Ladies and gentlemen, good day and welcome to the earnings conference call of Hindalco Industries second quarter results for FY 2027. 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. Should you need assistance during the conference call, please signal an operator by pressing star and zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Subir Sen, Head of Investor Relations at Hindalco. Thank you, and over to you, sir.
Good morning and good evening, everyone. Thank you for joining us. On behalf of Hindalco Industries, I welcome you all to our Q2 FY 2027 earnings call. We will be referring to the Q2 investor presentation available on our website. Please note that certain statements made during this call may be forward-looking and should be read in conjunction with the safe harbor statement on slide two of the said presentation. The presentation highlights our consolidated performance for the quarter, along with our segment-wise performance review of Novelis and our India aluminum and copper businesses. The corresponding segment information of prior periods have been restated accordingly for a comparative analysis wherever applicable. Joining us today from Hindalco are Mr. Satish Pai, Managing Director, Mr. Bharat Goenka, Chief Financial Officer. From Novelis, we have Mr. Steve Fisher, President and CEO, and Mr. Dev Ahuja, Chief Financial Officer.
Following the management's remarks, we will open the floor for questions and answers. Post this call, an audio replay will also be available on company's website. With that, let me now hand over the call to Mr. Pai to take you through company's performance and key highlights of the second quarter of FY 2027.
Hello everyone. I would like to take this opportunity to wish everyone a happy and healthy festive season. Thank you for joining Hindalco's earnings con call today. On slides five to nine of this presentation, you can see our achievements and progress across quarterly metrics of safety and sustainability for this quarter. Let me take you through the key highlights of these initiatives. At Hindalco, safety is always our highest priority, and I am pleased to report that there were no fatalities this quarter across all our Indian operations. Our LTIFR for this quarter stands at 0.16, showing significant improvement over the prior period. I am also pleased to share that Aditya Alumina Refinery was honored with the British Safety Council Award 2026, a testament to our unwavering commitment to occupational health and safety.
We also launched an AI-powered behavior-based safety observation app in 22 + regional languages to strengthen critical risk identification while developing 40 certified TapRooT experts to enhance incident investigation and root cause analysis across our businesses. At Hindalco, we continue to make strong progress on circularity and responsible waste management. This quarter, 62% of the total waste generated was recycled or reused, impacted by the higher rainfall at certain plants and temporary logistical challenges. We achieved 93% recycling rates for bauxite residue, excluding Utkal, 77% recycling of ash, and 110% recycling of copper slag this quarter. We have made consistent progress in improving water efficiency across our operations through a series of forecasted interventions.
In our aluminum business, higher recycling rates of 33% were recorded in this quarter, up from 30% a year ago, with increased rainwater harvesting across the sites that helped us reduce freshwater consumption on a year-on-year basis. In our copper business as well, specific freshwater consumption improved year on year due to continued recycling and higher rainwater harvesting this quarter. Biodiversity conservation remains an integral part of our sustainability agenda. At the end of Q2 FY 2027, our cumulative tree plantation has crossed 6.8 million trees, with nearly 5.4 lakh saplings that were planted this quarter to strengthen greenbelt coverage and enhance local biodiversity around our operations. We have implemented conservation programs for special status species across 10 high-priority sites, reinforcing our commitment to biodiversity conservation and ecosystem protection.
We also commenced implementation of no net loss project at our Belagavi plant, aimed at restoring 123 hectares of habitat and strengthening local biodiversity in the region. Renewable energy remains a key pillar of our decarbonization strategy. As of the end of Q2, we have 643 MW of renewable energy capacity across solar, wind, and hydro resources, along with 35 MW of pump storage tie-ups under our round-the-clock renewable energy program. By FY 2027 exit, our renewable energy portfolio is set to reach 884 MW, complemented by 125 MW of RE-RTC capacity, accelerating our transition to a cleaner and more sustainable energy mix and building a more sustainable and future-ready Hindalco. Our aluminum-specific greenhouse gas footprint stood at 19.4 tons of CO2 per ton of aluminum in Q2, lower than the comparable period last year. Now let me give you a glimpse of the current broader economic environment on slide 11.
IMF projects global growth at 3.1% in 2026, slowing from 3.5% in 2025, as the global economy remains resilient but divergent in its performance. A significant drag is arising from the Middle East and Central Asia region, where growth is expected to contract by 0.3% in 2026 after expanding 3.7% a year earlier, reflecting the economic disruptions caused by the prolonged conflict and energy supply constraints. The negative supply shock arising from the conflict and its impact on global economic activity has been partially offset by strong investments in artificial intelligence and the broader technology sector. The U.S. economy is expected to grow by 2.3% in 2026, supported by resilient domestic demand and continued investment. While in China, it is projected to slow down to 4.5% from 5% amid weak domestic demand and ongoing structural challenges.
Global growth remains vulnerable to escalating geopolitics, continued commodity price volatility, higher financial conditions, and increasing trade fragmentation. Global inflation is projected to rise from 4.1% in 2025 to 4.7% in 2026, driven primarily by higher energy and food prices before easing begins again in 2027. Bharat continues to demonstrate resilience of its domestic economy despite a challenging global environment. The RBI forecasted GDP growth for FY 2027 at 7.1% against 7.8% in FY 2026. Recent high-frequency indicators suggest that economic activity continues to maintain momentum. Manufacturing remains steady despite cost pressures, while the services sector continues to benefit from robust domestic and external demand. Investment activity continues to strengthen, aided by government infrastructure spending, improving private sector CapEx, and strong credit growth. Rural consumption is expected to be supported by resilient non-farm activity, although deficient monsoon conditions and strong El Niño effects pose risk to agricultural output and rural demand.
Urban demand remains healthy, backed by stable employment conditions. Meanwhile, external headwinds, including geopolitical tensions, elevated commodity prices, supply chain disruptions, tighter global financial conditions, and trade-related uncertainties continue to weigh on growth outlook. Inflation prospects have become less favorable, with the CPI inflation projected at 5.2% in FY 2027, driven by food and fuel price pressures, deficit monsoon conditions, El Niño-related risk, and volatility in the global crude oil prices. With signs of inflation becoming more broad-based, the RBI has raised the policy repo rate by 25 basis points to 5.5% and shifted its policy stance to calibrated tightening, signaling its focus on containing inflation while ensuring macroeconomic and financial stability. Moving on to the industry outlook on slides 12 to 14. On slide 12, from a pricing perspective, the quarter was marked by significant volatility.
Looking ahead, the global aluminum market is expected to remain in deficit through calendar year 2026. Current estimates point to a deficit of around 0.8 million tons, significantly higher than earlier expectations. Any further disruptions in the Middle East could tighten supply further and provide additional support to aluminum prices. While capacity restarts and new supply additions are expected to gradually rebalance the market, the medium-term outlook remains constructive. Looking at the global aluminum market in Q3 calendar year 2026, Chinese aluminum production grew about 3% year-on-year to nearly 11 million tons, supported by capacity additions in Yunnan, partially offset by capacity rationalization in Shandong. In the rest of the world, production declined 6% to around 8 million tons, primarily due to disruptions stemming from the Middle East conflict and the closure of Mozal, partially offset by higher production in Indonesia.
As a result, the global aluminum production stood at approximately 19 million tons, down 1% year-on-year. On the demand side, aluminum consumption in China increased 4% to around 12 million tons, supported by continued strength in new energy vehicles and healthy export demand for semi-fabs and finished products. However, the construction sector remained weak amid ongoing challenges in the real estate market. Outside China, consumption declined 2% to around 7 million tons, reflecting softer demand in Europe, Middle East, and North America, partially offset by growth in Bharat. Overall, the global aluminum consumption reached approximately 19 million tons, up 1% year-on-year. With demand continuing to outpace supply, global aluminum markets remained in deficit by roughly 0.5 million tons this quarter. Turning to Bharat, demand remains resilient and continues to be among the strongest growth markets globally.
Aluminum demand in Q2 FY 2027 is estimated to be around 1.7 million tons, representing growth of approximately 6% year-on-year. This growth is primarily driven by the automotive sector, supported by healthy vehicle production and sustained demand across both passenger and commercial vehicles. Overall, Bharat continues to outperform most global markets and remains one of the most attractive long-term growth opportunities for aluminum demand. Turning to the Indian copper industry on slide 14. In Bharat, refined copper demand remained relatively subdued during the quarter, declining 3% year-on-year to 388 KT. While demand from building and construction and power sectors continued to grow, this was partially offset by softer demand from consumer durables and electrical equipment segments.
On the copper concentrate side, Q2 FY 2027 continued to witness extremely tight copper concentrate markets, with spot TC/RC remaining at negative levels in the range of -$0.48 to -$0.58 per pound, and concentrate availability remaining constrained. The market continued to be affected by the structural gap between expanding global smelting capacity and constrained growth in mine supply. Coming to slide 14, our consolidated business EBITDA was up 52% year-on-year at INR 13,869 crore this quarter, and the consolidated profit after tax was up 59% on a year-on-year basis at INR 7,534 crore. At Hindalco India business, our business segment EBITDA was up 66% year-on-year at INR 9,011 crore this quarter, whereas the quarterly profit after tax was at INR 5,852 crore, up 91% on a year-on-year basis this quarter.
On slide 17, it is encouraging to see the earnings from our non-LME-linked business, namely Novelis, aluminum downstream copper, continuing to grow, reaching INR 6,860 crore this quarter, with momentum continuing to accelerate. These businesses have a much lower correlation to LME price movements and are driven by factors such as value-added products, recycling, innovation, customer relationships, and operational performance. Our growth is increasingly being driven by three key factors, that is, recovery at Novelis, strong operational performance in our copper business, and the continued expansion of our aluminum downstream portfolio into new products, applications, and premiumization. Coming to our business-wise performance this quarter on slide 17, the India upstream aluminum shipments were up 1% year-on-year and revenues were up 33% year-on-year. Our quarterly EBITDA stood at INR 7,009 crore, up 55% year-on-year, backed by favorable macros and our strong performance across the value chain.
This delivered an EBITDA per ton of $2,125 this quarter. EBITDA margins were at 52% and continued to be among the best in the global industry. Our hedging position in aluminum for the rest of FY 2027 stands at around 29% of the commodity at $3,000 per ton and 21% in the currency at INR 93 per dollar. Our Indian downstream aluminum business continues to deliver a strong core performance, while quarterly shipments were up 6% year-on-year at 119 KT. Aluminum downstream delivered a quarterly EBITDA of INR 329 crore, up 26% year-on-year this quarter versus INR 261 crore in the prior period. This was driven by product mix and premiumization. The resulting EBITDA per ton stood at $289 per ton this quarter. Copper performed exceptionally well during this quarter, delivering another strong set of results.
Overall metal shipments were at 116 KT, up 2% year-on-year, while CCR volumes were stable at 96 KT. Quarterly copper EBITDA reached a record INR 1,673 crore, a significant 164% increase year-on-year, driven by strong operational performance, healthy domestic demand across segments despite elevated LME prices. In addition, higher realization from sulfuric acid and other byproducts, along with certain one-time gains, further supported earnings during this quarter. Copper is expected to deliver underlying quarterly EBITDA of around INR 1,200 crore on a normalized basis, underscoring the strength and resilience of this business. Turning to cash flows and capital allocation in slide 20, our business continued to generate strong cash flows of INR 23,322 crore during the period, representing a robust 57% year-on-year increase.
At the same time, we invested INR 20,719 crore in capital expenditure, up 83% year-on-year as we continue to advance our growth and capacity expansion projects. These investments are forecasted on strengthening our competitive position and delivering long-term value creation. Importantly, we continue to maintain a strong balance sheet with consolidated net debt to EBITDA at 1.8 as of September 2026, providing us flexibility to fund growth while maintaining a disciplined approach to capital allocation and shareholder returns. Now let me conclude today's presentation with some key takeaways. At Novelis, our second quarter performance once again reflected the strength and resilience of the underlying business. We are now normalized production at Oswego Hot Mill and through September 2026 received cumulative insurance recoveries of $519 million. Importantly, our long-term EBITDA per ton guidance of $600 remains unchanged.
We are confident that the strength of the business supported by cost restructuring will drive a return to positive free cash flow and mark the beginning of our deleveraging journey by the end of FY 2027. We also achieved a major milestone at Bay Minette, where our 600 KT greenfield rolling and recycling facility produced its first cold rolled coil in September. Commercial shipments are expected to commence in the first quarter of FY 2028. Bay Minette will further strengthen our operating footprint, expand our recycling capabilities, and position Novelis for the next phase of long-term profitable growth. Turning to our India business, we continue to deliver record-breaking performance with industry-leading profitability across both our aluminum and copper businesses. This performance reflects the strength of our integrated business model, our relentless focus on operational excellence, disciplined cost management, and consistent execution across market cycles.
On the growth front, all our key upstream expansion projects are progressing well and remain aligned with our strategic ambition of doubling upstream capacity. These investments will further strengthen our integration and cost leadership, our goal of delivering fourfold increase in downstream EBITDA by FY 2030. A key aspect of our transformation is the growing contribution of non-LME-linked businesses, as our portfolio increasingly shifts towards value-added products, recycling, innovation-led solutions, stronger customer partnership, and operational excellence. Our earning profile is becoming more resilient and less correlated to movements in LME prices. We are also making steady progress on strengthening our resource security. As the Chakla Bandha and Meenakshi mines become operational, we will enhance raw material self-sufficiency, lower production costs, support margin expansion, and further strengthen the earnings profile of our upstream business.
With over INR 50,000 crore of expansion projects currently under execution across our businesses in India, and another INR 50,000 crore of growth opportunities under evaluation, we are preparing for the next phase of our growth journey. These investments of over INR 1 lakh crore in growth projects over the next five years reflect our confidence in India's long-term demand outlook and reaffirm our commitment to creating sustainable value. Overall, Hindalco is exceptionally well-positioned for the future. Backed by our integrated business model, strong resource base, disciplined capital allocation, and strategic investments across the value chain, we are well-equipped to capitalize on emerging growth opportunities. We remain committed to our purpose of engineering better futures while delivering sustainable growth, enhanced profitability, and long-term value creation for our stakeholders. Thank you very much for your attention, and the forum is now open for questions.
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue settles. First question is from the line of Pinakin from HSBC. Please go ahead. Pinakin, please go ahead with your question. Your line is unmuted.
Yeah. Thank you very much for the opportunity. Can you, sir, give us some clarity on when do you expect to have detailed timelines on the INR 50,000 crore of expansions that are being evaluated in the India business?
Yeah, Pinakin, I think that our focus right now is to get the first set of projects completed. Just so that we can recap, the copper recycling plant in Pakhajan commissions in December of this year, and then starting from the alumina plant that in Aditya Alumina Refinery commissions in December of 2027. The 180 KT Aditya first line commissions in December of 2027. So, these three big projects are our focus. Then the next Aditya line will commission in December of 2028, and the copper smelter will commission in December of 2028. So, this is in that first INR 50,000 crore. Once we are doing this, we will then start from Mahan. The Mahan expansion, we are now going through the EC and trying to get the licensing and all sorted out. So, that will be the next big project.
And then, of course, we have downstream, further copper recycling expansion from 50 KT to 150 KT. It will be fair to say that every year and a half, we will be starting one more project. What we are trying to do, Pinakin, is to stay on the consol net debt to EBITDA at about the two times that we have committed to you. As we go along, we will give you as some of these new projects get approved for execution.
Sure. Got it.
I am sorry to interrupt you, Pinakin, but your voice is breaking. Can you come in a good reception area?
Yeah.
We are still unable to hear you, Mr. Pinakin. I would request you to please check your connection and call back in queue. We will go on to the next question, which is from the line of Sumangal Nevatia from Kotak Securities. Please go ahead.
Yeah, good evening, and thanks for the chance. My first question is, on the cost, if you could guide us, how are costs moving for the aluminum division in the coming quarters? What are the timelines for the captive coal mine commissioning, both Chakla and Bandha? Is it on track for end of FY 2027? On the copper division, I wish you mentioned something that INR 1,200 crore is a sustainable run rate for copper. Can you just elaborate on that? What has changed in terms of quarterly EBITDA run rate? One, of course, is sulfur, but some elaboration will help. Thanks.
All right. Let me remember all your questions, Sumangal. Starting with the cost. Q2 costs were up roughly 5% above Q1. The cost up was two main factors, coal and CP coke. The coal, it is a monsoon quarter, and we got badly impacted in the northern region. It was basically Renusagar, Renukoot, and Mahan, because the rainfall was very heavy and the demand for the northern power plants was very strong. We had a low linkage materialization and had to buy a lot of coal on the spot auctions. On the Odisha side, we did not have an impact. Long story short, that led to a 5% increase in the cost of production of aluminum Q2 to Q1. We expect Q3 to Q2 to also be around that 5% because the northern area, the coal is still not stabilized. October continued to be very hot.
We are slowly at mid, at November, starting to see some signs of improvement. I think Q3 to Q2 will also be 5% up. In Q4, we will start to see the price go down as the coal prices and coal availability improve in Q4. Now, of course, as your second question is, what is important for us is to get Chakla and Bandha started so that by next monsoon, we are not under this pressure. Bandha, the box cut has already happened. It is a high stripping ratio.
First coal should start to come out towards the second half of the next financial year. Chakla, we are expecting still that we will be getting coal by sometime middle of next year. Then on copper, you heard right. We think that it is about INR 1,200 crore-INR 1,300 crore in the next coming quarters, largely driven by sulfuric acid pricing, along with precious metal sales. Of course, I think that the copper downstream products pricing is also helping.
Understood. Sir, if you can just elaborate, what is the proportion of sulfuric acid realization, say, in a normalized year like FY 2025/2026, versus what is it today?
Okay, right now, I think we are running at roughly INR 16,000 a ton. Last year, at the same quarter, it was around INR 7,000 a ton. Let me tell you, even INR 7,000 is quite high. We were normally, if you go before that, it used to be around INR 3,000 or INR 4,000 a ton. Sulfuric acids and sulfur prices are really high right now.
Okay. In terms of contribution to EBITDA, what is the proportion, and what is the volume that we kind of produce and sell?
I think contribution, let's say that, it's like 50% comes from other stuff, 50% comes from copper, more or less. The volumes of sulfuric acid is—
300.
300,000 tons a year.
A month.
A month, sorry. A quarter. 300,000 tons a quarter. Sorry.
Understood. I have just one more question on Novelis. Given that we are seeing so many moving parts with respect to tariffs and Oswego and recoveries of insurance, overall, the predictability of earnings and margins have really gone down for us. Is it possible now, since we are going back to normalized level, at least for, say, FY 2028, give us some guidance on volumes and some range of margin that we are expecting given the current tariffs and current scrap spreads?
Yes, Sumangal, I will take this on. I do not know why you are saying there are so many moving parts, because we have been pretty clear to say that right now, we have some headwinds from tariffs, but we are working with a clear plan, and by fourth quarter, tariffs would come down to a fairly marginal level. That is swing factor number one, right? We are giving you predictability, to be clear. Number two, Oswego fire impact. We are saying that Oswego fire impact, and now, yeah, sorry, on the Yeongju strike impact. On the Yeongju strike impact, we have told you that we have a $20 million impact in Q2, and you can broadly expect a similar impact in Q3, and after that, it is over. That is swing factor number two for you, right? The third thing is insurance recoveries.
Now, insurance recoveries, you can expect that we have another $47 million of insurance recoveries that will fall into EBITDA, and that should pretty much be by this fiscal year end. I do not know what else is in your mind a swing factor, but we have clearly called out these factors. Having said that, we will gain as the supply chains normalize.
I am telling you one more thing now, which is actually on the positive side, that right now, we are still facing some impact of our customer supply chains not having normalized, which are putting some negative color on shipments for the time being. But that is in the course of normalization, and the shipments momentum based on the underlying markets should pick up pretty well starting from Q4 of this fiscal. I think that we have sliced and diced all the factors for you, and I hope that that should help.
Got it. That's helpful. Thanks and all the best.
Thank you.
Thank you. Next question is from the line of Jashandeep Singh Chadha from Nomura. Please go ahead.
Yeah. Hi. Thank you for the opportunity. Happy Diwali in advance, sir. My first question is regarding your hedging. How is your hedging position? Also, if you can give some sense on the regional premium and how do you see them in the near future? My first question will be largely on this.
Yeah. The second, let's say H2 of FY 2027, the remaining six months, we are hedged 29% at $3,000 per ton. If we now go into FY 2028, we are about 26% hedged at $3,168. That's our position. MJP had spiked up. I think the MJP is correcting. I think Q3 MJP is already about 270-ish. I think that we expect MJP to be in that $200-$250 range in Q4.
Thank you, sir. My next question, sir, would be largely on the pot relining capitalization. Any rough estimate how much it would have added to the EBITDA per ton? Also, the India business depreciation seems to have increased significantly. Is this just this quarter, or should we start building higher depreciation going forward?
No, it's the impact of the pot relining. Basically, what we have done is we have capitalized the pot relining, which is more or less, we were the only company in the aluminum business not doing it. All our competitors do it. The impact roughly adds about INR 130 crore to the EBITDA line, and it adds INR 130 crore to the depreciation line. That's why you're seeing the depreciation a little bit up, and the positive impact in the EBITDA line is INR 130 crore. You'll see this now going forward. In Q2, there was a little bit more additional catch-up of the Q1 as well, which is why the number was slightly higher. On an ongoing basis now, you are seeing probably INR 130 crore additional due to the pot relining being amortized and the depreciation correspondingly going up by the same amount.
Understood, sir. Sir, just one last question. In your presentation, last quarter, I believe you were showing or estimating close to 1 million ton of [inaudible]. Now it has, I think, come down to 0.8 million ton. How are you seeing LME prices over the next year? Just one bookkeeping question, what will be your run rate of capex over the next couple of years?
Next couple of years? No, I think this year. Let me first start with your first question was on the LME prediction. Look, 0.8, 1 million, this is a call that's been made in the last few months. It really depends on I would not read too much into the difference, but next year is an interesting one. If the Middle East supplies get normalized and if the expected Indonesian volumes come, and there's a big if in that 1.5 million tons additional will come or not, then the LME Week, the consensus was, in some ways, the LME next year could be between $2,600 and $2,800. That's the next year's outlook. Difficult to say because one geopolitical event, as you know, changes that whole scenario very quickly. What was the second question?
Sir, it was your CapEx.
CapEx. This year will be around INR 12,000 crore. Next year will be substantially higher, which I'll give you the number in the February board when we have done our budgeting. But next year will be high, and the year after will be at the same levels because of all these projects that I mentioned to you. The sort of CapEx outflow in FY 2028, 2029 will be quite high.
Understood, sir. It is fair to say that by next year, you will hit your peak net debt. Just one last, if I can squeeze. For your smelters, upcoming smelters, for internal calculation, what sort of LME prices are you building in for IRR?
I think we took 2,650 or, yes, about 2,600 we took.
Understood, sir. You will hit peak net debt by next year, right?
Sorry, peak?
Net debt or peak debt.
No, consol net debt to EBITDA, let's just stick with our commitment that we will keep the consol at around 2x. Novelis in Q4, we have said, will reach about 4x, and then over the next two years, they're going to go through a deleveraging cycle, ending up between 2.5x to 2.8x is the plan. The India, which is now negative, once we get into our growth capex, it won't remain negative. It will become 1x, 1.5x. But the consol then for us, what we are trying to do is to keep it at what we committed, which is around 2x.
Understood, sir. Thank you so much. I'll join back with you.
Yeah, thank you.
Thank you. Next question is from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead.
Yeah, good evening, sir. The first question was, could you quantify the one-off in the copper segment? Is it correct to assume that out of some INR 1,600, if we assume that INR 1,200 crore are normal one, so this quarter is a INR 400 crore of one-off?
It is not a single one-off. There were a couple of things that happened. We had a certain amount of copper slag sales where our accruals and what we realized by selling was higher. There is a certain amount of derivative noise. There is a certain amount of precious metals extra sales. All that put together, there was about roughly INR 350-INR 400, what we think is not on a sustainable basis repeatable.
Sure, sir. Also, if I look at the aluminum upstream EBITDA on a sequential basis, given the fall in the LME and the 5% increase in cost, probably the EBITDA decline could have been higher. Did we get the benefit of some higher premium, or what led to the better-than-expected performance over there?
We got higher premium. We realized a higher net premium, one, because of the exports that we were doing, which went to high-premium countries, not MJP. The second is the value-added upstream parts, which is the conductor cables and things, we got a better pricing on it. The VAP and the premiums resulted in the EBITDA per ton being higher.
Sure, sir. Also, in terms of the copper pricing, you said concentrate availability is tight, which is reflecting in the low TC/RC or negative TC/RC. But the inventories on the London Metal Exchange don't seem to be declining to that extent. So, where is the disconnect between the two?
The London Metal Exchange, you're talking about the copper inventories. People, especially in the U.S. and all, have been holding copper because they are worried about. I think that for us, let me be one thing is clear, the copper concentrate availability is tight. But for people like us, we are now very comfortable because we have got large miners with which we have long-term contracts. So, we have no problem in getting the concentrate. But the overall supply-demand, because of the huge Chinese smelting capacity, TC/RCs are negative.
Sure, sir. Yeah, okay. Thank you, sir.
Yeah, thank you.
Thank you. Next question is from the line of Indrajit Agarwal from CLSA. Please go ahead.
Hi, sir. Two questions. First, on copper EBITDA, as you mentioned, INR 1,200 crore quarterly run rate. What kind of sulfuric acid price are you taking in that?
We are taking a high sulfuric acid, Indrajit. I mean, somewhere between 14,000 and 15,000. I think we are seeing that in Q3 and Q4. So, we are taking it at these higher levels.
Sure, makes sense. Second, you mentioned about 2,600-2,800 LME. Just to understand, where do you think is the 90th percentile cost of today is, and what is the kind of cash cost Indonesian capacities could have?
The Indonesian one, we are not really clear, but the average on these are. Let's take the first, the highest side of the cash cost is roughly around $2,000-$2,200 per ton.
Sure, that helps. Thirdly, on the consol CapEx, with Novelis tapering off, consol CapEx may not rise next year. Is that understanding correct? Even though India rises, but—
Yeah, that's a fair point, because this year, the Novelis CapEx is very high. Next year, it will go back to normal maintenance plus project around $500 million-$600 million levels. So yes, the consol CapEx may not go up that much. You're right.
Sure. Lastly, on the relining EBITDA adjustment at aluminum of INR 130 crore, the quarterly run rate, is this the first quarter we have done? So, sequentially, EBITDA improvement looks better optically than what the underlying number is. Is that understanding?
I think we had to restate—o r we did not. I am just checking. No, so you are right. It looks better because this is the first quarter we did it.
Of 130 crore. All right. Thanks. That is all from my side. Thank you and Happy Diwali.
Thank you.
Thank you. Next question is from the line of Satyadeep Jain from Ambit Capital. Please go ahead.
Hi. Thank you. Mr. Pai, just one more question on the LME expectations. I know LME Week, a lot of people expect LME to go down on higher supplies. Now, when you strategize, would you I know you have a hedging strategy, you like to keep something open. But if generally the expectation is prices go down, would you like to hedge more? And would Mahan 370, would you still want to go ahead if we see more capacity and prices come down, the 370 that you have on board which you are evaluating?
Yeah, I think that, look, Satyadeep, fundamentally, these things you have to take a 10-, 15-, 20-year view. We think that aluminum demand, let's take Bharat, is going to grow at 7% - 8%, which is fairly conservative. The second thing is that general aluminum demand worldwide is growing at 3%. It is also very clear that nobody in the Western world is adding any smelting capacity. The only places left is Bharat and Indonesia.
Then if you go and look at our cost curve, Satyadeep, once we are Chakla Bandha and Meenakshi running, we have locked in, except CP coke, our cost curve at very attractive levels. LMEs can swing up and down, but we will be the last man standing. Yes, we think that taking advantage of the backward integration of bauxite and coal is the reason why we should do the investment. There can be some years where it goes down, but the fundamental demand of aluminum, we think the long-term trend is good.
In the brownfield optionality, after you reach this two million tons between Aditya and Mahan, how much optionality would be there beyond this?
Look, in the downstream now, we still have the capability to add another cold mill in Aditya, which is another 170 KT. So on top of 600, we can add 170 of rolling capacity. Then on the extrusions, we are already looking at in Kuppam and Silvassa with the auto demand and the consumer electronics. If we get to two million tons of aluminum, we will get to about 1 million tons of downstream capacity in Bharat.
In the brownfield optionality after this, after 2 million tons on the, sorry, after two million tons for the upstream, what optionality you have between Aditya and Mahan?
No, no. You are talking about upstream optionality or downstream?
Upstream.
Upstream? See, upstream we can easily add another 360 KT in Mahan. We have checked, we have the land. Aditya land, we put the rolling mill, so we do not have any more land in Aditya after this 360 expansion. But in Mahan, we can do another 720 KT expansion.
Okay. Just one more question on this bookkeeping. Of the INR 50,000 crore that you have in Bharat, how much have you already spent and what was the royalty payment? I know Novelis, I think was about $11 million. Overall, the Hindalco level, what was the royalty payment? Out of INR 50,000 crore, how much has been spent so far?
Hindalco was also the same level, 11 million. Because we pay on a quarterly basis till we hit the cap of INR 225 crore. That's how the royalty thing has been set up. And of the CapEx of 50,000, we were calculating, I think we have probably spent about 20 at the end of this financial year.
Okay. Thank you so much.
Thank you. Next question is from the line of Ashish Jain from Macquarie. Please go ahead.
Hi, sir. Good evening. Sir, my first question is on the aluminum EBITDA for this quarter.
Is it possible to give a breakup in terms of how much is sulfuric acid led and how much is pure copper and copper downstream?
You are talking about the copper EBITDA, not aluminum EBITDA?
Yes. Sorry, my bad. Copper EBITDA, yeah.
No, I don't think we want to give you a breakup there. I think it's fair to say that we have given you that the underlying run rate on a going basis is around 1,200-1,300.
Okay. Sir, just to confirm that, did you say earlier in the call that 50% of EBITDA this quarter was copper led? Did I hear you right on that?
Yes, more or less. See, we get money from the. Copper is sold, we do not sell too much cathode, so we convert it to rods and then we convert it to other downstream things. So, when I look at the premiums on all of that and put it, yeah, roughly 40%, 50% will come from copper products, the rest will come from sulfuric acid, precious metals, et cetera.
Sir, this is in spite of TC/RC being where it is. That is why I am asking.
That is why if I was selling cathodes, I would be losing money.
Got it.
Yeah.
Sir, secondly, in terms of the cost curve, like for 3Q and 4Q, what is the outlook on other cost? Coal you explained, but what is the outlook on the other cost drivers from aluminum business point of view?
It is only CP coke. All the rest, we do not expect too much variation from the current levels. Actually, caustic prices—
But CP coke is also —
Yeah, CP coke [crosstalk]
CP coke is also trending higher.
Yes. These are the two that are high, but CP coke, we don't expect that it's going to go up a lot more than current levels. It's already high. The coal is the one that needs to come down, because that's got a nearly 40% impact on the cost curve.
Got it. Okay, sir. Thank you so much, sir. Thanks.
Yeah, thank you.
Thank you. Next question is from the line of Raashi from Citigroup. Please go ahead.
Thank you. I do not know if I missed it, but did you indicate the alumina sales in the quarter, the expectation going forward?
Yeah, the alumina sales, we sold 194 KT in Q2, and in Q3, we should sell in the similar range, 190-200.
190-200. Got it. On the capex, how much do you spend in India in the first half?
About INR 6,000 crore. This year, I think our expectation is we would spend about INR 12,000 crore by the end of the year, INR 12,000 crore-INR 13,000 crore.
Got it. What did you mention? You said that India has a net cash balance. How much was that?
INR 16,000 crore. We are sitting with treasury of INR 16,000 crore.
Got it.
Net cash is nine.
Net cash is nine.
Yes, because we have long-term loans of about INR 6,000 crore-INR 7,000 crore.
This is only India books?
That's only the India. That's why net debt to EBITDA is - 0.35 in India.
Okay. Thank you.
Thank you.
Thank you. Next question is from the line of Ritesh Shah from Investec. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, you did indicate broad outlook on aluminum. Can you please help us with your thoughts on alumina as well?
Alumina, the only good news is the alumina index is starting to trend slightly up. It had been low for the last two quarters. Currently, it is running about $350. We expect that it should be firmer, closer to $400 next year.
S ir, what will be the underlying variables which will drive that?
See, when the Middle East capacity went off, that is when the alumina demand went down, because the third-party alumina market is largely driven by people who are not integrated, which is the Middle East smelters, because everyone else and China, everyone else is more or less backward integrated.
Sure. Sir, second is you indicated with respect to the aluminum EBITDA bump this quarter, you attributed it to higher premium and higher value-added products.
Yes.
Is it possible to give some color on how is that on spot basis? How do you see this on Q3 basis? And is this something which is sustainable?
I mean, the value-added products are of course sustainable, so that will happen. But the premium may not be because MJP has already come down in Q3. So we had managed to get quite a good premium on the export side in Q2. In Q3, already the MJP is down by more than $100. The percentage of VAP should continue.
Sure. Last question. You did indicate on the incremental projects, we will take one new project every one- and- a- half years. Just wanted to understand, say hypothetically, if we go ahead with Mahan 370 KT first, it would be contingent to what variables on the projects which are due for commissioning in say, 2027 and 2028? Is it we are looking at a particular utilization level or is it more contingent to the balance sheet?
It is actually an execution capability and the balance sheet. Because we are working with one large EPC contractor as our partner. Really, I would like to use the crew that is finishing Aditya to go and do Mahan. So we have to phase it because the capacity to execute large projects is quite limited in the country right now. So we have to be careful. So execution capability and the balance sheet, both are the two things. Utilization, no. I mean, if you produce aluminum, the market is there.
Perfect. This is quite helpful. Thank you so much. All the very best.
Yeah, thank you.
Thank you. Next question is from the line of Rahul Gupta from Morgan Stanley. Please go ahead.
Yeah, hi. Thank you for taking my questions. Two questions. First, the downstream EBITDA per ton has been largely stable over the past couple of quarters. How should we look at in the second half? That's my first question.
Yeah, it should start to go up because we are qualifying quite a few products in Aditya FRP right now. Aditya FRP is now at the 50% loading level. So in the next two quarters, we would like to get many products under qualification, battery foil, the ULG foil, the can body stock. So as those volumes pick up, the EBITDA per ton should cross 300.
Got it. Thank you so much. My second question is slightly longer term. When you talked about the newer upstream projects that you have been undertaking is on the back of estimate of 2,600 aluminum prices. Can you help us understand with all the backward integration and also moving downstream, what kind of IRRs are you thinking about at 2,600 aluminum prices?
At least sort of teens at the 2,600, because there is a certain amount of inflation in capex and cost of execution as well. So at 2,600, we want to be at least in the teens.
Got it. So this is just a follow-up. When you talk about around INR 1 trillion of capex over the next few years, that does take into account the inflation over the next few years, right?
Yes.
Got it. Thank you so much. Wish you a very happy festive season.
Yeah, same to you.
Thank you. Next question is from the line of Jasandeep Singh Chadha from Nomura. Please go ahead.
Yeah, hi, sir. Thank you for the opportunity again. Sir, around 50% of the copper EBITDA came from non-copper materials. Can you give us a similar number for, let's say, last quarter, and on an average run rate, how much is it?
See, look, last quarter was at similar levels. I mean, you will have to go down to when TC/RCs were. If I go last year, the picture changes because TC/RCs were 15 - 17. So then the contribution from the copper side will go up. But it's fair to say that the copper value chain is fairly diverse. So you do get a little bit of one goes up, the other goes down, and sort of balances out. You can't really average it over the last five years and say where it has been.
Understood, sir. And sir, the next question is on alumina strategy. I see that, and it might be in the last quarter, but AluChem, you have terminated that. Does that change your specialty alumina strategy or the 4x downstream target? I mean, how should we look at that?
Not at all, because we just commissioned the PPT hydrate plant, which the technology was fully indigenously developed. Of course, it took us five years to do that. We were hoping with AluChem for the tabular alumina, we would shortcut that. So, A, we are out looking for other people who can help us fast-track that, and B, we have our internal program to develop tabular alumina. We are, of course, going to launch the white fused alumina project very soon. So, our plan to get to about a million tons of specialty alumina is not changed.
Understood, sir. And sir, just one last thing. I believe you answered this earlier, but I would like to ask you in separate thing. So most of Hindalco and your peers are putting up capacity, and you were saying that even for Bharat, there is a lot of demand, so utilization is not an issue. So if you can just maybe tell the demand drivers in domestic market, which sector, which region you are looking the mainly demand coming for aluminum over the next couple of years, that would be great.
Yeah, that's a good question, requires a more detailed answer, but I'll just give you a highlight. Historically, the electrical sector, which is conductors and cables, were nearly 40% of the aluminum demand. We are now starting to see auto sector becoming significant. We are starting to see packaging sector become significant. We are starting to see industrial and home appliances becoming significant. So, as this Indian economy grows and urbanization come in, and now, by the way, data centers is starting to become significant. So, all these other drivers are starting to come in. So it's fairly, how should I put it? Indian demand is now starting to replicate Japanese or European or U.S. demand in many ways. For many years before, it was very much concentrated on the conductor cable market, which was nearly 40% of our aluminum. Now it is much more broad-based.
Understood, sir. I'll get in touch with you off and on to get details further. But if you have to put out a number, let's say demand number for next five year, what will be the CAGR that you will be building for demand?
We normally work with a. I always say, can go up and down. India grows at roughly 7% CAGR. That is the number we use.
Understood, sir. Thank you so much. I will join back now.
All right. Yes. Done?
Thank you. Ladies and gentlemen, we take that as the last question for today. For any further questions, please connect to Hindalco IR team. I now hand the conference over to Mr. Pai for closing comments.
Yeah, thank you very much. So, another good quarter, and I think for me, the upstream business did well, but in the coming quarters going ahead, we believe the recovery of Novelis, the ongoing strengthening in the copper business, and the aluminum downstream are going to be important. Overall, the strength of Hindalco is in its diversified business model, with at least four pillars driving the growth. Thank you very much for your attention, and happy Dhanteras and happy Diwali to all of you.
Thank you. Ladies and gentlemen, on behalf of Hindalco Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.