Ladies and gentlemen, good day and welcome to the Q2 FY 2027 earnings conference call of National Aluminium Company Limited conference call hosted by Systematix Group. As a reminder, all participants' line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Dikshit from Systematix Group. Thank you, and over to you, ma'am.
Thank you, Vikram. Good morning, everyone. On behalf of Systematix, we welcome you to the Q2 and FY 2027 earnings conference call of National Aluminium Company Limited. I would like to thank the management for giving us the opportunity to host this call. I now hand over to Mr. Bharat Sahu, Company Secretary, NALCO, to discuss the company's results as well as introduce the management. Over to you, sir.
Thank you, ma'am. Namaste. Good morning. Warm greetings from National Aluminium Company Limited, a Navratna CPSE under the Ministry of Mines. It's a privilege introducing our CMD, Singh Brijendra Pratap , and Shri Abhay Kumar Behuria, Director (Finance), attending this earnings call today. I am Bharat Kumar Sahu, Company Secretary and Compliance Officer of NALCO. NALCO published an impressive Q2 and H1 2027 financial results last evening after the board took it on record. I take the pleasure informing all of you that this is the best-ever quarterly results with regard to revenue, PBT, PAT, and EBITDA of NALCO since its inception. A presentation in this regard has already been uploaded in the websites of the stock exchanges, that is NSE, BSE, and also on the website of our company, NALCO. It is also circulated to all of you through Systematix.
We hope you all must have received it by now. Just to briefly give you an idea about the results yesterday. In fact, the H1 revenue was all-time high of INR 11,143 crores, all-time high of EBITDA of INR 5,539 crores, highest-ever PBT of INR 5,160 crores, highest-ever PAT of INR 3,837 crores. The H1 net profit was up by 54% year-on-year basis compared to INR 3,837 of last year, 2026. So also the Q2 net profit, this Q2 2027, is up by 28% year-on-year basis compared to INR 1,835 crores last year. Without wasting any time, we open the floor for question and answer from our side. Our CMD, Shri Brijendra Pratap Singh sir, will address all the queries raised by the active members attending this conference call. Thank you.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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 assembles. The first question is from the line of Manav Gogia from Aditya Birla Institutional Equities. Please go ahead.
Yeah. Hi. Good morning, and thank you so much for the opportunity. My first question comes around, what is the status on the refinery? If you could just elaborate on where we are currently in terms of commissioning and the stabilization. Along with this, if you could also provide me with the status of Pottangi mines and how the Utkal coal mine expansion is looking for this particular fiscal.
Okay. Good morning. Thank you, Mr. Manav. Three questions which you have asked regarding refinery, Pottangi, and Utkal. Myself, B.P. Singh, CMD, NALCO. Refinery system refinery is in very advanced phase of completing the mechanical completion. We have already many packages we have completed and started the trials testing. Out of around 50 packages, around 30, 34 packages, 35 packages already have been completed. Three, four packages are in the critical path, which are already almost 90% completion, physical completion, 90%, 92% physical completion is there. What we are targeting is, the packages which are getting completed, we are already have started doing the trials for that packages, no-load trials and all. Integrated trial of the system and start of the production we have planned in last month, last week of December.
Maybe we will be completing all the packages which is left out and starting the integrated trial and starting the production from last week of December or maybe early of January. That is the status of system refinery. Pottangi mines, we are very aggressively working with state government and the locals out there. We have ordered to an MDO, Dilip Buildcon. They are also engaging with the local people. They have started some jobs there. But our one of the main constraints which we are facing is starting the mines is clearing of the trees for the road making going from NH to mines. For that, some kind of resistance we are getting from the locals, from local activists. But it is taken at the highest level, then our Ministry, state government, they are seeing it, they are negotiating with the people.
We are hoping that within two, three months, we will be able to solve this issue and start the mines. That is one issue of concern for us, which we are taking very aggressively at all levels, and we are very much sure that we will be able to solve it. Utkal mines already, last year we have done 4.8 million tons, 4 million tons to the rated capacity of the mines. This year we have planned for 4.8 million tons. All clearances are there with us. Environmental clearance for 4.8 million is under process, and I think within two months or three months we will be getting that. But for this year, yearly, we are going as per the rate of 4.8 million tons production of coal. That target of 4.8 million tons will be going from Utkal.
I think these were the three queries, which you required. Is it clear from our reply?
Yes. Thank you so much, sir, for the detailed answer. Just one more thing. You are saying that early January is where the refinery starts. Is it safe to assume that we will be running at full utilization levels for next year, or do you think that probably the ramp-up period might eat some of the utilization for next year?
If you are able to start the production in January, then it will take three, four months to four months or maybe five months, three, four, five months to reach to the 100% of the rated capacity. Our target was from next year onwards, we will be taking to the full capacity. Maybe not 1 million tons, maybe 0.8 million tons or 0.75 million tons, 0.8 million tons we will be able to do next year.
Understood. Understood, sir. Thank you so much. My second question is on the smelter front. If you could throw some light on the status of the approvals for the brownfield expansion, and how should we look at the CapEx over the course of the next four, five years? Also, if you could throw some light on how the greenfield smelter in Andhra Pradesh is going to look like. Thank you.
Smelter expansion brownfield at Angul, it can as per schedule whatever we have targeted, and we have given our timelines to the Ministry of Mines that we are almost able to achieve it. Only one or two months, three months delay is there. The technology license agreement with EGA is already signed, that's EGA in Dubai. They will be giving the technology. That was signed two months back. Now we are making the DPR, that is Detailed Project Report. We are expecting to somewhere in January or February, this DPR will be completed. We will be taking for the board approval. Maybe February we get the board approval. After that, we will start the ordering of the packages. There will be around INR 17,000 crores or INR 18,000 crores of investment. So, lot of big packages were there.
Ordering these packages, and ending and ordering will take maybe six to eight months. Our target, and we have given this target to the ministry also, that by December next year, we will be ordering all the packages. Land acquisition is also in the advanced phase. We will be getting the land also February, March next year. So by that time, land availability will be there. Ground work will start there somewhere from January, February 2028. From there, three years to three and a half years, the target we have given to the ministry is December 2030. We will complete the mechanical completion, and maybe 2031 first quarter, we start the commissioning. So till now, the timelines we are maintaining. For the power plant, for this smelter, the power plant will also be required.
For that, we are making a JV company with Neyveli Lignite Corporation. Neyveli Lignite Corporation, 50%/50% JV company is already approved by DIPAM and all that. We are progressing on that. DPR already made. DPR we are taking to the board next two, three months, two months. That will be getting approved, and that package ordering also will start. The main purpose was making the JV was that Neyveli Lignite are having coal mines near our power plant. So we will be sourcing coal from there, and the coal which we will be getting will be at their production cost, and no premium they will be charging from us. So there will be a fuel security for our thermal power plant. So that's our overall power cost goes down.
Sure, sir.
CapEx, when you were talking about the CapEx expenditure, the main CapEx expenditure will start coming from the financial year 2028/2029, when the actual groundwork, some ordering of technology license which we have signed, some CapEx very less, around INR 200 crores-INR 300 crores will come. But the major package of both smelter and power plant, which will be total costing around INR 25,000 crores. So around in the year 2028/2029, around I think INR 5,000 crores-INR 6,000 crores, or maybe after that, INR 7,000 crores-INR 8,000 crores will come in 2028/2029, and 2029/2030 and 2030/2031.
Understood, sir. That is quite helpful.
Thank you. The next question is from the line of Pathanjali Srinivasan from Sundaram Mutual Fund. Please go ahead.
Hi, sir. Thank you for the opportunity. I have a couple of questions. Our cost of production has gone up by almost $75 or $100 roughly at an EBIT level. Could you tell us where are the main areas where we have seen increase in cost, and how do we see this trending for the second half?
You see the cost of production has increased for the raw material cost. Major increase has been in caustic soda, in CP coke, and in fuel oil. These are the three areas where the cost has increased. As compared, if you see the cost of last year, 2025/2026 cost, the CP coke, the caustic soda prices, like in last year average was caustic soda around 2025/2026. The average price which we got was around INR 42,000. In H1 this year, the price went up to INR 46,900, around INR 4,700-INR 4,800 increase. In Q3, the prices will be around INR 49,000. Again, INR 2,000 increase will be there in caustic soda. That is the kind of projection for caustic soda. CP coke, you see in 2025/2026, it was average, CP coke was INR 44,600. H1 this year, it went to INR 63,700, and Q3, the projection is INR 70,600.
Again, HFO and LDO prices have also gone up. LDO prices from INR 60,000 to INR 84,000 to INR 115,000. All those prices, around 15% increase in the prices is there, and Director of Finance is also here. That has led to the increase in raw material prices and increase in our expenses.
Actually, for whatever cost we have incurred H1, I think the price increases which similarly will be listed in the input area, that we have observed. In the next H2, there is no major increase in the input cost. Rather, we will be controlling our cost by improving our techno-economic efficiency. In the first half of this year, there was adverse impact of techno-economic, which we will be taking action for the next step. That will give reduction of cost by maybe about INR 500- INR 1,000 per annum in our cost. That is our plan, because we will be controlling our caustic soda consumption, CTP, CP coke, all areas. That area will be taken care in the next half because of some issues in the rainy season, we could not maintain our techno-economic in the first half.
But since the cost is increasing, so we are going to get some relief in that area in this financial next half of this year.
Sorry, your voice is a little muffled. Could you repeat why you will get relief in the second half with respect to cost?
Because some of the area where we are not good in our techno-economic area, so that will be controlled because the dry season will be there, and production will go up, and our techno will be also controlled by taking some action, which was not taken during this rainy season, particularly in caustic soda area. Because of rain, we could not recover the much of caustic soda from our slag pond, that is rainwater pond. That action will be taken, and there will be some action, and that will be reduction of 6 kg to 7 kg in caustic soda tons.
Got it. Got it, sir. Okay. Sir, and then I have one more question with respect to alumina. So how has our price increases been in alumina? I think globally we are seeing an increase in alumina prices. So can you tell us like how much you have been able to increase, like in October from exit of September? I think September exit was $386 based on your reported number. So where are we today?
You see, alumina spot prices, whatever we are getting, in first quarter of this financial year, average price we are getting somewhere around $324 per ton in first quarter. Second quarter, it increased, it has improved. We are now at least getting on an average $370. Some of the spot it was $400 also, more than $400 also. But average we are getting somewhere around $370-$ 375. There is an increase in alumina spot prices realization, because some of the refineries issues in China and USAR, in Australia also, which has led to increase of this prices of alumina.
If you see the realization, if you see H1 realization, average realization was INR 33,200. And we are expecting that in our H2, average realization will be around INR 35,000. So there will be INR 2,000 increase in our revenue realization in respect of alumina. And cost will be maintained at this stage, rather we will be reducing cost by INR 500 or INR 1,000. That is our target.
Great, sir. Thank you, sir. All the best.
Thank you.
Thank you. The next question is from the line of Akhilesh Kumar from Emkay Global. Please go ahead.
Yeah. Hi. Thanks for the opportunity, sir. My question stands on the alumina itself, sir. Despite the strong alumina pricing, like you mentioned that cost components were kind of offset the margins. How do we see this going forward given we are seeing already an uptick in the alumina realization? Are we able to expand our margins from the 2Q levels, or how do we see it given the cost pressure is also there?
Alumina realization, what the forecasts are there, we will be getting somewhere around $370-$ 400 because some of the smelters are starting in Middle East. In Indonesia also, some of the smelters are starting. There will be a greater demand of alumina in the market because if you see in the H1, there was a surplus of alumina in the market, and the projections were that in the 2026/2027 financial year, around 1.6 million tons of excess alumina will be there in the global market. Now, with this smelter starting, some kind of absorptions will be there. We are expecting somewhere around $370 average will be whatever we got in Q2. Almost similar kind of situations will be there, but ultimately everything depends on Hormuz blockage because there is a demand of alumina in the Middle East, but the vessels are not going through those blockages.
Due to which the insurance charges have increased, the shipment charges have increased. That is why the buyers, the spot buyers, whoever are buying, they are quoting somewhat low. If the situations get improved, then the prices may further increase.
Okay, so for 3Q or the second half, if we say so, we see the margins remaining stable at 2Q level. Is that the right understanding?
Yes.
Alumina totality, sir. I guess you are right. In the second half of this fiscal, we expect that our margin would be stable because three potential areas are there because we are going to start our new refinery, which will be giving INR 2 lakh extra alumina. If we convert to the financial term, it will give INR 150 crore extra margin to our PBT. That is one of the area. Another techno-economic area, in the first half, we could not get the benefit of techno-economics, which we are expecting to get the benefit. It will add at least INR 100 crore to our profit margin.
Third is one area, in the first of this year, we have taken an additional impact of royalty because the area which Government of Odisha has claimed that we have bargained the first of the year, which will not be repeated in the second half. That will give us INR 50 crore extra. All about we are going to get INR 300 crore- INR 350 crore extra in the next half of this year.
Got it. Sir, do we maintain our alumina full year guidance of 2.5 million tons of production?
You see, now with the present refinery of four trains, we are going at the rate of 2.3 and 0.2 we are planning from fifth train. Even if you are starting in January, may not be 0.2, but definitely 1.5 will be unique.
Okay.
2.4 point
2.4 million ton kind of be maintained for full year?
24.5 lakh, 2.4 million.
Okay.
[Audio distortion].
Your voice was a bit muffled.
2.45 [audio distortion].
2.45. Okay, got it. My second question is on aluminum. Now as we see aluminum pricing has been under pressure over the last one month, due to Middle East supply coming up. Does that change our strategy to hedge some of our aluminum production, or we still want to sell on spot basis?
Aluminum, we are not selling on the spot basis. Our aluminum metal pricing is totally dependent on LME, whatever LME is there. We have an MOU with our customers because most of around 95% of our customers are domestic customers. in the beginning of year, we do the MOU for the quantity, and pricing is done on the basis of the LME. It is totally dependent on LME, how the LME is moving. LME, of course, has gone down in Q3 as compared to Q1. At the beginning of year also, we have assumed that the LME will be somewhere around $3,000, $2,900 to $3,000. Due to war, it went up, but our annual target, whatever we have taken annual business plan, that we have expected that $3,000, and we are very much confident that it will remain somewhere around $3,000.
We are not hedging any volumes as of now at a lower or higher price?
Actually, as per NALCO policy, we have not gone for any hedging of our commodity. Since our pricing mechanism is, as [Shailesh] has explained, it is linked to our LME. Whatever LME movement is there, that we capture in our price, and every three days, we revise our price as per the movement of LME, and we add the other factor also, that is a premium and other import duty. Since our price mechanism is taken as of the movement of LME, we do not hedge anything. So at this point of time, NALCO, I do not think require to be hedge anything because we do not have any commitment, financial commitment for our CapEx, OpEx, and any other revenue margin we are maintaining. We do not require hedging this part. After commissioning of our fifth stream refinery, we will see if we should go for any hedging or not.
Got it, sir. Lastly, if I could squeeze in one more. How are we assessing the Middle East situation right now with the capacities coming up and ramping up fast? What kind of supply-demand imbalance are we seeing? Do we also see surplus in CY 2027?
In Q3 and Q4, the demands of alumina will be there. What is happening since the ships are not able to go through the Strait of Hormuz, a lot of restrictions are there. They are taking through some land route and all that, increasing the cost of alumina on the smelters in the Middle East. They are not ramping to the full capacity because the alumina availability is not there. Once this situation of Hormuz, maybe today I think election is there and what happens we do not know. After that, if it improves, definitely the smelters will, in the Middle East, they will ramp up their production because there is a huge shortage of alumina there. All the alumina which they are taking, they are taking to some other, some Sohar or some other ports and by land, by trailers and all that they are taking the alumina.
That is increasing their cost. That is the situation as of now. So totally depending on this geopolitical situation in the Middle East. But of course, the situation which was there in H1, the production of metal in H2 will be more than that. Whatever this metals has stopped due to some bombing and some disruptions due to war, that has started coming up and in H2 they will increase their production. That is kind of the situation there till now.
Got it, sir. Thank you so much.
Thank you. The next question is from the line of Darshan Mehta from Dolat Capital. Please go ahead.
Yes, sir. Thanks for the opportunity, sir. My first question was on this status of the conveyor belt of 7.9 km that we were going to build for transport of the bauxite. What is the status of that?
Okay. So conveyor means long distance conveyor for that land acquisition, some land we have to get from forest department that has already handed over to us. Some part land around, I think, 80 acres or 100 acres or 132 acres of land is to be acquired from the private villages of there. For that, public hearing is scheduled and it was scheduled on 27th of this month. Again, due to some issues, it is deferred. Which I told earlier also, both this public hearing for the land and tree felling, these are the two issues which we are taking up very aggressively with the state government, with our Ministry. Somewhat delay is there, but lot of improvement has come and we have got able to mobilize the people there. Our MDO is also there with us.
We are expecting that all these issues we will be able to solve in next two to three months. As far as the visibility of the conveyor is there, once we get the land, some of the lands are there with us. Our target is next two to two and a half years, we have to make this conveyor. It is around 18 km long conveyor is to be made. It will take some time. Till that time, the bauxite will be coming by road. That is the plan we are doing.
Sir, just to understand, you are saying the conveyor belt would take two years, if I heard it correctly.
Taking the conveyor belt, because 18 km conveyor belt making and the land also is, this public hearing is going on after that also some kind of activities are required after that. It will take around six months or seven months or eight months to get the land. Till that time, whatever land is available with us, we will start the job and try to complete the conveyor in next maybe two years or two and a half years.
Oh, okay. Sir, other question was on this other income. That has increased almost like 43% quarter-on-quarter. Sir, can you let us know what is the reason for this one?
This is because of other income because one is your interest because your fund base is increasing day by day because of our earning. Another is we are also getting some interest, additional interest benefit because of the enlistment of additional banks, we are getting a good rate of interest. Two factors have increased our interest income. That is primary interest income and some of the windfall, because windfall we have taken account of this H1 that was increased INR 10 crores extra. Other is primarily on account of interest income on our deposit.
Our main fund base, it was INR 8,500 crores, now it is around INR 12,000 crores. From that the interest earning has increased.
Okay. Sir, one more question. I think about Panchpatmali mines, I think the central and north block lease tenure, I think it was going to end in 2029. Just wanted to confirm from you, is this understanding correct? In case it is, then what is the process of renewal in that case? Does that mine go for bidding or that is automatic renewal, but maybe with some amount of increase, incremented royalty or something?
There is automatic increase for government organization. There will not be any bidding. We have already started the process, appointed, we are in the process of appointing the consultant for doing all this due diligence, doing all these processes, completing. Already as per government norms and government guidelines for the government companies, for public sector units, it will get automatically increased. The process we have started, some kind of royalty increase and all that will be there as per the rules. There is no issue in that. We will get those approvals.
The central and north block would end in 2029, whereas the south block would be more like a 2031, right?
North block, almost north block we are finishing. Central block, a lot of material is there. South block, we have got two blocks, south block one and south block two. South block one is also finishing, south block two we are having. So combined south block one, south block two and central block, we are having around 150 million tons of reserves and around 111 million from Pottangi. Around 250 million tons of reserves are there that will last for next 15 years. Combined Pottangi and central block and south block.
No, no. Sir, I understand on the reserves part, but what I was saying the lease tenure for the south block would end in 2031. I understood that it would go for automatic renewal [aucio distortion].
No issues on that.
That's why if you see the Electricity Act, there is a provision in the Electricity Act that government company, they have the reasonable to be there is a certain, but additional right they may impose upon. Because they cannot take out this mine and go to bidding. Because it is a captive mine, isn't it? It's captive and our whole country and plant is dependent on this. There is a legal provision also in the Electricity Act.
Yeah. Understood. Thank you.
Thank you.
Thank you. The next question is from the line of Pinakin from HSBC. Please go ahead.
Yeah, thank you very much, sir. My first question is, the alumina exports are down 16% year-on-year, given what is happening in the Middle East. As and when the situation normalizes and your export volumes pick up, should the mix also impact margins positively at the same index level of alumina prices? Are domestic alumina sales less profitable than export sales?
You see, domestic, our major sales is in export markets because every month we sell around four shipment, that is around 1,20,000 tons of shipment. Till September, we were doing around four shipment every month. October, it got badly affected due to some restrictions in Strait of Hormuz. We could only dispatch one vessel in October. Now, situations, buyers are not able to put in the vessels. Already vessels have been ordered here. They are in line. This month itself, in November itself, we are planning around six vessels dispatch in this month. So, it is getting normalized, and what we are hoping is in the coming days, times, we will be dispatching around four vessels every month. Prices already have told, the prices will be somewhere around $370- $380 average what we are expecting, depending on the demand-supply situation.
Sure. My second question is, sir, you mentioned the caustic soda increase, and we can look at the implied alumina cost of production, which has surged. What is the current situation in caustic? Are prices expected to remain like this in the second half of the year? The second is, this is a global cost inflation, so all alumina producers will be impacted at the same time. So in that context, given that the alumina cost curve has moved higher, shouldn't we expect alumina prices to move even further higher as the shut Middle East smelters ramp up and start importing more alumina?
You see, caustic soda prices, what I told earlier also, it was average 2025/20 26 was INR 42,200 per ton. H1, the prices were somewhere around INR 47,000. In Q3, the prices forecast is around INR 49,000. So there is an increase of around, you see, H1 to H2 will be around INR 2,000 per ton, will be there. But the prices, the relation which we get from the market, that is not depending on the raw material prices, that depending on the totally demand-supply situations. Whatever you told, that the smelters are coming, we are also expecting with the increase in the production of smelter, the demand will be there and the prices will further increase.
In between, what we are trying to do is, we are going to, we have already earlier floated one EOI for a long-term tie-up with the smelters in Middle East and other places, maybe two years or three years tie-up, because our smelters, which our nominal expansion which we are planning, should come from FY maybe 2031, year 2031 or 2032, the final total ramp-up will be there. So till then, we will be having an excess of around 2 million tons of alumina with us. We are trying for a long-term agreement with the smelters. If we are able to succeed that, we will be able to get a better relation. Because if these smelters, if they get long-term agreements and all that, what we have seen, we get better prices.
We are trying for that also, but till then, somewhere around $370-$ 380, we are hoping not more than that.
Got it. Thank you very much, sir.
Another thing, sir, I will add on that. We are also exploring the selling alumina in the domestic market also in the bulk quantity, that we have already finalized a pricing mechanism, and that will be in import parity basis. Whatever money we are getting from export of alumina, in the domestic market, we will be trying to sell at that price. There will be no base price in domestic market. Both will be in the same platform.
Domestic price is totally dependent on the export. Whatever from export realization we are having, in the previous month, whatever export tenders, spot tenders prices were there, on that basis the domestic pricing will turn.
Yeah.
Thank you. Next question is from the line of Pallav Agarwal from Antique Stock Broking. Please go ahead.
Yeah, good morning, sir, and congratulations on the set of results. Sir, the first question was on the power and fuel cost. This being a monsoon quarter, traditionally we have had some disruption in coal supply, et cetera, and we have also seen some increase in the power and fuel costs in this quarter. So, did we purchase some external electricity in this quarter?
Yes. You see, power and fuel cost has increased substantially, around INR 317 crores increase if you see H1 last year and this year. So the major was around INR 256 crores increase was there in fuel oil and refinery. Refinery, what happened, there is a restriction from railways for the supply of rakes to the power plants, to the integrated power plants. The railways from the government, because some of the power plants all over India, there is short of coal is there. So all the rates have been diverted to the integrated power plants, IPP. So now whatever our power plant, we were getting the coal, so there was short of supply was there. Our average stock of coal which we have to maintain is around 15 days.
We went as low as one or two days stock also, due to which and due to rain, heavy rains also, the moisture coming, we have to inject more fuel in the boilers. That has increased the cost of fuel as because fuel is not required if the coal is there, proper amount of coal is there. During rainy season, some excessive rains were also there and slow stock of the fuel. But now we have taken some measures. We have appointed few consultants and all that who are able to manage the rates and all that. Our coal position in the refinery has increased, which was hovering somewhere around one day, two days stock. Now it has gone to around four days, five days stock, and we are trying to increase the stocks.
Some steps and some other steps also we are taking to increase the coal stock. That will reduce the power cost in the H2, because that was the major reason. And some purchase power was also there. The purchase power, you see, last year it was INR 50 crores. This year, it was around INR 123 crores. INR 73 crores increase in purchase power is also there. That also from CPP, because CPP, some breakdowns in the boilers were there, and some coal issue due to rain, moisture, moist coal already every year it is there. That was also there, but that is going to improve in the subsequent half yearly period in this year. When we show this extra cost of around INR 317 crores, we will be able to take care in H2.
Sure, sir. This INR 50 crores and INR 120 crores is for the quarter or for the half year, sir? You mentioned the increase in external power.
Our obviously increase, H1 last year, 2025/2026, to H1 2026/2027, the power increase is around INR 317 crores, out of which the contribution of fuel oil, just because of fuel oil in the refinery, it was INR 256 crores. And purchase power from the grid, we have purchase power, more purchase power from the grid due to some breakdowns in our CPP and low availability of the coal, moist coal, that was INR 73 crores. These are the two major reasons for H1.
Yeah. Okay. This will reduce going. Also, I mean, if in the notes to accounts you mentioned, you know, captive coal has been some reclassification in the costing. I think, you know, from the cost of raw materials now it is gone into power and fuel. If you could just, you know, clarify that, you know, that will not impact our overall
That is actually where you are sourcing coal either from purchasing or from your own captive mines. As per the accounting standard, that should be clubbed under the power and fuel cost. Earlier, we used to put that cost in the manufacturing expense or other expenses head, which is not logically correct. Since it is the input for manufacturing of aluminium, it will be under power and fuel. We have classified that. From last year, we are doing the last financial year 2025/2026 in the annual result. We have given that as a clarification in our notes. Now, we are doing in the main sheet of the profit and loss account because it is taken from the other manufacturing expenses to power and fuel head. And the corresponding period expenses are also recast accordingly.
Sure. Sir, reclassification doesn't only other expenses would have gone down and power and fuel would have gone up.
Exactly. Because it does not give a real picture to the public because it is primarily the power and fuel cost. So, it should be shown under power and fuel cost.
Sure, sir. Also, sir, you know, with the LME prices coming down, our royalty payment on bauxite also would have come down. That cost also, sir? That would have come down. Okay. Sir, and lastly, if you could just give us, you know, I think you mentioned the cash has gone to INR 12,000 crore. But, you know, could you just give us an exact, and, you know, given that, what is the CapEx that we had done in the first half of this year, and what is the expectation for FY 2027?
Our total CapEx plan for the year is around INR 1,800. In the first half, around INR 800. INR 800 we have done. First half normally it is low. Second half we are expecting because 15th we also got a payment. We are expecting
Almost we will be crossing INR 1,800.
It will be more than INR 1,800.
Sure, sir. But anyway, we will accrue more cash. I think this cash balance of INR 12,000 crores should, after payment of dividend, should again start inching up.
Yeah. We are expecting a cash balance at the end of this fiscal, INR 12,000 crores.
INR 12,000 crores. Okay. Okay, sir. Yeah. Thank you so much.
Thank you. The next question is from the line of Amit Murarka from Axis Capital. Please go ahead.
Yeah. Hi. Thanks for the opportunity. Just to harp upon cost inflation a bit more. I think you mentioned, from what I understood, all the key raw material costs are further higher. I think particularly, on the coke side, I think there is a significant inflation is what I understood. While you will try to bring in the techno parameters down, but assuming the same techno parameters, could you maybe ballpark give a guidance on how much cost inflation could be there in the overall production cost?
Whatever our goods imply in the techno parameter area, we have already absorbed in the H1 cost. That will remain if we are not able to improve anything on that front. The cost will not increase much because that impact we have already taken in our H1. We are expecting there will be certainly improvement in the techno area because we have identified the areas where we can take corrective action, and corrective action has already been taken. That will definitely give us some positive impact in the next half. There is no question of not getting any benefit from our techno area because the Alva situation, we improve definitely, and we are expecting some cost reduction in that area. If it remains same, the cost will be at the level of H1. We are not going to increase the cost in the next half.
I was talking about the raw material cost you mentioned, right? That caustic is up and everything else is also up.
Because caustic consumption we are targeting to reduce by 7 kg at least in the next six months. Also, CT pitch and CP coke, there will be a reduction plan. In three areas, we are going to our HFO. CMD sir has explained that HFO, because of this coal shortage, there is a consumption of HFO. That would not be repeated in the next H 2. Three, four areas we have already identified. We will definitely see. We are seeing some improvement there.
Got it. Just on captive coal, I think there was a plan to raise it to 4.8 million tons this year. So, where are we on that?
Captive coal, last year we have done around 4 million tons. This year we are planning 4.8 million tons. 4.8 million tons, whatever we have planned, that was divided in a monthly target. As per that 4.8 million tons, we are going at the 4.8 million tons rate production of captive coal. Only some clearances, environmental clearances and all that, they are in the advanced stage. We are expecting that next two months we will be getting those clearances. From the state we have got, and now we have applied to MoEFCC. We will be getting that, and we will be ending the year with 4.8 million tons.
Okay. What was H1 production, if you could share?
H1 production of coal was Just a minute. Let me see. You see, H1 production of coal Coal production? [Audio distortion]. So, H1 production of this month, 2026/2027, in fiscal G, that is 21 lakhs, 2.1 million tons.
Got it.
21 lakh will be there, almost approximately, compared to last year, slightly higher. Yes.
21.5 lakh, right? Okay. Also, on the pay commission revisions, I think mostly you will be booking it in Q4, is what you had guided earlier. What is the ballpark increase that you would be expecting to happen?
Right. If you see in that pay revision, this fiscal, it will be only for three months, January to March. If you see our cost to the company, employee cost, it was 2025/2026, it was around 36. This H1, if you see the average cost, it is around coming to 32. So, there is a reduction. Though there is a reduction of overall reduction of 80 number of employees, but the mix of employees, because the higher paying capacity, higher wages earning employees are getting separated, and we are inducting the fresh employee, which is on the lower scale. So, overall, if you see our employee cost, it will be after taking this pay is an impact for three months, and other DA increase increment, I think it will be lesser than the last year, 2025/2026, whatever our salary, employee wages and regulation.
This 2026/2027, it will be little lesser because of this retirement of high salary employee and reduction of just primary pay. So, there will be reduction in employee cost.
Understood. But still, what is the kind of wage increases that you expect to come through maybe in the?
That pay commission has not yet been finalized. We do not know what will be the. At least 15% increase will be there.
That's right. Every revision, around 15% increase is there.
Understood. Okay, thank you. That's all from me.
Thank you. The next question is from the line of Siddhi Soni from Hansa Financial Consultancy. Please go ahead.
Hello. Thank you for the opportunity. Sir, sometime back you were mentioning about the domestic pricing of aluminium, which is dependent on export pricing. I just wanted to understand that point a little bit, if you can elaborate.
Like export, we are doing four spot tenders every month. Whatever spot tender prices we are getting, suppose in one spot tender we are getting $400 per ton, in second we are getting $317, in third $380. Out of these four spot tenders, we do an average. Suppose for pricing, if you see pricing for November, we take an average spot tender prices of October, export prices, and export spot tender prices. On that basis, some additions are there, that is import duty and all that. On that basis, the domestic pricing is done.
Okay. Got it, sir. Sir, can you give some guidance on the order book as well? Like what percentage of our current order book, open one, which is coming from Middle East?
Order booking for alumina you are telling?
Yeah.
Alumina, as of now, around six vessels already spot tender orders we are having for this month of November. Six vessels we are trying to dispatch, two vessels already loaded, two more vessels. Three vessels already they have done the payments also. There is a positive sign because October only we were able to dispatch one vessel. A lot of restrictions were there. There is a sign because we are not everyone, no one is able to tell what is the exact picture there. But since the vessels have started turning and moving, so we are getting a positive sign and we are expecting that this month onwards the supplies will get resumed for around four vessels per month.
Okay. Pricing, sir, we are expecting. Yeah.
Pricing?
Pricing we are expecting around
Pricing we are expecting somewhere around $370-$380, not more than that. Because there is an excess of alumina in the market due to restrictions in the smelters and all that. Now these smelters have started coming up. It totally depends on the geopolitical situation. If these smelters are ramped up fast, maybe it will slightly increase to $400 also. But what expectation we are having is around $370-$380, not more than that.
Okay. Got it, sir. That's all from my side.
Thank you.
Thank you. The next question is from the line of Rajesh Majumdar from 360 ONE Capital. Please go ahead.
Yeah, good morning, sir, and thanks for the opportunity. I also had a few questions on alumina, sir, but mainly on the cost of production. Would you tell us that over the years how the cost of production has increased in the old mines because of the impact of red mud, and how the new Pottangi mines can act as in terms of the cost of production going forward, say, when the mines ramp up to reasonable high capacity? How can the cost of production of alumina come down with that? That was the first question.
The cost of production of alumina in view of the red mud.
Yeah.
In view of the red mud, I don't think that there is any increase in the cost because red mud is not going to affect. We have already red mud pond one, red mud pond two is already ready for us. Red mud pond one is also going to sustain for maybe next one or two years. We'll put in red mud because red mud is not an issue. We are going for a red mud filtration unit, for which we are spending around INR 400 crore- INR 500 crore. Some amount of depreciation, when that project will be completed, some amount of depreciation will be added. Interest is not there. I think [Non-English content] . It will be somewhere around INR 20, INR 50 or INR 100 per ton [Noe-English content] . That will be very less.
As far as Pottangi mines and our ore coming from Pottangi mines, that will increase the cost slightly. That is a transportation cost. Initially, we have to transport the ore from Pottangi mines by road. In that, the additional cost will be somewhere around INR 490-INR 500 per ton. If you see our bauxite cost presently, which we are getting is around INR 1,300- INR 1,400 per ton from our Panchpatmali mines. If you are taking from Pottangi mines, there will be an additional cost of INR 400- INR 500 per ton because of road transport. After two, three years, two and a half years, once this conveyor comes, then this cost will come down to around INR 100-INR 150 per ton. Till that time, some additional cost from Pottangi for the only amount which is coming from Pottangi.
That will not be for the total amount. The advantage which we will be getting, the ore which will be coming from the Pottangi, since it will be a new mine, that will be a better quality ore and the silica will be less, the reactive silica will be less. That will reduce the overall caustic consumption in our fifth stream refinery. The fifth stream refinery which is coming again, that is a modern plant, that is a low pressure digestion and high pressure digestion and all that. In that also, the caustic soda consumption which is there in our fourth stream, in the old fourth stream, in the fifth stream, the caustic soda consumption will be better than the earlier fourth stream.
What we are envisaging in the new stream from Pottangi mines, even if the transportation cost is there, that will be taken care of from the fifth stream refinery.
What is the cost of production right now in alumina? Is it $240- $250?
Alumina, it is around INR 24,000. If you convert in [audio distortion]. It is around INR 24,000-INR 25,000 for Indian rupees. INR 95 rupees and-
Yeah, $250. Once all the conveyor, et cetera, are set up, how much can this cost of production go down eventually when the Pottangi mines are operational with the entire infrastructure?
Okay. Pottangi mines, sir has already explained. Pottangi mines, we are getting advantage in the mining cost because the party who has taken the MDO, he will be giving us ore at the rate of INR 420. Initial period for two, three years, because the LDC, long distance conveyor will be ready by two years. In this initial transition period, he will be adding INR 490 extra for road transport. Initially, the cost will be higher in the Pottangi mines, the ore taken from Pottangi mines. But after commission, long distance conveyor, the Pottangi mines cost will be equal with our existing Panchpatmali mining cost. Because we will be getting advantages in the mining cost.
Because party has quoted a very competitive figure of INR 140, which presently in our existing mines, it is around INR 500+ . So that INR 150 we will be getting benefit there. The long distance conveyor, for that we are investing only INR 1,000 crore. That depreciation impact will be, because it is a funded project, the depreciation impact will be on NALCO account. So that will be INR 100 extra. Overall, if you see the Pottangi mines cost after commissioning of that mine is full-fledged, after the rated capacity is achieved, the cost will be at par with our existing mine cost.
Right, sir. That's useful. Secondly, sir, my question on the alumina as a percentage of aluminum, what are the factors one should look out for other than the resumption of production in the Middle East, which is of course positive? But if you look at the bauxite prices, they are not moving up. It was there at $70, and if the ocean freight etcetera again starts coming down, then there will be no inflationary pressure on the bauxite freight to kind of ramp up the alumina prices. It has a fair chance that alumina prices will not go back to 15%-16% of LME aluminum, but rather remain at, say, 12%-13%.
Yeah, if it is 13%, it is okay. We are expecting, we are projecting alumina price 12.5 basis point. If it is more than 12.5% of your LME, that is fine. It will not go to 15% or 16%, but it will be certainly at the level of 13% or 12.5%. If that remains, there is no issue in your alumina relays. It will be coming around $370+ .
Okay.
[Audio distortion] $370.
My last question is that we have, of course, nearly [4 lakh million tons] of captive coal now, and our total requirement is, I understand, 7.2 million for the smelter. Are we covered in terms of FSA for the remaining, or are we exposed to e-auction prices at all? Because e-auction market has gone to nearly more than INR 250 per ton now.
We are covered by FSA. There is no issue in that. Our FSA is for 6 million tons, and we are not able to take whatever FSA is there. But with FSA, some issue is there, the quality of the coal which we get from the FSA, some of the mines, the quality is not there. Just for the blending purpose, we go for very small amount of e-auction coal. Earlier, we used to have higher e-auction, but with this Utkal coal production increasing, going to 4.8 million tons, the e-auction component has been very less.
For your kind information, if you see our figure, last year, e-auction coal normally we take at our refinery, not in our smelter. It is totally fed by our FSA as well as Utkal D. E-auction coal, if you see the figure last year, 2025/2026, we have taken 5,16,000 e-auction coal. This year for the H1, we have taken only 1.96 lakhs. We are reducing e-auction coal. The higher cost coal we are reducing and managing from others linkage, and primary linkage, because refinery is managed by linkage and e-auction. Linkage coal we have increased, and we have reduced e-auction coal. One consultant appointed, who is ensuring us to give rake availability, which will help us to move and evacuate coal from our FSA.
Because in the first half, the availability of FSA rates are very low. Some kind of increase in e-auction was there, but in H2, I think this will cover the difference.
Okay. And sir, in our segment results, what is the cost of alumina we pay to the aluminium smelter? Is it the market price or is it the cost of the alumina at 25,000?
I could not get you. Please repeat.
In the segment results, when we transfer the alumina to the aluminium division, chemicals to alumina, do we transfer it to market price or we don't see?
As per our accounting policy, we transfer the alumina to our aluminium smelter at cost price. It is not cost plus or it is not market price. It is cost price.
Okay. Thank you. Thanks so much. Thanks.
Thank you. Anyone who wishes to ask a question may press star and one now. The next question is from the line of Jashandeep Chadha from Nomura. Please go ahead.
Yeah, hi. Thank you for the opportunity. Sir, most of my questions have been answered. A couple of questions from my side will be largely on the bookkeeping front. Can you please tell us what will be your cost of production for this quarter for alumina?
Alumina cost of production will be almost same. There will be a slight increase in caustic soda prices, what I was telling. In H1, it was around INR 47,000, and in Q3 and Q4, maybe somewhere around INR 49,000, INR 2,000 increase. That INR 2,000 increase will add around maybe INR 500-INR 600 per ton increase. But that we'll try to offset by improving our specific consumption of caustic soda, because the H1 was a purely rainy season, around four, five months, four months was a totally rain, not able to get the recovery of alumina from our red mud pond and all that. In H2, definitely in dry season, the caustic soda consumption will be less. Even HFO and LDO consumption, which was very high in H1, that is going to reduce because our coal stock is improving.
Post stock is becoming more better and better, and dry coal will be there. There also the saving will be there. Of course, the LDO and HFO prices are increasing from INR 84,800 in H1, will go to around INR 120,000. The specifics will definitely improve, and it is a trend every year in H2, the specifics are better, the prices are there, the production volume is more. So, the cost will be somewhere similar kind of what we have got in H2, not more than that at least.
Right, sir. So just to Yes, sir. So just to put it another way, on ex-port, your cost will be largely flat, barring if the spot prices go up, right, sir?
It is based, but
Sir, my second question is largely on the structure line. While the most of your renewable power will be coming post FY 2030, right? And your smelters, CapEx will also start from FY 2028 onwards or maybe later in FY 2029. Over the next couple of years, what will be the major cost drivers which will help the company to reduce their cost structurally? If you can just help us with that would be great, sir.
Cost drivers, sir? How we can reduce our cost because in terms of alumina. You are talking about the total cost?
Yes, sir. Both on the alumina and aluminum front, total operating cost, sir.
Alumina as well as aluminum.
Sir, if you can give the cost drivers for both, that would be great.
Look here, in the next four, five years, or three, four years, till our new smelter is coming to ground, the cost will be definitely certainly the input price cost, because the input price cost will be certainly there is a market trend, it will go by 3%- 4%. What we have projected, it will be increased by 2%- 3% year-wise. That will increase. But how we will contain our cost by improving our efficiency. Definitely, when our new refinery will be coming, that is with the modern feature, that is a technology, very good technology, that will give us benefit in our operational efficiency.
Though there will be input cost increase, but that will be set off by our new plant, because our plant, old refineries are very old and their features are very old, and new refinery, caustic conversion will be lesser and the efficiency will be more. So that advantage we will be getting, though we will be adding some cost on account of depreciation, because interest is not there. We are going to add some cost on account of depreciation, and I don't think depreciation will be set off by reduction in technical, which is the new refinery. So that area, the cost will be remain in the flat. Input cost will be almost as of now. There is another impact will be there, employee cost, because the dilution impact will be there in 2027, 2028 onwards, and there will be average increase of 15%.
That employee cost is around our 10%- 12%. So 15% increase in employee cost will not add much to our total cost. So that there will be certainly 3%- 4% cost increase. As well as, if you see the cost front, there is also revenue front. Your alumina price will increase and aluminum metal price also increase in the next three, four years. So almost NALCO will be maintaining the same margin level in the next three, four years, and till our new smelter is commissioned.
Understood, sir. Thank you so much, sir. Just one last question. While you have highlighted that in the second half, with Middle East capacities, the smelters coming back, the demand for alumina will increase, and hence you are forecasting a higher alumina prices. If we take it for, let's say, for FY 2028, right, where there are concerns that some of the refineries will also be coming up in Indonesia. So how do you see alumina prices over the next couple of years? Let's say for next FY 2028, if you can give us hint. Do you feel the alumina prices will remain high, the market will remain in tightness or in deficit? Or do you think once the refineries are running in Indonesia, there will be some pressure in pricing?
Refineries are coming in Indonesia, but Indonesia, the smelters are also to be commissioned. The smelters around 0.5 million tons to, I think, 0.6 million tons of capacity smelters are going to be commissioned in maybe next year or next to next year. So part production will start coming, and with this Middle East smelters getting stabilized to the full capacity. So the demand of the alumina will be there. But of course, the projection is there, this year itself, around 1.6 million tons of excess alumina in the market. The pressure on the alumina will, of course, be there because the alumina production, we are also building alumina production by 1 million ton next year. Vedanta's refinery is also coming. So, of course, the pressure will be there, and we are not expecting anywhere more than $350 of alumina prices which we will be getting in the export market.
Thank you so much, sir. It was really helpful. I will join back the queue .
Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Bharat Kumar Sahu for closing comments. Over to you, sir.
Thank you, ma'am. On behalf of NALCO, we thank all our active participants for taking their keen interest on the activities of NALCO and participated in this earnings call today. In fact, this shows your interest and trust on NALCO and its business activities. We look forward for similar kind of cooperation in future as well. Thanks, Chorus Call, for facilitating this seamless earnings call for FY 2027. We are also thankful to Systematix Group for arranging this call and also arranging on quarter-on-quarter basis. We also look forward for your cooperation on continued basis. Last but not the least, again, on behalf of NALCO collective, we wish all our active participants a happy, prosperous, and prosperous year ahead with endless opportunities. Thank you. Thank you all.
Thank you.
Yeah.
Thank you. On behalf of National Aluminium Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.