaffirming its AA rating. On global recognition, Hindalco has been included in the S and P Global Gold Class category as a sustainability leader in the Dow Jones Sustainability Yearbook in 2021, reflecting our strong commitment to ESG. Turning now to the broader economic environment in Slide 10. While global economic activity is gradually recovering from the pandemic induced slowdown, it remains uneven across countries and sectors. The GDP growth is projected to contract by 3.3% in calendar year 'twenty and is expected to rebound To 6% in calendar year 'twenty one and 4.4% in calendar year 'twenty two as per IMF's latest forecast. The global output is projected to reach its pre pandemic level by mid-twenty 21. The rebound in 2021 will be supported by ongoing vaccination drives, sustained accommodative monetary policies and sizable fiscal stimulus. A huge U. S. Fiscal stimulus of $1,900,000,000,000 is expected to have a positive spillover P. Vijay Kumar:] However, 2021 will be a year of divergent recoveries. This recovery will be largely contingent on the pace of vaccine administration and its efficacy against emergent variants of the virus. As per IMS, China with 8.4% growth and India with 12.5% growth will lead this recovery Within emerging economies, while the U. S. Will lead the recovery with a 6.4% growth rate amongst the advanced economies, thanks to the massive fiscal stimulus. Multi speed recoveries are linked to stark differences in the pace of our vaccine rollout, The extent of economic policy support and the resurgence of virus and containment measures as well as structural factors. China has already returned to its pre pandemic GDP levels of 2020, while the U. S. And India are expected to return to pre pandemic levels by H2 of 2021. Containing the resurgence of COVID cases, especially the new variants, remains the key focuses for governments globally. On the domestic front, the 2nd COVID resurgence continues. Thus, the key focus now is on containing the of the 2nd COVID base to mitigate its impact on the economic recovery. The GDP growth contracted 16% year on year in H1 FY 'twenty one with only a marginal recovery of 0.4% was seen in Q3 of FY 'twenty one. Economic risks have been mounting amid state level restrictions and partial lockdowns due to which services, particularly those which have high contact risk, mainly hospitality, travel and tourism have been impacted. This has had a ripple effect on manufacturing as well. Early high frequency indicators like PMI data have eased in the month of April compared to March. Contraction in fuel demand, GST, ebay business and certain employment indicators in April suggest that the economy has started to feel the pain. The second COVID wave adds uncertainty to the Q1 FY 'twenty two outlook, but recent data suggests that the worst may be over. The RBI has stepped up and announced liquidity support measures for health care sectors and support for small enterprise and borrowers to counter the crisis. Stepping up the vaccination drive remains the biggest stimulus for economic recovery in the country. Let me now take you through the aluminum industry overview on Slides 1112. The global production in calendar year 'twenty, The world grew by 2% to around 65,000,000 tons led by a 4% increase in the Chinese production, while the rest of the world growth was flattish. Global consumption declined by around 3% to around 63,000,000 tonnes Because of contraction in demand of nearly 12% in the world ex China, partially offset by the Chinese consumption growth of 4%. Consequently, while China was in a deficit of a little over 1,000,000 tonnes, rest of the world was in a surplus of 3,000,000 tonnes. Hence, the globe had an overall surplus of 2,000,000 tonnes in calendar year of 'twenty. It must be noted that in Q1 CY 'twenty Accounted for the majority of the surplus coinciding with the onset of COVID-nineteen last year. Hence, with the strong stimulus measures around 20% of the world's GDP. The economic sentiments were lifted and the global surplus has become narrower over the year. In Q1 of CY 'twenty one, the overall world consumption saw a growth of 16%, Largely due to the base effect reaching 6,200,000 tonnes, while the production expanded by 6% at 16,800,000 tonnes. Hence, there was a very small surplus of 600,000 tonnes. World excluding China, the consumption grew 5%, supported by growth in auto, electrical and consumer durables demand. The production grew by 1%, leading to a marginal surplus of only one of 0,100,000 tonnes. In China, strong automotive, real estate and solar demand led to sharp growth of aluminum consumption by around 27% year on year to 9,100,000 tonnes, while the production grew by 9% year on year to 9,700,000 tonnes leading to a surplus of about 500,000 tonnes in Q1 of calendar year 'twenty one. With the improvement in global consumption, aluminum prices have recovered sharply by 9% to $2,096 per tonne In Q1 of calendar year 'twenty one from an average of $19.16 per ton in Q4 of calendar year 'twenty. On a quarter to date basis, the Q2 CY 'twenty one global aluminum prices continue to grow And I've reached about $2,370 per ton. Coming to Slide 21, the domestic aluminum industry In Q4 of FY 'twenty one, it is estimated to reach the highest ever sales in any quarter On the back of a strong recovery in transport and consumer durables. The import of scrap particularly is likely to witness a sharp growth Of 20% to 415 CRATI, given the healthy growth in the transport and auto sector, While imports excluding scrap is likely to grow by 44% to 240 kt, it is estimated that the domestic producer sales growth will be around 12% year on year at 4.22 kT. The government stimulus package with a strong Trust on infrastructure, housing and manufacturing sectors is helping the revival of economic sentiment. Auto and Packaging demand has continued to remain robust in line with the growth in Pharma and Flexible Packaging segments. We are observing some signs of recovery in the demand in the electrical power, building and construction sector. However, the economy may face headwinds as the 2nd wave of COVID-nineteen related lockdowns continue to restrict economic activity. Moving to Slide 13, the global FRP demand is expected to grow by about 8% in calendar year 'twenty one versus a contraction of around 5% in calendar year 'twenty on account of recovery in demand and the base effect. You must have gone through the details of the segment wide end market outlook in the Novelis presentation earlier. I will, however, quickly refresh some specific end market outlook for calendar year 'twenty one. Beverage cans continue to show its resiliency with a higher at home consumption that favors a package mix shift towards increased demand for sustainable aluminum cans across all regions. The overall market demand for beverage can sheet is estimated to grow by 3% to 6% in calendar year 'twenty one. In the automotive market with OEMs focusing on sustainability And consumers adopting electric vehicles, there is an increased demand for aluminum in this segment across regions. This segment is estimated to grow between 25% to 30% in calendar year 'twenty one due to the base effect and continued revival of demand. The semiconductor shortage is expected to have a limited short term impact on OEM production and sheet demand. The demand for premium aerospace sheet from OEMs is expected to remain at similar levels at fiscal 2021 with an uneven recovery The overall demand in the aerospace sheet is expected to grow in the range of 5% to 6% in calendar year 'twenty one as air travel normalizes. India FRP demand is estimated to surpass the pre COVID levels of Q1 or Q2 FY 'twenty in Q4 As the domestic demand continues to revise, stable demand is expected from pharma and food package industry, While the auto and B and C sectors may see some headwinds due to the surging second wave of COVID. Turning to the copper industry globally on Slide 14. In calendar year 'twenty, on a yearly basis, global copper consumption declined by 1% to 23,200,000 tonnes. China consumption grew by 7%, whereas the World ex China consumption declined by 8%. On a quarterly basis, global copper consumption grew by 14% to 5,500,000 tonnes in Q1 CY 'twenty one compared to 4,900,000 tonnes in Q1 CY 'twenty. Chinese refined copper consumption grew by 37% As China was severely impacted by COVID in Q1 of calendar year 'twenty compared to the rest of the world. The WorldX China is still struggling with the 2nd wave of COVID, as a result of which consumption has declined by 2% year on year compared to the corresponding quarter of the last year. On global level, slow recovery was observed in Q1 calendar year 'twenty one, And the average global quarterly consumption has still not reached the pre COVID levels of 6,000,000 tonnes. Throughout the end of 2020 and the opening of 2021, copper rises rose to an 8 year high of around $8,000 per tonne. Slow but continued recovery in copper demand coupled with COVID related mine disruptions compared to smelters It's driving the copper prices higher. On the concentrate side, mines output remains impacted due to COVID, resulting in downward pressures on spot TCRCs, while affecting the entire value chain of customer smelters value chain of custom smelters in the current scenario. Coming to Slide 15, owing to COVID spread, the refined copper market dipped by 24% to 566 kT in FY 'twenty one from 7 50 kT in the last year. Because of the CVG implementation on wire by the government. The share of imports declined to 31% in FY 'twenty one from 45% in FY 'twenty. On a quarterly basis in Q4, the overall domestic market reached 161 kt, which is still lower by 15% compared to 190 kt during pre COVID quarters. In this quarter, sales of domestic producers increased by 2%, Whereas imports declined by 24% on a year on year basis compared to the corresponding quarter of the last year. The market share of imports has decreased to 26% in this quarter versus 32% in the corresponding quarter. Praveen will now take you through the performance highlights of each of the business segments during quarter 3. Thanks, Satish. 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 18, Novelis clocked a record financial performance in both their existing business as well as the acquired business of Eneris. Novalis achieved record operational and financial results on almost all parameters. It recorded an all time high shipment of 983 kt, Up by 21% year on year with a significant progress across all the product segments. We are also progressing equally well with respect to the various ongoing expansion projects. The automotive finishing lines in both Guthrie, U. S. And Changzhou China were commissioned during FY 'twenty one and have started their commercial shipments. The recycling, casting and rolling expansion project at Pinda, Brazil is on track and is expected to be commissioned by the end of the next financial year. The groundbreaking for the new coal mill Project in Xinjiang, China is expected in the middle of next financial year. On Slide 19, you can see the competitive financial performance trend of Novelist reflecting its record quarterly performance on the back of higher volumes, cost control and product mix improvement. This also includes an EBITDA contribution of $60,000,000 in Q4 and $200,000,000 in FY 'twenty one by the acquired Elerbus business. Slide 21 shows the details of the performance of the Indian aluminum business segment. The aluminum metal production was at 316 kt. In line with the sharp recovery in the market, The production of downstream products was higher by 13% year on year at 89 kt in this quarter. Our alumina production was at 697 kt in Q4, 3% lower YOY due to a maintenance shutdown at Utkal Refinery. On the sales front, the share of domestic sales has reached 50% in this quarter. VAP sales were at a record high of 92 kt Reaching 28% of the total metal sales, reflecting a sharp recovery of the domestic VIP market in this quarter. Moving on to the financial performance of the Indian aluminum business on Slide 22. This segment posted revenue of INR 5,969 INR69 crores in this quarter, reflecting a growth of 13% year on year on account of higher global aluminum prices. Aluminum EBITDA was at a record high of INR 1610 crores, up 54% y o y on account of favorable macros, Lower input costs, better efficiencies and strong market recovery. The EBITDA margins in this quarter were highest in the last 12 quarters at 27%, up 7 29 basis points year on year. Moving to Slide 24, the overall copper metal production was at 97 kt in this quarter, up 29% on account of stable operations. The metal sales were also higher by 24% year on year on account of higher demand. The production of PC rods was higher by 7% at 76 kt while sales stood at 73 kt which was in line with the corresponding period of the last year. The financial performance of the copper segment is on Slide 25. Revenues were up 80% year on year at 8,508 because of higher global prices of copper and higher volumes. EBITDA was higher by 33% sequentially at INR269 crores in this quarter on account of higher volumes. Let's turn to our consolidated financial numbers for quarter 4 on Slide 27. Hindalco reported an outstanding consolidated financial performance with Q4 revenues of INR 40,507 crores, Up 38% year on year. Business EBITDA of INR 5,597 crores, up 33% year on year. Before exceptional and special items, profit before tax and profit after tax for continuing operations were up 41% 42% year on year at INR 3,134 crores and INR 1866 crores respectively. The detailed quarterly comparative financial numbers are attached as an annexure to this presentation on Slide 37. The Indian business of Hindalco also reported a remarkable performance in this quarter with revenues of INR 14,471 crores And business EBITDA of INR 18.86 crores, both up around 45% 30% respectively. Profit after tax was at INR 6.53 crores, up 72% year on year in Q4 FY 'twenty one. These details are provided as an amixtures to this presentation on Slide 38. Slide 28 shows The reduction of our INR 18,200 crores in our consolidated gross debt and of INR 14,900 crores in our consolidated net debt from the peak in June 'twenty levels. This along with increasing EBITDA has led to a substantial improvement In the net debt to EBITDA ratio from a peak of 3.83 times in June 2020 to 2.59 times at the end of March 'twenty one. Let me now hand over this call back to Satish to give you a perspective on our sustainability updates Thank you, Praveen. So coming to Slide 30, I would like to share Hindalco's progress across various Sustainability metrics and trends over the last 4 years. On the environment, there's a strong focus on waste, Air Emissions and Biodiversity and Water. Freshwater consumption reduced by 8.5% in FY 'twenty one year on year to 71,700,000 meters cube. With a continuous reduction in the consumption of water at all locations over the years, Hindalco has added 1 more site in our 0 liquid discharge league with a target to reach all sites 0 liquid discharge by 2025. On waste recycling, in terms of waste that is hazardous, non hazardous and bulk waste such as fly ash and bauxite residue, We are committed to 100% recycling. Last year, we have enhanced recycling or waste and usage in other industries to 79%, which is a 15% increase over previous year and reducing the landfill. The commitment is to reduce landfill by another 5% year on year, Moving towards 0 landfill by 2030. On the green cover and biodiversity, the company did very well to increase the green cover By another 5% year on year in FY 'twenty one, with the scientific biodiversity management plan evolving with the IUCN, International Union For conservation of nature at 4 sites, with 3 additional sites getting added every year. Green cover at all sites is being enhanced with On Slide 31, on the Renewable Energy and Safety We remain committed to our target of 100 megawatts of renewable capacity in FY 'twenty two. We are also exploring and evaluating emerging technologies in the space of energy storage, carbon capture and utilization and hydrogen to be used as fuel. The specific energy consumption in aluminum was recorded at 83% in FY 'twenty one from the base year of FY 'fifteen. The LTI FR was 0.46 in FY 'twenty one. We stay committed to 0 harm and have been continuously upgrading Our safety programs to meet international standards and provide the safest atmosphere for all our employees and contract workers. Coming to Slide 33, let me conclude today's presentation with our key focus areas. We delivered yet another strong and resilient performance across all our segments, while maintaining safe and stable operations as we are catching up with a sharp recovery of markets supported by improved macros. The cost competitiveness of Hindalco Smelters continues to position it in the 1st quartile of the global cost curve. We continue to strengthen our balance sheet with robust cash generation both in India and overseas, while accelerating the pace of deleveraging to reach the optimum leverage of 2 to 2.5 times in this sector. The Alaris integration is providing accelerated synergistic benefits Along with positive EBITDA contribution, as we continue to unlock and capture the entire value of this acquisition. This year, Eleris contributed around $200,000,000 to the EBITDA, including energy synergies. We recently announced our capital allocation framework with Clear road map to deleveraging profitable growth via organic expansion and distribution of shareholder returns. Another critical area where Hingalco has done remarkably well over the last few years is on ESG. We shall continue to strive on our 3R model of Sustainability with a strong focus on our ESG commitment while creating a greener, smarter, stronger and sustainable world together. We continue to thrive on our downstream strategy supported by product innovation, complete digitalization, Organic expansions with a diversified product mix and continue to be the global leader in aluminum downstream value added segment. With that, I want to thank you for your attention. The forum is now open for any questions you may have. Thank you very much. We will now begin the question and answer Participants are requested to use answers while asking a question. The first question is from the line of Anup Singla from Bank of America. Please go ahead. Yes. Thank you very much. Good evening, everyone. So my first question is with regards to hedging in the aluminum business. Aluminum prices, this is $24,000,000 $2,500 we are seeing after a 3 year lag. And these are very attractive price levels. So how do you look at the hedging policy for the next year? Would you rather over hedge at these prices given that these are multi year high levels or would you Still stick with your 20%, 25% kind of heading on an ongoing basis? So that's a very good and difficult question, Anuj. So I mean, I think that to answer it, first, I have to tell you that the our view on the macro continues to be very bullish for aluminum. So we really believe after having looked at all the reports and the strong demand in China and the U. S. And the fact that in China, they are very convinced that the production is going to be capped at a max of 45,000,000 tonnes. So we believe that the supply demand tightness is going to continue and hence aluminum prices will remain firm. So That is why we are not going to over hedge at this current level yet. So what have we done So far. So the last quarter, when we had told you that our hedged position for Q1 was around 28%, I think at $1800 and something. So we have added another 5% At $2,344 a ton. So that's all we have done so far and we think that we will Be very cautious before we commit anymore. And I think that even in FY 'twenty three, we added another 5% at $2,500 a tonne. So even if we do now, we are going to do an extremely thin slices Because we still think that this aluminum price rally has got more legs. Understood, sir. Very clear. So the second question is with regards to how do you see the cost thing on the aluminum side We have seen the aluminum prices obviously rebounding, but I think there is some kind of cost escalation we have seen across the Maybe timing on the energy side as well. So how do you see the industry working out in terms of profitability for us? So I think in Q4, honestly, we were pleasantly surprised because Even though I had guided 1.5%, 2%, the cost increase Q4 to Q3 sequentially was only 1%. And that was largely because we could still all the coal that we had bought. So coal prices in Q4 compared to Q3 were flat. Now April May, we have already seen the impact of the newer coal prices, which we bought on auction during February, March, CP Coke pitch going up. So we are factoring that Q1 versus Q4, the cost of production will be up 4%. And this is largely as a result of coal, CP Coke and pitch. And so lastly, one data question. Any CapEx guidance for the Indian operations for FY 'twenty two? So we are going to spend about INR 2,700 crores. I mean, last if you remember, once COVID hit, we cut back the CapEx to about $1500,000,000 We actually spent about $1600,000,000 And this current year, we plan to spend about 2,700,000,000 largely doing many of the downstream projects, the Silvasa expansion, all that We'll largely come in this year. Understood. Thank you very much. All the rest. Yes. Thanks, Anuj. Thank you. The next question is from the line of Pinakin Parekh from JPMorgan. Please go ahead. Yes. Thank you very much, sir. Sir, my first question is that on aluminum upliftment smelting, you sounded very positive on the aluminum outlook And it looks like China's decarbonization could really move the industry out of what has been a very long 10 year plus pricing slump. In that context, sir, if the company is positive on LME aluminum prices, when can we see smelter upstream expansions in India Or is this something which is not on the table? Pinakin, to be fair, it's still not on the table because There are 2 issues that we need to resolve. 1 is our own ESG commitments. I mean China's commitments is They are not expanding because they also have the same commitments to cover reduction that we have. So to announce a coal based smelter expansion, [SPEAKER SRINIVASAN VENKATAKRISHNAN:] I will be very hesitant. But the more important point is that still the coal prices outlook over the next 5 to 10 years does not give us a good rate of return for a cementite expansion. So as a combination of the 2, We will continue to evaluate, but it's not on the cards right now. We have enough projects on the downstream that we want to do first. Just to clarify further, sir, thank you for that. That while we see a positive LME aluminum pricing environment over the next few years, Overall, on a top down basis, our business portfolio is more downstream oriented. Upstream aluminum would be less than 30% of EBITDA. So going forward, sir, If aluminum prices remain elevated in a $2,500 to $3,000 range, would we see the business model as being too excessively downstream oriented? [SPEAKER SRINIVASAN VENKATAKRISHNAN:] I think that, Pinakin, let's see whether it remains high for many years. This is not the first time aluminum has gone up. And then it has come down within a year, year and a half as well. So I think that trying to make a long term strategy based on current LME is I think it is slightly [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Let's put it this way. We announced a strategy in our Investor Meet. We will stick on to that strategy. It's not that we are inflexible. If Aluminum prices continue to stay high and we think structurally something has changed. And I have to repeat again, we get clarity on energy, Source and price, then as you all know for Aditya and Mahan, it's very easy for us to do an expansion. So we don't rule it out, but 1 quarter or 2 quarters of high levels will not mean that we completely change the company's strategy, Understood, sir. And so just last question, I mean, when the company had given out And there was a net debt to EBITDA target of less than 2.5x. In the last two quarters run rate EBITDA has been over 5,500 crores and the net debt is at 47,000 crores. So on a spot annualized basis, we are approaching 2x net debt to EBITDA. So what would be if we hit the target earlier than expected, sir, how should we look at that incremental cash generation to be divved up between What were the 3 buckets identified at that point of time? So the buckets that we identified were organic expansion, Deleveraging and shareholder return. So if we do get more cash, first priority will always be organic expansion. If we find Good projects that will return good IRRs, that is still our first choice. I think then second, we will look at deleveraging. And If you take shareholder return, if you see that we have already made a step change in the dividend that we announced today, we are committed to in the investor call. So we are going to continue at that levels of dividend for a while now. Understood, sir. So just to triangulate over the next 2 to 3 quarters, if EBITDA stays at this level, we should get more clarity on the next round of organic growth project, right? Yes. And I think we have quite a few to be honest, and especially in Novelis, there are some very attractive projects. So if we have more cash, we will be putting it into organic CapEx first. Understood, sir. Just one addition, Binak thing here. You should be also considering that given the LME has gone up both in copper and aluminum, the working capital requirement Yes. Going forward, it's going to be higher. So some amount of money will probably get lost there as well. So that's a good point. I mean, it's fair to say that our Q1 P. Vijay Kumar:] Head debt to EBITDA, especially in India, may slightly go up because the working capital block, especially in copper, is going to be quite high at $10,000 per It's very, very helpful. Thank you very much. Yes. Thanks Vinay. Thank you. The next question is from the line of Amit Dixit from Edelweiss. Please go ahead. Yes. Thanks for taking my question and congratulations for a good set of numbers. I have a couple of questions. The first one is on copper. Essentially, the way we see copper prices going up and the kind of bullet scenario That is improper because of EVs and everything else. And given that TCRC margins are Quite low and going further lower because of concentrate, right, efficiencies. So is there any plan on the table to acquire some copper mining effect That is an attractive one in India or maybe overseas? Amit, this is the worst time to buy a copper asset with the prices so high. If you try to go and get a copper mine when copper is at $10,000 you are buying at the peak. So Really, no, we are not looking at buying into a copper mine at this stage. No. And also, see, we are not so much in mining. Our main business is manufacturing. Mining is required only to support manufacturing. In case of copper, we find that with long term contracts In place. We have not had any difficulty in terms of sourcing copper concentrate so far. So we do not even see the need for it. Yes, frankly, yes. Anyway, this is a long time, too. It's a long time anyway, so. Okay. Fair enough. The second question is on essentially Your ESG milestone, so Novelis laid out some intermittent milestones for CY 'twenty six, The cavities in the carbon emission intensity and all. So have we also thought on single lines of laying out our CY 'twenty six or maybe CY 'twenty five intermittent, while long term targets remain intact as to go to 0, ZBT and all, but Are there any intermittent targets that we can in terms of? Yes. I have given the I said ZLD in all sites by 2025, 0 landfill by 2,030 and a 5% reduction year on year. So on each one of our water waste Specific energy consumption, we put every year a target reaching to a deadline in 2030, 2000 and 40 going forward. What about the carbon emission intensity that we have 83% compared to 2020? It's the most difficult one for us. So we are planning to reduce it by another 5% this year. And it will continue at the best we will get to about, let's say, from the 2015, about 70%, 75%. But then largely what we are going to do is the offsets. That's why we are trying to increase the renewables. We are actually going and trying to get new energy sources like gas. So all that we have built a fairly detailed model Of how we are going to reduce the carbon per tonne down to about 12 tonnes of CO2 per tonne by 2,030 5. Okay. 12 tonnes per Q2, sorry, can be 35. Yes. Okay. That's helpful. Thanks a lot and all the best. Thank you, Vince. Yes. Thank you. The next question is from the line of Indrajit from CLSA. Please go ahead. Hi, thanks for the opportunity. A few questions from my side. First, On the entire green aluminum thing, sorry for harping it a few more. Some of your competitors Just in their recent calls have mentioned that they are getting more inquiries on low carbon aluminum. Do we see any bottleneck or any Entrances for our aluminum sales in the near term because of that? No. Yes, Vyra. No problem in getting any sales. I think you have to remember that people are doing a little bit of marketing And everybody will do it. And in fact, as we get 200 megawatts of solar, I think I will claim that 5 Percent of my aluminum is green as well. So those tend to be, but we are more How should I call it? Much more serious about ESG than just playing on the smelting target of carbon right now. And the way we have positioned ourselves is that we are looking across the whole chain. With Novelis, we are leaders in recycling. And I think that what we are trying to say is that just besides the carbon emitted in the smelting process, overall, A circular economy of aluminum will bring the carbon footprint down a lot more. And we are appealing from that point of view. So just selling our primary Metal from India right now, no problem. That's helpful. 2nd, if you can give some guidelines on how was the coal mix In Q4 and what it could be in the first half of this year in the aluminum? So Q4, as I was telling you, we were pleasantly surprised because linkage Coal was 93%. The full year average was about 74%. But in Q4, linkage coal was 93%. That's why the cost of production in Q4 was only 1% above. I think that we will go back to in Q1 to linkage Coal being 74, 75, e auction being about 15 and then our own mines being the rest in Q1. That's why we are guiding that COP will be up by about 4% Q1 to Q4. Sure. That's helpful. And next on lastly on the tax, isn't tax incidence on the dividend that is upstream from Novelis to the parent entity? So see, you should look at the consolidated cash flows. And what we have promised is that we are going to Utilized to the extent of 8% to 10% of that consolidated cash flow in terms of shareholder returns. The fungibility of money between Novalis And Hindalco has already been established even in the past. So I can confirm to you there are no major tax implications When we move the money around between Novelis and India. Okay. And just on a guidance of standalone and console tax it will be similar to FY 'twenty one level for the full year next year or there could be sharp variance? No, no. I don't think there should be any sharp changes from here to next year. Novalis tax rate is a little under 30% normally. Q4 is an aberration because of certain one timers and because Q4 typically is more sensitive because it has to adjust for the full year. And Indian tax rate is roughly around 36% or so, which is normal. We are not expecting any major changes. Sometimes in case of Novelis because of the geographical mix of the Before tax, there may be some changes, but we are not seeing any major significant changes going forward. Thank you so much. That's all from my side. Thank you. The next question is from the line of Amit Murarka from Othila Lofwal. Please go ahead. Mr. Amit Muraka, your line is in talk mode. Kindly go ahead with question please. As there is no reply from the current participant. We move to the next question from the line of Ritesh Shah from Investec. Please go ahead. Hi, sir. Thanks for the opportunity and congratulations for a good set of analysts. Couple of questions. Sir, my first question is on one of the slides we have given the import Number for the aluminum ex scrap basins, which has increased from 166 to 240 kt for India. Are we speaking with the government on any potential measures to restrict aluminum imports? That's 1. And what implication would this have on the downstream CapEx that we have announced on the resilient side? I do not know the HSN code for the imports or the breakup over there. So if you could put it in context with the expansion plans that we have, That would be very useful, sir. So the as you we did spend some time analyzing the 2.40 KT to 160. So the first thing you have to realize that in the 2 40 KT, any metal sold in an SEZ comes in that. There is about 26 kt of metals sold by our competitor from an SEZ, which you have to subtract from the 240. The rest of the $240,000,000 when you look at it, it's largely coming from ASEAN countries and China. And there are the government is actually working a lot with us. There is a CBD going on against Wire Rod against Malaysia. There is an FRP [SPEAKER SRINIVASAN VENKATAKRISHNAN:] Anti dumping hearing that is just starting. So there's a quite a lot of efforts being made by the government to reduce The import of value added goods coming into India. So we are working with the government and I think that our part of the bargain which we have told the government [SPEAKER SRINIVASAN VENKATAKRISHNAN:] We are going to ramp up our downstream capacity so that we can meet the domestic demand in terms of quantity as well as quality. So which is a key part of why we are doing our downstream strategy because in India, the demand for downstream things is growing. And if we don't put in that capacity, it's going to come Right, sir. So should we expect any trade measures over here? You did indicate why is all against Malaysia FRP Anti dumping duties. So my simple question is basically when we have looked at this incremental expansions, How should we capture the risk of the threat of imports? No. So look, one thing I'll tell you, Right now, we take into account the current pricing and we do our IRR calculation based on that. So it's not that the market in India is growing and majority of our customers, if they can buy it from an Indian company in the same quality, they will buy it from us. Many have, in fact, started to tie up because I'll give you example. A lot of Western companies in India are slowly trying to diversify their Supply chains from China. So many have approached us to put in downstream capacity in extrusions and FRP to meet their demand. So if the government puts in duty, it's an additional benefit to us. But even without that, The business case for expanding downstream in India is still strong. I don't know if I'm getting clear. Yes, yes, sir. That helps. Sir, my second question is on the ESG side. I was not there on the Novartis call, but wanted to understand the rationale for On 3 note, wherein the coupons are, say, 3.3% something, had it been different? Had we gone for a bond issuance, Specifically, given Novelis did come out with certain environmental targets post the green note issuance, that's one. And secondly, the interest cost at Novalis is still upwards of 5%. Is there any room for further clean issuances At Novalis level? And something similar at India level, given you indicated that we are working on carbon capture and storage, probably It's too early stage, but is that also a possibility? And a linked question, in the prior call, you had indicated that at $5 per MMBtu Of gas supplies, things can actually be worked out. Any particular update over that? Thank you so much. So I'm going to let Dave answer the green bond and the Novelis interest rate. But on the Gas, this COVID actually slowed down the gas pipeline that was coming in Dharsikudha and Sambalpur area. So I Hope now that after the second wave it picks up because we really would like to get gas supplies coming in, and I think the government is Focused on getting increasing the gas, but it is fair to say that because of all this COVID mess we have lost a year With all these gas pipeline constructions that were going on. Dev, you want to take the Yes. Yes, absolutely. So let me take it one at a time. So the first point you made was That would the interest rate of the 3.375% green bonds be lower had we been announcing all the targets Ahead of that? Well, not really. No. I think that we have been fairly articulate about our commitment on Yes, G. And no, it would not have made any difference at all On the interest rate, it is largely driven by market forces at that time. And so the answer is no. Now when you say that we have an interest rate of over 5%, the only coupon that is sitting at Over 5% is the 5.8752026 bonds. And our mind will stay open Doing the refinancing of that at the right time, at the right opportunity, I mean, the call window for that opens in September, But we keep our mind open to doing it at the right time. But outside of that, no, I think that our average Long term rate is now sitting somewhere in the mid-3s or thereabouts. So I think we are in a pretty good place In terms of both the maturity profile of the debt as well as on the long term interest cost? That's very useful. And just last question, any particular update on ROD CET I think we had certain NEIS benefits. So any update over there will be useful. Thank you so much. Yes. The RODTP, we are expecting an announcement anytime. By the way, we have asked for about 5%. I don't know whether the government will have money to afford 5%, but we should get something. I mean, the NEIS was 1% to 1.5%. We lost about INR 100 crores because of that going off. INR 200 crores, okay. So I hope that the RODTC will come at least at that level, if not more. We have asked for 5%. And it should be retroactive from 1st January when they have notified it. So it should be it's expected anytime now. That's very useful. Thank you so much, Anwarag. Thank you. Thank you. Before we take the next question, a reminder to the participants, please limit your questions to 2 per participant. Should you have any follow-up, maybe request you to rejoin the queue. The next question is from the line of Samuel Chen from Alliance Bernstein. Please go ahead. Good. Can you hear me? Yes. I can hear you, Samuel. Go ahead. All right. Thank you. All right. A couple of quick questions and congrats for the great results. Once the Woodcloud alumina Site is operational. What's your plan for the current site, which is at a much higher cost Compared to the news, right? So that's 1. 2, just given all the conversation that I hear today, Is it fair to say that 5 to 10 years from now, we're looking at The India pilot and doubtful as we know basically becoming just novelists in a sense that you would be concentrating on Downstream organic operation. Yes. I think, Samil, the answer the second part first. We have articulated the next 5 years strategy. And at least for the next 5 years, we are Going to put most of our capital into downstream expansion both in aluminum and copper in India. And we have reserved the next priority to be maybe another alumina expansion if it makes sense [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Because there is still good money to be made in the alumina side. And the smelter comes in 3rd in that priority order. So fair to say that in the next 5 years, if things don't dramatically change and you need to be I think As a business, we need to remain flexible if things do structurally change. But what I'm hesitant to do is to take 2 or 3 quarters of High aluminum prices and then change my strategy and then by the time the smelter comes up by the way, Aditya and Mahan were Actually launched when aluminum was at 2,500. And by the time they came, it had gone down. So I think that we will stick with our strategy for the next 5 years at least. The second part of your question was on the Oskal alumina 500 kt coming in. We will probably it will take us a while to ramp up, but we will reduce Utkal more sorry, Renukot Because Renukot refinery is quite old and we have cost as well as safety concerns there. So our plan is that roughly half of the expansion we will use internally and the other half we will sell on the 3rd party market. This is a broad Plan we have right now. Okay. Thank you. Very clear. Thank you for your time and best of luck. Thank you. The next question is from the line of Sumangal Newatiya from Kotak Securities. Please go ahead. Hi, good evening and thanks for the chance. First question is on the copper division. So the CEC volumes still remain subdued given the macro situation What is the capacity? So how do we see that ramping up in coming quarters? And then given what we have locked in for BCRCs for this year, what Sort of analyze EBITDA should one expect in FY 'twenty two? So on the CC Rod, In terms of production and operations, we are having absolutely no issues. We are fully equipped to handle it. It's a question of market demand. Just to tell you a little forward in terms of Q1, we are seeing subdued demand In copper, more subdued than in aluminum. And primary reason also is because of the high LME prices because at $10,000 Our customers and their customers need a lot of working capital to be able to sustain their level of operations. So we have seen a drop in demand In the current quarter in copper business and really speaking the Indian business is all rod business and whatever is surplus we can always export as cathodes. So that is as far as rods are concerned. Capacity wise, we have sufficient. In the last quarter also, the level of 73 kt It's not a bad number actually, but we could go up go a little higher from there. But March was the period when the LME had started going up. And the other reason for the demand impact is also COVID because in COVID periods, we are seeing some of our customers' lines are impacted because of Workers falling ill, etcetera. But I think that impact is more transient. It may not last for long because as the Country comes back to normalcy, that impact will go away, but LME prices will continue to have an impact. In terms of TCRC, you see about 80%, 85% of our sourcing is based on long term contracts. In most of those, it is linked to the benchmark TCRC, which is announced sometime in November, December for the next calendar year. So that is more or less fixed for the full calendar year 'twenty one. What is available is in terms of the spot TCRC for the remaining part of the Open business and that we do opportunistically in terms of where we get the best prices, where we get the best TCRC for ourselves. But going forward in terms of your guidance, I will say the guidance is divided into 2 parts. First is quarter 1. Now quarter 1, There are two things which will weigh heavily upon the results. 1 is the market side impact as I mentioned to you And the second is the we are having a smelter 3 shutdown in this quarter. This shutdown happens once in 4 years or so, this kind of a big shutdown. And for that reason, we will not have a significant amount of production coming from the concentrate route in this quarter. So this quarter will be impacted for that. But the rest of the 3 quarters should actually be reasonably good because smelters after shutdowns performed very well. The rest of the equipments that we have Whether it is refineries, Smelter 1 or rod mills, they are doing pretty well actually. So really speaking for the next 3 quarters and hopefully The demand should come back in the coming quarters because underlying demand is there. The potential for that pent up demand will remain And most of the projects the government is going to spend upon in terms of infrastructure etcetera, all that will add up to demand coming back. So our hope is Last three quarters of this year, Q2, Q3, Q4 should be good. Q1 is likely to have some impact. Understand. That's very good color. Thank you. Second question is on the Nohales business. There is north to account Note number 14, it says about a court case with regards to tax issue. So is there any material thing to take note of that, Keith? Yes. I think, Deb, you want to handle that? I think the question is around the tax base in Brazil. So, no, I mean beyond what we have already said in the note, no, I mean we really don't think that At this moment, anything more than the fact that we are still undergoing The legal process is all that we can say, but no, I mean from a materiality perspective, not really. Thank you. Thank you. The next question is from the line of Ashish Jain from Macquarie. Please go ahead. Hi, sir. Good evening. So I had two questions. 1 on the AC realized scheme being announced, you had booked it Yes. So how are we looking at that going ahead? So this production linked incentive scheme, the immediate thing that we are trying to utilize is on the air conditioner trend. So we are the air conditioner guys have got the PLI, and we are benefiting because we provide the ACFIN to them. So that is the first one. We are trying to get because they have got it only on some very specific things that they are putting it on. So we are trying to Also get it a little bit on bicycles, some amount on the auto, but the immediate benefit of the PLI will be on the AC So something like a copper tube and all, will we be kind of participating in? Yes. So that is But honestly, that is our future project for us. So the inner group copper tube is a downstream project that we plan to this year, we are going to do the sort of Checking out and probably do it next year. So that's a very critical technology that we have to get in as well. So it is in our plans to make it as a part of that Same air conditioner PLI, by the way. So the aluminum part is the thin and the copper inner group tubes is the copper tubes, yes. But that's to be fair, that will take us 2 to 3 years to get that manufacturing facility up. And just secondly, on the upstream expansion, I know this has been touched upon, but what markers will you look at To reassess that even within the next 5 year timeframe, given like last time you had alluded to that you assessed demand in India could be 7,000,000 tonnes Incrementally, China is talking of picking up option at 45,000,000, 46,000,000 tonnes. So is there any price marker that you would look at? Or is this more driven by ESG focus at this point of time? So it's a balance, both. And I think that [SPEAKER SRINIVASAN VENKATAKRISHNAN:] We will have to I think as Pinakin was saying, let me stay about 2,300 for a couple of years Because in the past, it has gone up and then it has come down. So we would like to see where the LME will stay. We would like to see the Indian demand, as you said, Continue to grow. And then we need to see where at what price will we get the power in India because ultimately the Cost of production of aluminum, 40% is the cost of power. And if you take the coal price today in India, To get more than a 12% to 13% IHARA, you will not get it. And coal price keep will keep escalating. So I think price of power is also very important. You have to remember that most of these hydral power guys, they get power at the equivalent of INR 2.6 a kilowatt hour. They all have very cheap power sources, whether it's Canada, whether it's Norway, whether it's in China. So for us to compete on them on a sustainable basis, what we have been trying to tell the government Is that the price of power has to be in that INR2.8 to INR3 per kilowatt hour? And sir, at $5 MMB2 gas, that number look achievable or No. That just replaces coal today. So that's just from a pure ESG point to reduce the carbon emissions of our existing production. But $5 an MMBtu will not give you INR3 per kilowatt hour. Got it, sir. Thank you so much. Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I now hand the conference over to Mr. Satish Bhai for closing comments. Yes. So thank you very much. I think that we are in a very Tough year. I just wanted to conclude that majority of the management bandwidth has actually been spent on employees and their safety. I spent more than 50% of my time on COVID related issues. And I think that it's all kudos to our employees in the plants We've managed to keep the plants running and the sales guys who have managed to do the sales. And hence, we have been able to take benefit of a very favorable macro environment. But really, the performance of this quarter or the whole of last year is to all the employees of Hindalco and Novelis. With that, I thank you for your attention and we close the call. Thank you very much and stay safe. Thank you. Ladies and gentlemen, on behalf of Hinalco Industries, That concludes this conference. We thank you all for joining us and you may now disconnect your lines.