Hindalco Industries Limited (500440) Earnings Call Transcript & Summary

We are happy to host the world's largest value-added aluminum producer, Hindalco, which after being successfully deleveraging its balance sheet turns its focus on growth. The company is represented by Mr. Subir Sen, Head of Investor Relations. Now I would request Subir to give his opening remark where he can highlight his present growth plans, which they have announced, and then we can open the floor for Q&A. Over to you, Subir.

Thanks, Ashish, for the brief introduction. Good afternoon, everyone. I hope you guys are all safe and sound. So I think you must have gone through our latest investor presentation, which covers -- this was Investor Day, which we did on 30th of March. So we just came out with our, say, growth plans over the next 5 years, including Novelis and India. So I hope you must have seen the presentation and the live event, which we did on 30th. So just for -- just a refresh on what we actually discussed in this forum. So in this forum, we basically called out our overall plans in India as well as in Novelis. And also we gave some market overview on the Novelis' side on the different segments, including our 4 major segments that is beverage cans, automotive, specialties and aerospace. So if you must have noticed that now the beverage cans is growing at a CAGR of 3% to 4% and so is automotive which is, say, growing at a CAGR of 11%, and specialties, again, it's a new sector which we, say, ventured into after acquisition of Aleris, that is the building and construction and the, say, thick gauge and light gauge segment. So that business is also picking up as the house bills and all, say, picking up in U.S. So that business is also doing pretty well, and so is the overall market's demand from these segments. On the aerospace side, aerospace, again, as the travel is resuming after now we are getting back to normal, this market is also, say, getting back to its -- it was how it was. So we hope this segment also does, say, pick up. And I think you can expect in the next, say, 3 to 4 quarters, this market will again come back, too. This is not a very big market again. This is around 400 Kt odd market where we, say, supply around 80 Kt to 100 Kt from the -- again, we got this segment as an addition from the acquisition of Aleris. Going forward, we have, say, covered our overall transformational journey across Novelis. How we have announced our organic projects and how we have achieved this growth over the period of, say, last decade and some from -- in FY '10 to FY '16, we have pulled out our capital expenditures and have grown and then being -- this is how the transformation journey has begun and where we are now today, say delivering an EBITDA of 1.5 million tons -- sorry, $1.5 million. So coming to India, India's journey, again, we are focused on downstream. We are expanding and downstream is the overall focus for the company. Upstream, again, we are, say, doing small brownfield expansions and the alumina and the aluminum side. So we have, say, called out certain details on that. This market, the downstream market, is quite strong in India. The consumption of aluminum in India is around 4 million tonnes. And this is expected to go up to, say, 8 million tonnes. Let me just, I think, share the screen. I think it will be easier. Can you see my screen, Ashish?

Yes, we can.

So this was the slide which we presented for the overall aluminum market on the end-use side. So this, you can see building and construction, transportation, packaging and others. So these are all growing at a CAGR of around 7% to 10%. So the consumption of aluminum is going up. So you just see that in the next decade, it is expected to grow around 8 million tonnes. Same for the other segments like copper. So these are some end-use segments, and this sector is also expected to grow between, say, taking all the segments, say, between 10% -- 6% to 12%. So we are getting into newer spaces like the IGT, which is your inner groove tubes. So this is basically used in the AC outdoor and indoor unit. These are the groove pipes, which is being used for refrigeration. So this is particularly a sector, which is totally dependent on imports. So we are trying to get into this market and capture this opportunity. This is a project which we -- which is also being approved under the PLI scheme. So this is the way forward from, say, rods, which we are doing currently to copper inner groove tubes. Apart from that, there are uses of copper across all these end use. So we are focusing there as well. So this is the overall market segments in the copper space, same for alumina. So this is the specialty alumina, which is basically used in these end-use segments like ceramics, flame retardants, refractories, electronics, the solid surfaces. Electronics, basically, your automotive and the medical and the aerospace, this is -- this acts as a -- all the gorilla glasses, you see, it's all made out of specialty alumina hydrate. So we've also given some guidance on how do we plan to go ahead in India, as I said. These are some recent inorganic expansions or inorganic acquisitions we did. So this is a Ryker copper CCR facility of around 225 Kt, a SAPA Extrusions facility, this is the Hydro's facility in India. This is in Kuppam. This was around 15 Kt. So this is the -- these are the plans of the upstream and the downstream. So this is upstream, we are, say, plan to spend around $1.7 billion; on downstream, around $719 million going forward. On the copper business and all the specialty alumina and energy, energy, basically, these are the 2 mines we have bought. And this will come in the next, say, 3 to 4 years. This will again give sort of assurance of supplies as now we are dependent on Coal India. So this will basically gives us an assurance of -- we are having our own mine. So if we can, say, our requirement is around 12 -- our requirement is around 16 million tonnes, and these 2 mines together would make up more than 16 million tonnes, so we will be completely secured. So dependency on the linkage coal from Coal India as well as e-auction will reduce. So that's the plan. But this will take at least 3 to 4 years to get all the clearances done and getting the mine up and running. This was the overall -- if you take all the expansions in place, so this is some projected numbers we have shown from the current capacity and how the capacity will look like after, say, adding up all the VAP and these expansions on the smelting side, which is a 50 Kt brownfield and 180 Kt another brownfield we are looking at. Same for copper VAP, we are at 540 Kt. And if you add that IGT and alloy rods of 75 Kt we discussed, it gives us 565 Kt and this will -- this is 5 -- 421, this is the cathode capacity. This includes the recycling, which we have discussed. So on the alumina side, as I said, there are 2 projects in the pipeline, one is greenfield and one is brownfield. If you add that, we are currently around 3.6 million tonnes. We will grow up to nearly 5 million tonnes after these 2 projects come up. Now this is on the specialty alumina. So currently, we're at 361 Kt, we'll go up to nearly 700 Kt. So this was all on the project side. I think I will not, say, go slide by slide on the ESG side. You must have, say, seen all the slides. So we are doing a lot of things on the ESG side. This is the deleveraging path we have shown for Novelis, India as well as consol. So on a consolidated basis, we are currently at 1.62 at the end of last quarter. This is expected to further improve, say, by the year-end and in Q4. This was our broad capital allocation, which we discussed that 75% will be, say, directed towards -- free cash flows directed towards growth CapEx. As you've seen, we're investing around $8 billion over the next 5 years, 15% on the overall net debt reduction and 8% to 10% as per our policy, we'll keep it for shareholder returns. I think this was a short refresher and we can now take on questions.

Yes. Thanks, Subir. Thanks for this presentation. Yes, we are open for question-and-answer round. Please feel free if anybody has any question. Okay. To set the motion I'll ask one question, Subir. The growth plan which we have discussed, obviously, there are lots of -- in Novelis especially, if we look at our greenfield project in North America, where we are investing around $2.5 billion for a capacity of around 600 Kt. What kind of returns we are expecting over there, I mean, ROCE and peak capacity also?

See our threshold number, as you know, it is well above that number, which we have already been talking about that is, say, around 15% IRR, which we talk about, or any project has to say, reach that number before it gets any further green signal. So that is the threshold, and that is, I think, within that. And I would like to also highlight that this particular project is being worked out based on the newer contracts we have discussed with the end customers of ours, including Ball, Ardagh, InBev, all these people because as you know, there's a shortage of cans across. So the demand of cans is increasing day by day. And there was a pressure on us again to put up some capacities because the current capacity is all full. And again, we don't want to again put up capacities at the current prices. We obviously want a sort of a better pricing than what we are today. So these contracts, so what we have done, this particular $2.5 billion project, we already, say, contracted nearly 50% of that. And this is at a higher price, far better pricing than what it is currently. So that, again, gives edge and also all newer contracts which will be coming for renewable from, say, now on will be, say, recontracted at this agreed price. So I cannot share any sort of a number with you as of now. And the other thing is like this plant will be highly automated. For a downstream segment, the major components include the labor as well. So this is -- this plant, again being highly automated will require less of labor for running this. So again, you will save on the fixed cost side, plus it will be highly automated, the efficiencies will be better. And this plant is also, say, fungible. You must have noticed that this is like you can also, say, switch from can to autos if needed. And this will also be accompanied by the recycling along with it. So -- because if you're going for a can expansion, you have to have a recycling because only a stand-alone can rolling would not, say, be a viable option, because in cans, recycling, spreads, of course, helps a lot. So that's the overall plan on this $2.5 billion.

Sure. So is it safe to assume that we -- normally we guide about $500 sustainable EBITDA per tonne. So this plant whatever number it will come, definitely, it will be much higher than what we are having as a sustainable EBITDA per tonne because why I'm asking is that on $2.5 billion, if you do the reverse calculation, even at $600, you will end up with around $360 million, which is not even 8%, 9% of overall investment on a per year basis. So if you...

Yes. As I indicated that this is definitely at a better pricing from the current levels. So definitely, that will have a better impact going forward. So I cannot give any sort of a number as of now because we don't disclose all those EBITDA per tonne on a product-wise basis. So it will be difficult for me to, say, call out any number. But on a comparatively basis yes, it will be -- it is -- say, it is negotiated far better than what it is. So once this project is online. And once our newer contracts -- existing, newer contracts gets into place on the existing capacities, you will, of course, say, see the difference. And then you can -- obviously, we can talk about it at that point of time.

And when can we expect the new contract for the existing capacities? Any major thing coming?

So these contracts are basically 3 to 5 years, so whatever is coming for renewal. So it's a continuous process. So as and when, I think this will come, you will be able to gauge that when that hits it.

Sure. Thanks.

I have a question. Can I go ahead please?

Yes, please go ahead.

I need to ask Subir Sen on the macro front, like in Europe, how much production can we hit due to the higher gas prices? And are we seeing any further cuts post the Russian-Ukraine conflict?

See, if you ask about our existing operations of Novelis in Europe, so I think our operations are going fine. So nothing has been, say, impacted as of now. But on the energy side, yes, we are impacted on the contracts. As a policy, we have, say, contracted the energy part of it. So around 75% is already contracted. So on the 25%, we are getting a hit. I think for the next quarter, we already talked about that you guys can -- for an indication, I think we have, say, given out around $30 million, $35 million impact in the coming quarter. So that includes not only energy, but also inflationary supply chain impact. So all taken together, I think it is around $65 million impact in Q4. So -- but this going forward, I think situation is expected to improve. But as of now, there is no impact on the operations as such. But yes, the costs have gone up in Europe.

Thanks. You can go ahead with your question.

So sir, I would like to understand one thing. So for our CapEx, what kind of debt would we need to raise or our EBITDA is okay for to fund the coming CapEx?

Yes. So if you have, say, listened to our management during this Investor Day show, so we have said that there won't be any debt we've taken to fund these CapEx nor in India, same for Novelis. So we are doing -- we'll be funding all these projects through our internal accruals. So that's the plan.

Okay. And sir, what percent of our aluminum volumes has been hedged for FY '23?

'23, we are hedged at around, if you ask me now, '23, we are around 18%, just give me a sec. '23, we are hedged around -- sorry, '23 we are hedged around 30% at...

Sir, at what price?

At nearly about, say, $2,500.

Satyan, please go ahead with your question.

I was just going to ask, are you going to hedge any more, given aluminum is now roughly $1,000 higher give or take a bit?

So this is, I have given you the average. So we have been, say, doing it at the levels -- it's good levels we are getting because I think the LME touched at one point of time around -- nearly around $4,000 as well. So we have been continuously monitoring it. And so this is the average of which the number which I have given you.

Average is $2,500, right?

Yes. So that includes all the -- it includes some recent levels as well.

Okay. And is it the maximum that you will hedge over the course of a year?

See, as a policy, what we do is we have some core hedges, and we have some view-based hedging. So the maximum we have done is up to, say, around 40% to 50%. So I think of that, say, 20%, 25%, we do core hedging. Core hedging is nothing, but see you hedge based on some -- the threshold EBITDA which you want to protect. And view based is basically, you take your views, whether LME is going up, going down, you just take views on that, and then you basically go for the hedging. So the core hedging is like an insurance. It's like you have taken that hedge at this particular LME. So this is like an insurance which we do, so that is around 20%, 25%. And remaining is view based.

Okay. Great. And the alumina capacity that you are setting up will start to come in from when?

See the debottlenecking would not take much time. So that 350 Kt project will come sooner. So we have given time lines as well. So if you see that slide for the debottlenecking, I think we have given, yes, '24, that is next year. And for the greenfield expansion, it will take time because it's a greenfield again, so this is FY '26.

Kunal, please go ahead.

Yes, sir, taking ahead on this hedging policy, you mentioned around 23% has been hedged till now?

Sorry, you're talking about which year? '22 or '23?

FY '23. '23, basically.

'23, I've said 30%.

30% you have hedged. So -- and it is around $2,500, right?

Yes.

So like what is your view on the aluminum pricing? And do you see that there is like -- not too much price may go up from your end, you should like hedge the balancing 20%? Or you see that prices will remain at elevated level and can hedge in bits and parts. What is your view overall on this?

See, hedging just doesn't go with where the LME is. You have to see whether the market is in contango or it's in backwardation. So you have to get those levels as well. So as I said, this number is basically an average. So we have been, say, hedging for '23 since last year, right? So we have got some good levels this year for '23. So we have taken that advantage. So we recently have done some small amount, which was, above, say, $3,500 even. So as and when we are getting an opportunity, we are trying to do that. So this is an average what we've given the number for '23. So that includes -- we have taken some positions when the LME was at a higher level. And the market was, say, not in a backwardation, it is in contango. So then only you can hedge. Your spot, your future has to be higher than your spot. If it is the other way around, you cannot.

Subir, one more thing. When you're talking about in the fourth quarter where you have -- the management has earlier said a hit of around $65 million, $70 million. So the entire $65 million, $70 million is cash hit or a part of it is opportunistic, because in last quarter also, you mentioned that around $25 million is hit because of auto contracts or because of auto volumes. So just to get clarification on that, whether this $65 million, $70 million is including that auto thing or is it over and above that?

No, no, no. See, Q3 also had that impact. If you see the Q3, the semiconductor impact is continuing, right, since it has started. So the range of $20 million, $25 million being said on the calls, so the last year EBITDA you see is including that impact. So as and when that situation gets better, which we expect in the, say, second half of the next year, so that will again get settled. But this -- what I think Dev has spoken about, this includes your inflationary pressure, supply chain disruptions, this high energy prices. This includes all that. So most of it is, again, a sort of a headwind that has come up. So I think this is for basically Q4, and we expect this to basically settle down in coming quarters.

So just to clarify, the $65 million, $70 million is not beyond Q3 because in Q3 also $25 million was included?

Yes. That is already there in Q3.

Sure. And the kind of scrap spread benefits which we are seeing, do you think that, that is more than enough to offset these cost targets?

See, spreads have been good in Q3 as well. And so is continued to be in Q4. So spreads, again, is a function of how LME and the premiums are moving in which direction. So again, it would have a positive impact, but again, would not be enough to offset this particular impact in this quarter. Maybe going forward, the spreads improve further because if you see the spreads as a percentage has remained there, but it is the quantum, which is again dependent on how the premiums are. So premiums have gone up. So the quantum, again, gets impacted. It goes down, it again gets corrected. If it goes up, like the LME, which say trading at, say, $3,500 now, if it has been, say, gone down to $300 -- say, $3,000, then spreads would have say, again, on a quantum may have come down, because it is basically nothing but the discount on your base metal price. So even the percentage discount remains the same. If your base goes up and down, so that has an impact.

Sure. I think then fourth quarter when we look at LME scrap and LME aluminum price, the average of that spread has increased by something like $100 per tonne?

Yes. And that is -- and that also has an impact on 60% of the business because spreads are again mostly connected to the scrap and scrap is mostly used in the can business. So 80%, 85% scrap is used in the can business. Autos is very, let's say, 10%, 15%; and another, I think, 10%, 15% on the specialties, which is your B&C business in North America. So most of it is in cans. So you see whatever spreads are moving has an impact on the 60% of the business, not all.

And in addition to that, the kind of margins which we are making in South American business because most of them is beverage cans. So are we expecting similar kind or marginally lower kind of margins in our new beverage can facility in that range or it will be substantially differentiated from what we are making right now in South America?

You're talking about going forward, we will be getting better pricing?

So what I was asking you is that in South America because I think 95% or 100% of our volume is for beverage can.

Yes.

So my question was the kind of EBITDA per tonne or margins which we are making over there, are we seeing similar kind of margins we can make in North America new field capacity or will be lower than or higher than that because it's more of automated and all?

So you come from here or there. So we would not, say, give any sort of a number there. But again, yes, South America is a different market altogether. And we have that, again, early mover advantage. So that -- and also -- so what happens is when the supply and the demand is balanced, which is happening in North -- in South America, so there is no one who can say actually come in, in that vicinity. So you should be able to beat up the demand. If the demand goes up in that region and there's no supply, again, there is a chance of, say, someone coming in and then there's a pricing war that starts. So I think in South America, we have that advantage. And there is also a duty which has been put up. So again, you have that duty protection. So the other guy also cannot import and sell. So that is not a viable option. So I think we have that advantage in South America, and that continues to be. If you've seen the trends, so I think South America has been the positive and a very good contributor on the can space. But yes, we are trying to get better metal contracts in all other regions, including Asia and North America. And as I said, these newer contracts, including for the new project and the contracts which we are signing with the same customer are again signed at a better pricing. So that will definitely have an impact going forward.

Shaurin, you can please go ahead with your question.

Subir, just want to clarify on the cost part. I guess we have guided for a 9% to 10% increase in cost in Q4 mainly because of increase in coal prices. If I understand, Q3, our coal sourcing mix was around 60% linkages, some 20%, 25% of e-auction, 5% imports and 10% captive, am I right?

Yes.

So if you look at it, like, I guess, linkage and captive costs won't be impacted much. But e-auction and import cost would see an increase in prices. So could you just tell us, is there any change in mix in Q4? And what would be the mix going ahead? And more on how this captive mix of 10% we could see in next 2, 3 years down the line?

See -- so normally, what happens, as you know, we are -- say we need -- our requirement is around 16 million tonnes of coal, where we, say, have linkages with Coal India of around 12 million tonnes. So we get up to 75% of that. So our priority is getting linkage as much as possible. Then there is an option of, say, going for e-auction, own mines or imports. So imports is the last option we have because, as you know, import prices are like -- have shot up like anything. So it is now mainly between e-auction and own mines. So e-auction, again, prices, as you rightly said, has gone up. So again -- so this mix particularly remains more of linkage coal. So this was 60% last quarter. I think this quarter, it will be, say, more than what it was. E-auction, again, was around 26% Q3. E-auction and own mines, so I think own mines would be lesser this time and we have e-auctions more. Again, that also has an impact on the overall pricing, overall cost escalation, which we have guided say 10% -- 9.5% to 10%. So that includes the higher e-auction prices for this quarter. So this is how it is. And in a normal circumstance, it is more of linkage. So linkage coal, normally, as I said, we get up to 75% of the 12 million tonnes, which is 8.5 million tonnes to 9 million tonnes, so about 16 million tonnes requirement. So you can do the math.

Okay. So are we not able to ramp up our captive coal requirement?

So captive is again at a higher cost. So captive is again after the e-auction. So if the e-auction prices go above our captive, then of course, we can do our own mines. But on a GCV terms, our own mines are far better, then you have to, say, factor in that as well. So that is how we plan.

Okay. And one technical question, Subir. What is our fuel cost consumption in alumina -- aluminum, like per tonne requirement?

I don't have the number in back of my mind. But now what we are doing, we are, say, converting our baking furnaces, which is basically where the furnace oil is being used. We are converting those to natural gas. So I think 3 of the smelters have already done that. The fourth one is in the pipeline. So I think sooner we'll be able to cover most of the baking furnaces converted to natural gas. So I think the furnace oil consumption will go further down.

Chirag, you can please go ahead.

So just want to understand that, as you said that because of the energy price inflation in Europe, your operations are still not impacted, but then even normal operations. So until what level of energy price inflation can you still continue to sustain operations? And when will you be forcing -- forced to curtail the operations?

See, as I said, my 75% of the energy cost is contracted. So that much I have protected. It is only the pressure of the remaining 25%, which has, say, gone pretty high or maybe -- since of this current geopolitical tension and situation, what is currently going on. I think, say, closing down a plant for this, I think I cannot give you any sort of an indication on that, but things are in control. And energy cost, as I said, is not as a factor in a downstream as compared to an upstream business, where say, energy cost is, say, around 40% to 45%, whereas in downstream, it is, say, lower than that, far lower than that. The major cost for a downstream business is the manpower. So that way, you can take.

Okay. And as you said that the -- yes, so as you said that for the CapEx of -- the $8 billion CapEx which you announced over the next 5 years, you won't be requiring any debt, and it will be mainly funded through internal accruals. So this is based on what LME price assumption?

So we have not, say, drafted our plans based on LME because LME nobody can guess. So we can obviously think about a base dollar per tonne of EBITDA, which we have achieved, not now, but on an average of, say, last many years. So we have worked based on that, not because LME again you cannot predict the LME. So that is worked out on that side. So based on the realistic assumptions and based on the -- because, again, downstream business is more sort of a consistent or sort of a more predictable one. So we expect that the -- on an average, we will be able to generate at least $2 billion of net free cash flows after working capital. So this is how we are confident that we'll be able to fund the requirements of this CapEx, which we have talked about, which is spread over the next 5 years.

Any risk you perceive on this and these assumptions?

See, risk in the sense if there's something that happens like -- if there is something -- some situation which we have faced, say, 2 years back, and again, that is something which is very special or some sort of supply chain or something disruption happens. And look, that is beyond our control. So again, that is -- that can only -- but on a sort of -- on a current basis, I think we'll be -- this is very sort of a normalized, the way we have built in our model. There's nothing bullish sort of a situation, which we have basically built in to, say, plan for this CapEx over the next 5 years.

And if I understand correctly, you currently do 60% of the recycling in the can segment, so...

60% is overall on the Novelis side. Of the 60%, 80% is for cans.

So any plans to further increase the levels of recycling?

Yes, we are going -- if you see, I'll just put up this slide for reference. So we have given the guidance, how our rolling capacities will, say, go and so as our recycling capabilities. Let me just put up this one for reference. Can you see the slide?

Yes.

Well, this is how we will evolve. So this is our current capacity, 3.9 million tonnes as in this Pinda and China, Pinda is already online. So we'll reach -- at first stage, we will reach 4.5 million tonnes. This you remember, we gave it in our last year's Investor Day. And after all this greenfield U.S. and other expansion projects we've spoken about, our rolling capacity will reach 5.8 million tonnes. So same for recycling, we are, say, doing around 2.5 million tonnes. This is how all the recycling capabilities we will be building across as and when we expand our rolling capacity. So this will reach up to 3.9 million tonnes.

Okay. And in our overall CapEx plans, do you also foresee any CapEx for going towards green aluminum production? And if so, then do you also expect any kind of premium to be fetched if we go for green aluminum?

So green aluminum, you mean the smelting...

Low carbon emission, yes.

Yes. So see, green aluminum is just a marketing thing. So a client is not, say, giving any sort of premium of whether it is a green aluminum or a brown aluminum. So currently, it is only marketing tactics, what I can say. So again, you don't have to -- you cannot compare only one part of it as green aluminum. We are doing -- you're just doing your smelting part with some hydel power or something which is say. So a company like Norsk Hydro, so they have been doing this smelting part based on hydel power, not, say, from last year or so. They have been doing it for last 50 years. So it is nothing new, right? So they are now marketing it, say, as a green aluminum. So customer is not, say, paying you any premium for green. It is -- again, you have to take in right from the complete value chain, right, from the bauxite till the end, say, value added, what are you doing on the overall thing? Like what are you doing with your bauxite residue? So as -- if you talk about Hindalco, you must have seen our slides that we talk about the recycling of the bauxite residue. We are sending it to the cement industry. We are not just dumping it into the ponds. Same for fly ash, we are reusing again, recycling it and, say, giving it to the cement industry again. We are doing mines backfilling with the bauxite residue. So if you -- if I take you to this slide, I think that will make you more clear. So you have to see on an overall basis. So our bauxite residue recycling, if you see, has gone up to 100% last year, and will be more than 100% by the end of this year. Same for fly ash recycling, if you see our YTD number, which is beyond 100%. So this is end to end. So again, recycling going forward in the downstream segment, how much recycling you're doing. So we are doing in the Novelis segment, 60% recycling. So end to end, we are focused on the overall value chain, not only the smelting part where you're just, say, using hydro power and making the ingots and saying we are green and now you give us the premium for it.

So when you go, say, you're going above 100%, what does that mean?

So you're, say, utilizing more of your waste than you are generating. So again, like you have -- it's not like -- it doesn't go like what you generate and what you recycle. So you have some older material line. So we are just getting rid of that as well. So we are not just keeping it there. We are trying to get rid of our earlier backlog as well. So that is how it is more than 100%.

So are you committing any specific CapEx for reducing carbon emissions or any other kind of emissions from your operations?

So our maintenance CapEx, which is, say, around $200 million in India, that includes this CapEx, which we are doing.

Subir, 2 more questions. One is the CapEx guidance of around $8 billion for next 5 years. How we are planning to step it up?

Means?

For year like FY '23, '24 will be much lower and then maybe '25 onwards it will...

Yes, initially, it would be lower. So '23, you can say won't be the peak, say '24, '25 can be higher than the '23 levels. So I think for modeling it, you can say take that $8 billion spread over next 5 years, so that way. So it might go up and down. I think '23 -- sorry, '24, '25 will have -- and it all depends on the cash flows you generate, like if you don't have enough cash flows to fund your CapEx at that point of time, you, of course, have an option to particularly little delay the project since you are not able to, say, in case the LME falls or something, you're not able to have that much of cash flows. So that way, we are planning it to do.

Yes, Kunal, please go ahead.

Yes. In copper segment, we recently acquired the Ryker business. So historically, we have not been stable with the volumes and margins in the copper business. So going forward, after this acquisition, how we can see on the volume and stability of the margins? Can you just brief up how the business will change -- what we -- additionally, we can gain after this acquisition?

Yes, sure. Good question. So as you know, there was instability in the smelting business -- smelting part of the business because of, again, some instability in the operations and all that thing. That more or less has been now resolved. So you must have noticed that last quarter and, say, Q2 and Q3 are more or less, say, a balanced quarter. And we foresee this to sustain in the coming quarters as well on the smelting side. On the downstream part of it, which is your CCR, in the current Hindalco setup, things are pretty good. If you've noticed that our CCR facility was -- didn't have any sort of a shutdown or something. We've always been able to supply to the market as per the demand, because as you know, all the CCR is being sold domestically. And whatever cathodes we sell is exported. So if you, say, we are making 400 Kt of cathodes every year, and we are making say, 420 Kt of CCR, then the CCR is all sold domestically. Say, 380 Kt of CCR, then this 380 Kt is all sold domestically. The 20 Kt, if you see the difference is what is exported because there's no market for cathodes in India. So if you -- so what happens in the Ryker, if you see our existing capacity, including Ryker has reached 540 Kt for CCR. And we have smelting capacity of only 420 Kt. So this difference, so how do we make up for that difference is like we'll import the cathodes and we'll roll the rods and sell. This is how it is. But on an operations basis, I think things are more or less stabilized, and you can actually model it the way it is now going forward, and market is quite strong. So again, you have to -- on the downstream side, you have to align yourselves with the market. So you cannot just produce more. So as a policy also, we don't say, make for the stock. We always say it is all made to order. So we don't keep inventories lying as unsold inventory. So we always align with the market demand. So we will be -- you must have noticed that our production and sales are mostly balanced.

So we will be importing around 100 Kt of cathode from now onwards?

Yes. So again, we have to align ourselves with the market, how much we are producing, say, how much the market demand is because, again, as I said, CCR is all sold in domestic. So over and above our 420 -- 400 Kt capacity in terms of smelting. So over and above whatever we need we'll import.

Do you think it will be incremental to our existing margins or it will...

No, definitely not because you're getting the imports. See, the beauty of smelting versus import of cathodes lies in the TCRC, which you get while you do the conversion. The CRC is nothing but the discount you get from the miners. The second is the byproducts you generate while you do the smelting. Byproducts as in sulfuric acid, you add ammonia to it and above phosphate, you tend to get that diammonium phosphate, which is nothing but your urea. So these are the byproducts, which you don't pay for it, right? When you're buying the concentrate from the miners, you pay for 3 things; one is your copper content, your gold and silver content. And all these byproducts which come in is like you get an extra benefit out of that. So that is basically smelting versus you import the cathodes. So if you're not smelting, then you have an option to import the cathodes, but you lose on these benefits.

Is there an option on going for increased cathode capacity for the balancing part or we will seek import?

Yes, we are say, if you see this slide, so we have a plan to increase the capacity by another 100 Kt through recycling. So that will also but come -- that will come in next couple of years or more, not immediately. So I'll just put this slide on. So if you see here, this 421 Kt is going up to 521 Kt. This is nothing but the 100 Kt recycling, which we spoken about, 100 Kt here, which will come up in FY '25. So once this is up and running, but this is again under appraisal, this will give another 100 Kt on the cathode side. But still, there would be a gap. That gap will be filled in by the imports.

Subir, one more question was, of late we are hearing again that Coal India, they are trying to supply more coal to power sector. So the way we have seen in October, November last year. Are we facing any kind of -- such kind of situation now?

Yes. I think Coal India always has the situation during the summers and during the monsoons. So as a company, what we do is we plan our coal well in advance. So we make sure that we have enough coal so that our smelters don't have any issue. So normally, we have created that infrastructure to keep that much of coal. And mostly, it is what we faced last year as well. Again, there is more of a challenge of availability of rigs. So the other option is you get it through the road, which is, again, time consuming and higher logistics because it again increases your cost. So I think that way we are planning as a backup. So when we are facing a challenge of getting the way, so we are getting it through road. So that is the option we have. So again, we are able to maintain the threshold inventory across all our smelters as of now.

My question was actually on the linkage coal. E-auction coal, obviously, you must be buying more. But linkage coal, are we getting the same percentage?

Yes, whether it is linkage or e-auction, again, you have to get it through either rigs or -- so again, you have to prioritize based on that. So it doesn't -- because supplier is the same, right? You have to buy it from Coal India only. So we prioritize the linkage first and e-auction is when you need more, when they are not able to supply via linkage. Again, linkage is a continuous thing, right? It is not when you need the coal, you order that time. So that is a continuous process that happens because we have signed that contract. So we need 12 million tonnes of coal from Coal India every year. So that process goes on and on.

Lastly, is it possible to share what kind of incremental EBITDA per tonne we make while selling value-added products, both in aluminum and copper? And with the kind of expansion in aluminum we are doing in value-added products, whether that delta will change more or it will remain more or less the same?

See, on the aluminum side, we are planning to, say, give you a sort of a number on EBITDA per tonne basis from next year onwards. So let's see how we can do that. And then as of now, I cannot just give you any number, but yes, the things are quite good. We are generating a good amount of EBITDA per tonne in India downstream value-added as well. So this is how it is now. And that's the reason we are completely focused on, say, expansion on the downstream to be completed by the time lines which we have discussed and given it on the presentation and being discussing with you guys. On the copper side, value-added copper rods, I can just give you some indications like versus an export of cathode, when you sell it as a rod in India, you tend to get around, say, nearly about $200 premium over export of cathodes. And you reduce the conversion cost and you get the EBITDA directly to your earnings.

Okay. So conversion cost should be more than $50 maybe?

Yes. Rod to -- sorry, cathodes to rods, I think the conversion cost is somewhere around, say, maybe around $80, $90 per tonne.

Okay. So incremental $100, $120 per tonne we are making on...

Yes, yes, versus the export of cathodes, because if you're not converting to rods, you have an option to export cathode.

So do we have any further questions from any of us? I think there are no further questions, Subir. So we'll take this to the end. So thank you so much, Subir, for your time. And I think you have patiently answered all the questions as well as reiterated your growth plans for the company. I wish you all the best, and thank you so much once again.

Thank you. Thank you all.

Thank you.