Hindalco Industries Limited (500440) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Hindalco Industries Financial Year 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Subir Sen, Head of Investor Relations at Hindalco. Thank you, and over to you, sir.

Thank you, and a very good afternoon or morning, everyone. On behalf of Hindalco Industries, I welcome you all to the earnings call for the third quarter of financial year 2025. In this call, we'll refer to the Q3 financial year 2025 investor presentation available on our company's website. Some of the information on this call may be forward-looking in nature and is covered by the safe harbor language on Slide #2 of the said presentation. In this presentation, we have covered the key highlights of our consolidated performance for the third quarter of financial year '25 versus the corresponding period of the previous year. A segment-wise comparative financial analysis of Novelis Indian aluminum and copper business is also provided. The corresponding segment information of prior periods are also being reinstated accordingly for the comparative analysis. Today, we have with us on this call from Hindalco's management, Mr. Satish Pai, Managing Director; and Mr. Praveen Maheshwari, Chief Financial Officer. From Novelis' management, we have Mr. Steve Fisher, President and CEO; and Mr. Dev Ahuja, Chief Financial Officer. Following this presentation, this forum will be open for question and answers. Post this call an audio replay of this conference call will also be available on our company's website. Now let me turn this call to Mr. Pai to take you through our company's performance for the third quarter of fiscal 2025.

Thank you, Subir. Let me start this call by giving the good news that Hindalco is the only company to achieve the top 1% ranking in the S&P Global Sustainability book 2025 with the highest ESG score in the aluminum sector. This recognition emphasizes our unwavering commitment and a comprehensive strategy towards long-term ESG excellence. On Slide 4 to 8 of this presentation, you can see our achievements and progress across metrics for ESG for this year versus the prior year. I will now take you through some of the key highlights in this quarter. For the first 9 months, 79% of the total waste generated were recycled and reused. We achieved recycling of 109% of bauxite residue excluding Utkal, 101% of Ash in this period. We are proud to share that Aditya, Mahan and Renusagar facilities have achieved zero waste to landfill certification this quarter, taking Hindalco's total number of zero waste to landfill certified units to 6. Water conservation remains a key focus area for us. As of date, 16 of the 19 Hindalco sites now meet zero liquid discharge standards, with Kuppam facility successfully meeting the ZLD standard during this quarter. We also have made significant process in what -- progress in water recycling with 14.37 million cubic meters of wastewater being recycled and reused. This is 26% of the 55.5 million cubic meters, which is the total water consumed in the first 9 months. Further, we are continuing our journey towards water positivity while working with CII Triveni at the NITI Aayog's water productivity framework for which the certification assessment for 5 of our manufacturing units at Aditya Utkal, Hirakud, Alupuram and Belagavi are underway. These initiatives highlight our dedication towards efficient resource management and commitment to support sustainability in the communities where we operate. Our biodiversity conservation efforts remain strong. In Q3 FY '25, we completed a pilot project at Utkal for the removal of invasive species of non-native plants and 20 tonnes of these were sent to paper mills for them to utilize. Additionally, biodiversity management plans are in progress for 7 of our plants and 11 of our mines. These biodiversity management plans have already been implemented across 22 of our locations covering 10 plants and 12 mines. While we continue to expand our green cover with a cumulative total of 5.4 million trees that are planted till date, spread across 6,271 acres of green belt development across all our operations. Our total renewable energy capacity is 189 megawatts in primarily solar and wind. Recently, we commissioned a 6.3 floating solar capacity at Mahan. We are set to add another 9 megawatts of solar and 100 megawatts of hybrid capacity with storage in the first half of calendar year '25. Post this, we are well aligned towards our target of reaching 300 megawatts of renewable capacity in the first half of calendar year '25. We are also developing another 20 megawatts hybrid capacity of solar and wind, which is expected to be operational in the second half of FY '26. Our aluminum specific GHG emissions in the first 9 months of FY '25 were recorded at 19.48 tonnes of CO2 per tonne of aluminum. This was a bit higher compared to the same period last year on account of higher power consumption at some of our smelters that were impacted by disruptions in the power plant. We expect this to settle down with improved efficiency in the coming quarters. Safety is a top priority at Hindalco, and I'm pleased to report that there were no fatalities this quarter across all our operations. Our LTIFR in the first 9 months stood at 0.28, slightly higher than the same period last year due to increased project-related activities. Let me now give you a glimpse of our quarterly consolidated performance this quarter versus the same quarter of last year on Slide 10. Our consolidated business segment EBITDA was up 18% year-on-year at INR 8,246 crores, whereas our overall reported EBITDA was up 28% year-on-year at INR 8,108 crores this quarter. The consolidated net profit after tax was up 60% on a year-on-year basis at INR 3,735 crores this quarter. At the Hindalco India business level, our overall reported EBITDA was up 69% year-on-year at INR 4,773 crores this quarter. The net profit after tax was up by 134% on a year-on-year basis at INR 2,885 crores. Our Indian aluminum business for quarter 4 in our Indian aluminum business, for Q4 FY '25, we are currently hedged at around 35% of the commodity at a price of $2,600 per tonne and around 15% of the commodity is at 0 collar with the bottom at $2,262 and a ceiling at $2,558 and currencies hedged 16% at INR 88. On the balance sheet side, our consolidated net debt stands at INR 41,818 crores. In Indian operations, we have a net cash of INR 1,952 crores, while Novelis net debt stands at INR 44,716 crores at the end of December 24. Hindalco at the consolidated level continues to maintain a strong balance sheet with a net debt-to-EBITDA well below 2x at 1.33 at the end of December 2024, which is lower than the corresponding period of the last year. All our strategic CapEx in India are mapped with cash flow generation in the business. Coming to our business-wise performance this quarter. Novelis shipment was at 904 Kt versus 910 Kt in the prior year, down 1% year-on-year. Novelis delivered a quarterly EBITDA of $367 million down 19% year-on-year due to high aluminum scrap prices and unfavorable product mix. The result in EBITDA per tonne stood at $406 versus $499 in the previous quarter -- previous quarter year, down 19% year-on-year. All our expansion projects, including Novelis' Bay Minette projects are progressing well and as planned. Our new 100 Kt recycling center at Ulsan is being commissioned and our automotive plant at Sierre is now fully operational. On Hindalco, India, upstream aluminum performance this quarter, shipments were up 1% year-on-year, and revenues were up 25% year-on-year. This quarter, we achieved a record quarterly EBITDA, which was up 73% year-on-year at INR 4,222 crores primarily driven by low input costs and favorable macros. The resulted EBITDA per tonne was at $1,480, which were higher by 68% year-on-year. EBITDA margins were also at a record high of 42% this quarter and continues to be among the best in the global industry. This quarter, the Indian downstream aluminum quarterly shipments were up 10% year-on-year at 99 Kt on account of market recovery. EBITDA was up 36% year-on-year at INR 150 crores this quarter. versus INR 110 in the prior period, driven by higher volumes and realization. The resulted EBITDA per tonne was $179, higher by 22% year-on-year this quarter. Our copper business continues to deliver strong performance this quarter as well. The overall metal shipments were at 120 kt, up 1% year-on-year. Of this CCR volumes were at 95 kt, up 1% year-on-year this quarter. Our quarterly copper EBITDA stood at INR 777 crores, up 18% year-on-year on account of higher byproduct realization and favorable macro. Now let me give you a glimpse of the current broader economic environment on Slide 12 and 13. In 2024, the global economy witnessed resilient growth with inflation moving closer to central bank targets. For FY '25 and '26, global GDP is projected to remain steady at 3.3%, up slightly from 3.2% in 2024 as per IMF. Growth prospects vary significantly across regions. Growth in the U.S. is expected to remain resilient with GDP growing 2.7% in 2025 versus 2.8% in 2024 and the euro area is expected to recover moderately from 0.8% in 2024 to 1% in 2025. In contrast, China's GDP growth is expected to moderate further to 4.6% in 2025, from 5% in 2024. However, the outlook is tempered by fragmented and protectionist trading environment and inward-looking policies which may dampen economic activity and drive inflation up with repercussions for emerging economies. Monetary policy easing, therefore, will be carefully calibrated to ensure inflationary pressures are durably contained. The extent of easing will remain data dependent and cognizant of geopolitical risk until underlying inflation fully subside. Global headline inflation is expected to moderate from 5.8% in 2024 to 4.2% in 2025. Amidst a challenging global environment, Indian economic growth moderated to 6% in the first half of FY '25. Growth slowdown was led by moderation in investment in urban consumption. Recent high-frequency indicators present a mixed picture, with economic activity expected to moderately pick up in the second half of '25 driven by festive demand. The RBI projects FY '26 GDP growth at 6.7% driven by recovery in household consumption and industrial activity from an estimated GDP growth of 6.4% in FY '25. Headline inflation is projected to ease to 4.8% in FY '25 and further to 4.2% in FY '26, gradually aligning with central bank targets. Headwinds from adverse trade policies, financial market uncertainties and volatility in commodity prices are key downside risk to this outlook. By this FY '26 has been able to carefully balance consumption, CapEx and fiscal consolidation with a clear focus on ease of doing business, which is expected to provide a positive flip to growth. Given the growing inflation dynamics, RBI reduced policy rate by 25 bps to 6.25 in its latest monetary policy review. Moving to the aluminum industry outlook on Slide 14 and 15. Starting with Slide 14. In China, Production increased to 10.9 million tonnes, while consumption increased to 11.6 million tonnes, resulting in a deficit of 0.7 million tonnes in Q4 of calendar year '24. This demand growth was driven by 3 key factors: surge in solar installations, strong growth in new energy vehicle production and a 24% increase in semi-fabricated products export in anticipation of the cancellation of 13% VAT rebate on exports. However, challenges persisted in the construction sector where investments continued to decline this quarter. Moving on to the rest of the world. Production in this quarter increased to 7.5 million tonnes, while consumption stood at 7 million tonnes, resulting in a surplus of 0.5 million tonnes. Consumption in Western Europe remained weak, whereas markets such as India, Thailand, Vietnam, Brazil, U.S., Turkey and Mexico exhibited growth. As a result, the overall global aluminum market recorded a marginal deficit of 0.2 million tonnes in quarter 4 of calendar year '24. Turning to India on Slide 15. Aluminum demand in Q3 FY '25 is projected at 1,403 Kt, reflecting a robust 11% year-over-year growth. The key demands are in the electrical segment, especially cables and conductors, solar panels. Strong demand in the packaging and consumer durables segment and a stable demand in building and construction segment. However, in the automotive sector, demand was moderate due to weaker uptake in commercial vehicles. Imports, excluding scrap increased primarily on account of higher imports of solar frames and in primary aluminum in the form of alloy ingots and wire rods. The global FRP, aluminum FRP demand excluding China is expected to grow by 5% in calendar year '25, with demand recovery across all major segments of beverage packaging, automotive, specialty and aerospace between a CAGR of 4% to 6% over the next 3 to 4 years. Beverage packaging sector showed strong growth driven by favorable consumption and sustainability trends. Automotive growth reflects steady to positive outlook for aluminum in North America. Electric vehicles continue to gain share globally but are growing at a more tempered pace. Specialty products aligned with the global GDP growth supported by a strong building and construction backlog, though tempered by high interest rates and softer automotive specialty product demand. Aerospace remained strong with high orders despite OEM supply chain constraints impacting the production of new aircraft. The Indian FRP demand in financial year FY '25 is expected to grow by 20% on a year-on-year basis, led by strong demand from the packaging and consumer durable segment. Turning to the copper industry on Slide 17 and 18. In Q4 calendar year '24, Chinese production reflected a growth of 3% year-on-year, reaching 3.1 million tonnes while consumption increased by 6% year-on-year at 4.1 million tonnes, resulting in a deficit of 1 million tonnes. In the rest of the world, production increased by around 3% year-on-year at 3.7 million tonnes, while consumption increased by 2.7% year-on-year at 2.8 million tons, leading to a surplus of 0.9 million tonnes in Q4 calendar year '24. As a result, the overall global production of copper increased by 2.8% year-on-year at 6.8 million tonnes and consumption increased by around 4.8% year-on-year at 6.9 million tonnes, leading to a deficit of 0.1 million tonnes this quarter. On the domestic front in Q3 FY '25 market demand increased by 4% year-on-year at 206 Kt versus 198 Kt in Q3 of FY '24. The domestic producer share increased to 76% in Q3 FY '25 versus 67% in the same period last year. The concentrate TC/RCs remain under pressure due to continued deficit expected in 2025. Major Chinese smelters settled the 2025 annual TC/RC benchmark with large global miners at $0.054 per pound, representating a 73% year-on-year decline from $0.205 per pound in 2024. Uncertainty remains whether smelters outside China will adopt the same benchmark term. The issuance of export permits for Indonesian copper concentrates as and when granted, will increase the concentrate supplies in the market and shall help us support the spot TC/RCs in the short term. Details of the operational and financial performance in each of our business segments this quarter compared to the corresponding period last year as well as previous quarters are covered in further Slides and annexures to this presentation. Let me now conclude today's presentation with some key takeaways. Our Indian operations continue to deliver strong results, driven by robust market conditions, better efficiency and disciplined cost control. In this quarter, we achieved a record quarterly aluminum EBITDA alongside consistent performance by our downstream business. To further enhance resource securitization and cost efficiency. Hindalco has successfully secured the Meenakshi coal mine with a capacity of 12 million tonnes per annum. This strategic move shall significantly improve our sales efficiency, ensuring a stable and continued supply of captive coal to our captive power plants. On our organic expansion projects in India, the Aditya FRP project remains on track for commissioning in FY '26, which will increase our total downstream capacity to 600 kt per annum. We are also set to commission the 25 kt Copper Inner Grooved Tubes plant this month. This will help enhance our product portfolio and strengthen our position in the growing value-added segments in both aluminum and copper. Coming to Novelis our 600 Kt Greenfield Bay Minette project remains on schedule with completion expected in the second half of calendar year 2026. Of the 600 Kt, 420 Kt is now fully contracted to beverage packaging. And the balance 180 Kt is primarily allocated for automotive application with flexibility for other flat-rolled products. Despite muted demand in the specialty and European/Chinese automotive segment, beverage package shipments continue to grow strongly, helping to balance our overall performance. We remain focused on expanding our recycling capacity and leveraging new technologies and strategic partnerships to increase our recycled inputs. At the same time, we are also engaged in cost control measures and initiatives to improve operational efficiency to mitigate the ongoing pressure on scrap prices. In January 2025, Novelis has successfully issued $750 million in senior unsecured notes due in 2030. This will help further strengthen our financial flexibility and support long-term growth. Thank you very much for your attention. And the forum is now open for any questions you may have.

[Operator Instructions] First question is from Sumangal Nevatia from Kotak Securities.

Congratulations on another consistent strong performance. First question, sir, is on coal. If you could share what was our coal mix? How do we see the coal cost changing in the coming quarter? And then if you could just update us with respect to our 2 captive coal mines time lines?

Sumangal, the coal cost Q2 to Q3 was flattish. Linkage coal is around 50. E-auction is around 50%. So more or less the same mix as Q2. We have adequate coal stocks and probably quarter 4 coal will also be more or less similar, maybe a little bit lower than Q3. So that's on the coal cost. And if I look at the mines now, Chakla, box cut still we should be doing this calendar year sometimes in Q3 to Q4. So Chakla is on track. Meenakshi, we have just got allocated. So now we have to start the environmental clearance, forest clearance. So it will be about 2 years. But this mine is significantly crucial to Hindalco's long-term coal pricing and security.

Okay. So Meenakshi would be more of a FY '28 volume approach?

Yes.

Understood. Sir, second question is on the CapEx. So we are looking to spend almost INR 40,000-odd crores in India. Can we give some more detail at this stage in terms of what capacities are we looking at in upstream, downstream? How do we phase out these CapEx? And what would be the capital intensity of the smelters?

Yes. So the 2 projects that have already got EC and broken ground are the Aditya alumina refinery for 0.85 Kt in Orissa and the 50 Kt copper recycling plant in Gujarat. So the refinery is about INR 7,500 crores to INR 8,000 crores. The copper recycling plant is about INR 2,700 crores. So these are broken ground and FY '26. '27, you will see most of this CapEx coming in. The 2 projects where we have now filed for environmental clearance is the 180 for aluminum smelter expansion in Aditya and the 300-odd Kt copper smelter in expansion in Dahej. So these are the 2 projects. So what will happen is FY '26, '27, '28 is where all these CapEx' will play out. FY '26 CapEx should be around INR 8,000 crores. FY '27, it will go higher, '27, '28 will probably be at the peak.

And sir, these volumes, at least from the smelter would come in FY '29? Is that right?

Yes.

Okay. So apart from then the refineries. On the aluminum side, we are not expecting any major change in the volume. It's largely going to be -- earnings are largely going to be a factor of commodity prices, right, and a little bit of upstream additions -- sorry, downstream better volumes?

Yes. So downstream is, Sumangal, quite significant because we have added -- we are running at 400. So it's Silvassa and the Aditya, we will get to 600 Kt by sort of June of next year, calendar year '25. So this is going to be also fairly significant. The copper in a group tube 25 kt comes in. So there is small, small quite a lot of downstream coming in across aluminum and copper, which should add. But the upstream volumes will remain flat till the smelter expansion comes in.

Next question is from Tarang Agrawal from Old Bridge.

A couple of questions. The first one, sir, once Meenakshi kicks in what are the kind of -- I mean, you get great raw material security, but how does it make the cost structure more efficient? I mean, what are the cost savings that you're expected to do, a broad cut would be helpful. The second is on TC/RC. TC/RC is down from $0.204 to, I think $0.056 and there are various aspects to this business right, downstream percentage, silver, gold, sulfuric acid and TC/RC. So how should we really capture this reduction in TC/RC for your copper business going forward? I mean would that INR 2,500 crore number that you are operating at on an annualized basis, would that be maintained? Or do you see a downside to it? Just wanted to get a sense how should we look at it?

So let me just take the second part first. So TC/RCs are going down. And as you said, we have a varied change. So our guidance would be that we expect next year, the quarterly copper EBITDA to be around INR 600 crores. So that's how we would model it. I know this year, it has been much higher than INR 600 crores running consistently INR 700 crores, INR 800 crores. But next year, with our modeling, we would be around INR 600 crores a quarter. So that's the guidance we can give. You have to remember that our copper tube, copper rods, all these premiums are fairly high and the demand is high. And sulfuric acid like in Q3, our copper results quite buoyed by sulfuric acid prices. So we are confident that we'll be able to maintain that around INR 600 crores a quarter. The first part of the question was on -- I forgot.

Meenakshi coal mines.

Meenakshi, so if you take coal prices to be at today's level, and remember that these coal prices on the auction can go up and down. Meenakshi coming in would reduce those coal prices from current levels by up to 30%.

Did you say 30%, from the current levels?

Yes.

Okay. Got it. And sir, last on the copper piece. If TC/RC were to be $0.056 for this quarter, how would the EBITDA have moved from INR 775 crores that has been reported for this quarter?

I have not calculated that, but I can only tell you that in Q4, you will still not see the full impact of that because we'll be operating with the concentrate that's already in inventory. So this impact of this $0.05, you will see from the first quarter of FY '26.

The next question is from Ashish Jain from Macquarie India.

My first question is actually a Novelis. On the Novelis call, Dev and Steve had referred to their confidence that they'll be getting exemption on the import duties in the U.S. I actually missed that call, is it possible to kind of elaborate a bit more on that? And how come we are so confident about getting an exemption. What's the rationale behind that?

Steve? Dev?

Can you hear me, Satish?

Yes, yes. I can hear you, Steve, go ahead.

So first of all, it's very early stages it relates to where these tariffs will ultimately settle out. Both what the U.S. has done to date and what other countries might do. But the historical precedent that we've seen of getting exemptions as we've imported to support our project at Bay Minette has been positive. We think we're doing exactly what the U.S. government wants in domesticating supply chains and building the downstream facility in the U.S. with employment to supply beverage packaging and automotive markets. As it relates to primary aluminum, which primarily comes in from Canada into the U.S. The U.S. is short of aluminum. I mean, it would take years and years and a lot of investment to bring that supply into the U.S. And if you go back and look at what happened back in 2018. I think rationally, you understand that the flow of metal from Canada to the U.S. is something that ultimately is needed and we think longer term, we'll see relief associated with that. We can't predict in the short term when that relief will occur, but we do believe that on a medium to longer-term basis, we'll see relief associated with the imported primary as well.

But fair to say that there is a chance that this time it is different, given clearly the approach seems to be more aggressive given the levy is on pretty much any import into U.S. and all. Is that the way to think? Or we are actually very confident about assumption. I know it's a very tough question to answer as in nobody knows the right answer to this.

Yes. Yes, nobody knows the right answer, but I think we have to take a view and I think as we think of a rational view, our view is that the prevailing requirements of primary aluminum coming in from Canada to the U.S. and what we're doing at Bay Minette are the right longer-term solutions for the market. But anything could happen, but that's our view.

Sir, coming to India, just on the aluminum and copper project, the upstream projects, where are we in terms of hitting the ground on those?

I just describe that. So the alumina refinery and the copper recycling, ground broken construction started. The aluminum smelter expansion and the copper smelter, we are in the process, we have filed for environmental clearance.

Next question is from Indrajit Agarwal from CLSA.

I again have a question on Novelis. Fundamentally, what happened to scrap prices in case of a tariff. And in turn, what happens to scrap spread as a result. I mean, we understand this time it would be different, but how does that flow through?

Steve?

So again, early on, but as we understand today, scrap would not be subject to the tariffs coming into the U.S. under 232. So therefore, the short scrap position in the U.S. would be filled from other markets because it will become very attractive with higher overall local premiums rising, the Midwest Premium. But in the other international markets will also come under pressure, whether it be Europe, Asia or South America that we do business in. So again, a complicated question, but the nearer term would be that there would be a flow of scrap into the U.S. to fill the short position in the U.S. and with the favorable pricing that would be there.

And the pricing of scrap, is it generally as a percentage of LME or percentage of LME plus Midwest Premium, how does the pricing work?

Yes. In the U.S., it trades as a percentage of LME and the gross premium to a combination.

The next question is from Amit Dixit from ICICI Securities.

Congratulations for a great set of numbers. Couple of questions from my side. One is that how did the aluminum cost of production move in this quarter? And if you could highlight the prospective sense also that how it is likely to move in Q4? That is the first question.

The Q3 to Q2 was flattish. I think Q3 to Q4 will be similar. I mean there are some upward pressures coming in, in caustic, furnace oil, CP Coke. But we think balancing around coal prices, we may see a little bit of softening. So we think Q4 will be more or less flattish, won't be more than 1% or 2% off from where we are.

And in terms of coal sourcing, sir, when both Meenakshi and Chakla come on stream, and assuming we are able to extract the full EC, up to a full EC limit, so whether you will need linkage and e-auction coal then due to technical or logistical reasons? Or we will meet our entire requirement through captive provided coal prices remain where they are?

So we will still need to get coal for Dahej, which is in Gujarat. That's about it. Otherwise, we should be self-sufficient.

Okay. And 30% you said is including Meenakshi and Chakla, just to be clear.

Yes.

Next question is from Satyadeep Jain from Ambit Capital.

Just both question is on CapEx. Firstly, Mr. Pai on U.S. Novelis, you outlined CapEx in India for the next 2 years. we already have guidance for this year. If you can maybe talk about how much CapEx could be there annually for '26, '27 in Novelis. And one of the peers, obviously, the other peer is putting up capacity during this call, said they're putting up EAF in steel and aluminum rolling. But they say the aluminum rolling everything is known, there is Chinese suppliers. So there is hardly any room for surprises. It's generally the EAF where they thought there are surprises. But seem to indicate that is that fairly homogenous supply chain and all, so what has led to the surprise for Novelis on that capital costs and delays, which the other player is saying it's very relatively easy supply equipment, supply chain and all. So this 2 parts on overall CapEx guidance that we estimate for next year.

Yes. You're talking about the Bay Minette, Novelis CapEx. I'll let Steve answer. Just to let you know, the other person is a new entrant to the aluminum industry. So quite impressed with that confidence of the aluminum supply chain, but Steve go ahead.

I didn't catch the question.

I can take the CapEx question.

Yes, yes, go ahead, Dev. I didn't catch the full question either. Go ahead.

Yes. So to your point about how much CapEx to expect in '26 and '27. So the way to think about it is that over 3 years. FY '25, '26, '27, the average CapEx is $2 billion a year. And this year will be more around $1.8 billion next year will be a little over $2 billion. And so you should think about a cumulative CapEx altogether, including Bay Minette of about $6 billion over 3 years. So that's the answer to your specific CapEx question. Can you just repeat exactly what was the second part of the question, so between Steve and I, we just want to be clearer on that.

So the other player, the new entrant to the industry, it's putting up 2 -- there are 2 CapEx items. One is the aluminum rolling in and the other one is a different kind of EAF where they use different sorting stack. But the delay has actually been there on something, not on the aluminum. So when asked, they said the equipment supply chain, it comes from China, it's really standardized, so there is less room for surprises. It's actually on the EAF, they're seeing more surprise because it's kind of an unproven technology. So that seems to indicate that the room for surprise on aluminum CapEx is lower in that supply chain. So just wanted to understand what has Novelis experience different from what they are saying?

Steve, do you want to take that?

So I guess, I'm not -- even I was trying to understand. So when we went from our original guidance of 2.7, 2.8 to 4.1, we had explained that because we had moved sites and our civil costs had gone up substantially compared to what we had estimated in the budget. So that was done, I think, about 1 year ago and we are now at the 4.1 and we are committed to do this project at the time and at the budget that we had put in. I think commenting on what the other person is saying and the supply chain from China and all, I'm not sure that we have much more to say on that.

Second question would be on the India CapEx supply. On the alumina one also, I think initially from what we understood was this is going to be a 2 million tonne refinery and the CapEx for 2 million tonnes was going to be about $1 billion was our understanding because there's already infrastructure, the land is a site next to Utkal, there is already a surplus land, which has been acquired over time. So now it's $1 billion for 850 Kt, is that understanding, correct? And what has led to -- was it earlier misunderstanding on our side of estimating $1 billion for 2 million tonne refinery in 2 different stages. And then when you look at the...

We never said $1 billion for 2 million because it's me who's making the comment. So I think what is -- let me tell you, it's about INR 7,000-odd crores, I round it up to $1 billion. But what we set in place is like Utkal, this will be built for a 3 million tonne refinery. So large part of the infrastructure, the conveyance systems, the residue handling areas, everything we will build for a 3 million tonne refinery. But we'll put the first line in place. So that's why it's around INR 7,000-odd crores.

Okay. So when you look at 3 different projects, I think lastly, just on execution. It's very broad plate with 3 different large projects in India and obviously, Bay Minette is ongoing. How do you try to derisk execution? I mean I'm just going back in history when there were multiple projects, that risk of execution. So now you're in a phase where you have multiple projects simultaneously, how do you try to derisk on that front?

No, that's a very fair question. And I think if anything I wanted to tell you that in many ways in Hindalco, we are going to cut out all the other distractions. We are not going to look at any other new opportunities. So the whole management team is focused on these 4 projects. We have set up a project monitoring team, a project execution team, we have taken external help of some consulting agencies to do that. So we are very focused at these projects we are going to bring in on time and on budget. And I think that we will be able to do it because we are extremely focused on it now. There is no other thing in the business we will be looking at besides these projects.

Next question is from Pathanjali Srinivasan from Sundaram Mutual Fund.

I just wanted to get a few things clarified. So you mentioned that the total CapEx would be $6 billion. So could you give me this breakdown, what are the assets that you're talking about for this $6 billion?

You're talking about the Novelis CapEx breakdown that he gave over 3 years, right?

Yes, yes.

Yes, Dev?

Yes. Yes. So no, that's not so complicated. So basically, if you consider that we have as on date spent about $1.3 billion when it comes to the Bay Minette CapEx, we still have $2.8 billion to go, around $2.8 billion to go, and that is going to happen a little bit in the fourth quarter, but most of it will come in the next 2 years. So let's say, somewhere in the range of about $1.4 billion is that itself, maybe a little less because this quarter we'll spend some more. And then $300 million to $350 million is maintenance CapEx and then there are other ongoing improvement projects or debottlenecking projects which are in the pipeline for which cash still has to go out. I mean, there is Logan debottlenecking, there is Oswego, for which some cash has to go out, and also some cash has to go out for some of the recycling projects like the Ulsan project, which we have just commissioned but cash, kind of trails a little behind. And so there are other improvement projects, debottlenecking projects, ongoing projects, which is following the rest. So that's really how the math works.

Sir, I think you've covered all this in your presentation. It adds up to $4.5 billion. So I'm not able to get some math on the remaining $1.5 billion that is being spent. And also, when you say $6 billion, is it cumulative of the current year spending? Are you saying next 2 years and the current year put together $6 billion? Or is it for '26, '27, '28?

No. What I'm saying is that '25, '26, '27, you can take it as cumulative of $6 billion.

And the difference between $6 billion and $4.5 billion, can you tell me where that's getting spent?

Yes. So once again, so we are talking about 3 years CapEx of $6 billion. So let me try again. This is '25, '26, '27, we have spent only about $700 million at the end of last year. So again, I'm talking starting from fiscal year '25, right? So that really means that we have to spend $3.4 billion out of the total $6 billion CapEx in 3 years, right? And so that is really a big part of it, $3.4 billion, and the rest about $2.6 billion is basically things like maintenance CapEx, which you can take it about $1 billion, right? And the rest is other ongoing projects, which is debottlenecking expansions, which I already listed earlier. So that's how it all adds up.

So I think the $4.5 billion you're confusing with just the strategic CapEx, what Dev is telling you is that the strategic CapEx plus maintenance CapEx plus others is roughly $6 billion, including the current year we are on and FY '26 and '27.

Next question is from Raashi Chopra from Citigroup.

Could you please repeat the hedge bit again? I missed that earlier on the call.

So the hedged bit, this current Q4 FY '25. We have 35% of the commodity hedged at $2,600 per tonne. And we had an ongoing 15% 0 collar with the bottom at $2,262 and a ceiling at $2,558. The currency for the quarter is 16% hedged at INR 88. And just to round it off for next year, we have 12% of the commodity hedged at $2,700 per tonne and 13% of the currency at INR 87.33 per dollar.

Then on the -- what was the alumina volume that was sold during this quarter?

Sorry, the?

Alumina volume -- alumina sales.

The alumina sales. Alumina sales was 165 kt in Q3, will be about INR 180 to 190 in Q4.

On the coal, you said that when both Chakla and Meenakshi start then the coal cost should go down about 30%. Is that correct?

From today's level because it's always important where the baseline you're considering, yes.

And both should start like in about 2 years from now, like proper coal mining?

No, the Chakla box cut is this year, Meenakshi, we just got so it will take us 2 more years to get all the clearances and start.

When you said this year, you mean calendar '25 or right now?

Calendar year '25, FY '26. So we should be, say, October, November, we are planning for the opening of the mine. So coal will start from, let's say, February, March of calendar year '26.

Once both these mine ramped up fully, then you’re pretty self-sufficient, right? I mean, theoretically?

That's the plan.

And just lastly on the CapEx, India CapEx, you mentioned the INR 8,000 crores for next year. This year, what would be the number? And what has we done in 9 months for India?

It's about INR 6,000 crores. I think in 9 months, we have spent INR 4,400 crores.

And the India current cash balance, you said was INR 1,944 crores, right?

Sorry?

India net cash.

Net cash, yes, because we have about INR 14,000 crores in treasury and INR 12,000 crores gross debt.

Next question is from Parthiv Jhonsa from Anand Rathi.

Sir, my first question pertains to downstream aluminum business, it has been quite flattish Q-o-Q. By when do you expect this number to start giving the over $200 crores or $210 crores EBITDA number? Any flavor on that, sir?

Yes. I think in Q4, we should be getting close to that number. And next year, I'm really bullish on the whole thing because the FRP 2A project will also commission, Silvassa will be ramping up quite well. So the $200 crores number we should be getting close to it in Q4 and next year, we should be well into those number.

And my second question pertains to alumina. It has come off quite a bit from the recent highs. Just wanted to understand your take on it, how do you expect it to go going forward?

Yes. I mean the INR 700 was due to sort of force majeure type of situation that happened with the Guinea bauxite. I think currently, the indexes are around INR 500. So I don't know it's going to be in that INR 400 to INR 500 dreams. You have to remember the sort of more traditional pricing is more like between INR 350 and INR 400. So we'll have to see the tightness still remain. But currently, it's at around INR 500.

Next question is from Prateek Singh from DAM Capital.

So Mr. Pai, just a question on alumina itself. So did we see a flat kind of a pricing this quarter on a Q-o-Q basis for sales because the EBITDA improvement that we are seeing adjusted for the provision of INR 97 crores for aluminum business, kind of see like-to-like movement of the change in selling price of aluminum around $200-odd. So you would have expected that because we are selling alumina and alumina prices were significantly higher in this quarter, the impact of it would have come a bit more. So for us, was the transfer pricing or sale of alumina was flat on a Q-o-Q basis?

No. I think the transfer prices in Q3 were higher in a transfer pricing basis. The consolidated or the integrated cost internally, we take out any advantage of the thing, but the transfer pricing will follow the market pricing. The -- I think the other 1 point that has not come up, but I think it was there in our disclosures, and I just want to highlight that for the aluminum upstream business, we took INR 197 crores of provision related to electricity duty in Mahan on the auxiliary. So this was something that came to us this quarter, and we had to take a provision. So the INR 197 crores is sitting in the aluminum upstream EBITDA line, which you will have to take into account, then it gives you probably a better picture. The other second thing is the RPO obligation has also gone up. So in Hindalco, we take a full provision for the RPO every quarter on the metal prices. So these are the 2 things that are there in the aluminum upstream EBITDA.

Understood. And the second question is lastly on Novelis. So hypothetically, my understanding is that even if the assumptions are not there, the tariffs are largely neutral for us, right, because the Midwest Premium would remain high in that case. Is that the right understanding that even if there are no assumptions, tariffs are neutral for us apart from near-term distractions or noise around it?

Steve?

Yes. So when you say that even if the exemptions are not there, there will be some compensation from the high Midwest. Yes, we like to believe that with the higher Midwest, it does help us widen the spread. So that is directionally the right thinking. We simply do not see a scenario were either between the countries, Canada, U.S., Mexico, Korea, we simply do not see a scenario that there will not be a settlement soon around reciprocal tariffs because if you're following what's the latest discussion that is happening, it is about reciprocal tariff. So the door has been opened, wide open between the countries to discuss reciprocity. And we feel like this is a signal that there will be a solution in the coming weeks. So we do not see a scenario where this is not going to get resolved through some discussions and negotiations. But if you still want to believe that there will be no exemptions. We do see that the higher premiums will basically help to offset a very large part of the damage from not getting any refunds.

Just a follow-up on this. So if you can just remind me what happened last time, so was Novelis and few other players were specifically exempted or it was a part of the entire assumption for Canada, which happened like a year later that Canada -- that Canada indirectly was exempted and so everybody benefited and not just us. So is it like this time, we are applying for the -- just specifically, it would be for us or it would be a countrywide exempt for Canada, where we also will be benefiting?

Well, so between the U.S. and Canada, there was a settlement and duties were kind of exempted for movement of products between Canada and the U.S. entirely as part of the broader MCA settlement. And when it comes to imports from some of our interregional side like Korea, it goes through an exemption process. Whether everybody benefited from that is difficult for me to say. But basically, between U.S. and Canada, it was a broad exemption and when it comes to countries like Korea, it was basically a specific exemption -- continues to be a specific exemption on applications. So that's the way it moves.

Next question is from Amit Murarka from Axis Capital.

I wanted to check what is the hedging gain in 9 months of FY '25 for you? And was there some hedging in booked in Q3 as well?

Q3 was sort of -- I think it was a wash. It was about INR 36 crores negative. I think for the year, we are about INR 700 crores positive because of hedging.

And also the alumina external sales volume. So you have 1 million kind of excess is what I understand, maybe more than that actually. So why is that the run rate is still 150 to 200 quarterly, like should...

We don't have 1 million excess. We have about 700 excess that we sell.

You would have at 3.7, 3.8 million tonnes of alumina capacity, right?

So we do have annual maintenance shutdowns in all these refineries as well. So the total amount we can produce and what we sell roughly, it's around 700 kt.

Sure. So this is the optimal run rate what you are then?

Yes. I think that we are putting in a spare boiler in Utkal. So when that comes in, then we will get more closer to the 850 that we will be able to sell.

And the 1 million tonne alumina project will commission by when?

Sorry?

The first leg of the alumina expansion, that should get commissioned by when?

It is somewhere in December of '27. So on the hedging, I've just been corrected, the 700 crore gain was last year. This year, in the first 9 months, the gain has been 90 crores. So really, because of the high alumina prices, I think we are more or less running at a loss right now.

Next question is from Somaiah from Avendus Spark.

I have a few questions Novelis. So first one, in terms of Novelis margins, we had alluded 3 reasons, which will help us to kind of revert back to somewhere close to Q2 levels. So one was on contract pricing. The other one was on higher recycling and then operating outage. I mean, if you can get a broad sense of which of this is the largest in terms of drivers, which would help us get back there.

I missed some words, but were you asking about the Q3 versus Q4, was that your question?

No, no. He was asking that between scrap operational efficiencies and the margins are down, which is the biggest impact. I think it's scrap, right, Dev?

Scrap. Yes. I mean it is really scrap, which is the most leading cost so we can attribute it entirely to scrap.

Sorry, my question was on our expectations for Q4, where we expect margins to kind of revise. So for which we had alluded 3 reasons. One is the contract pricing -- also mentioned about higher recycling and then we had said operating leverage. Understand which of the -- because we were around close to 400 and then 475, 480 Q2 level. Just trying to understand which would help us larger in terms of quantum getting back there?

So clearly, we get a big boost from operating leverage because the volumes for Q4 are going to be meaningfully higher, as we keep saying that you can expect Q4 volumes to be more around the lines of Q2. So we had 904 Kt in Q3 and that will be one. Second, after that, pricing is going to provide us a meaningful upside and the rest will come from, let's say, more scrap consumption and other factors. So that is really how I would say it. So I would say that volume, operating leverage, therefore, and pricing are the 2 big factors in Q4 versus Q3.

Got it. So this is because we are able to pass on some higher cost because earlier we used to have this cost indexation, and here, we were able to pass it on. Is it a cost-led take back from customers? Or is it the market environment allows us to take a higher pricing at this point in time?

We have new contracts. We have new contracts, higher priced contracts, which are taking effect from January 1, and that is what is helping us. So I'm not talking about the inflation indexation here. I'm talking about the repriced contracts in particular.

So these are existing contracts that have come up for renewal or these are completely fresh contracts where we are able to have a higher pricing.

Well, these are the contracts that we have entered into. We have been saying that beverage can contracts will continue to give us a higher pricing. So these are contracts which have become effective, and these are long-term contracts on a higher pricing. So you can call it contracts, which are renewed but at a meaningfully higher price.

Understood. So the reason why I'm asking is contracts are typically 3 to 5 years, which means maybe 20%, 30% of the contracts come up for renewal in a year. So which means a similar exercise, something that's possible next year when we again come for renewal. That's the reason I want to understand this.

Yes. So again, what we have been saying is that the contracts that we have entered into now are much longer tenured contracts generally. So yes, I mean, it's generally, I can only say the same thing that our contracts are now coming at higher prices in beverage packaging, and some contracts will come every year for renewal, but a big bulk of the contracts have really been renewed at higher pricing right until the end of the decade. So overall, the key message here is that can -- as we reprice will continue to get repriced and that benefit will be seen -- has been seen, but will be seen starting again from Q4 as the new contracts come in.

Understood, sir. Also on the scrap outlook. So just keeping the tariff aside. So in general, you've seen now 2, 3 months of this change in regulation in terms of imports for China. So how are we seeing next 6 months or 1 year, have we seen the max impact of scrap prices going up or the demand for scrap will only continue to go up and the prices will only continue to go higher and keeping the tariff aside. So in general, what is -- I mean is more supply into the market going to be more secondary than primary and this is going to structurally keep the market higher, just your thoughts on that.

Steve, do you want to take that?

Yes, sure. So I mean, in the short and medium term, it is hard to predict. As we said on our call earlier in the week, we do think that the overall scrap pricing in the market is starting to peak out. Now how much it moderates back in the short term, medium term is hard for us to predict. We do think that we will be at new levels, higher levels of scrap pricing on a longer-term basis. What will moderate that back down is new technology, efficiency and collection of scrap, filler scraps being used in processes, higher recycling rates and so forth, but that will take time to ultimately see the overall impact into the marketplace. What we at Novelis are doing to protect our margins is to address this headwind that we see as more structural through looking at cost efficiencies, operating efficiencies, portfolio optimization, procurement savings, and we have a number of initiatives that we've launched and are in a process. We're not in place to talk specifically about the total impact of all those projects and the timing that in the early April time frame, we'll be able to lay out in a bit more detail what some of those are, so that you can better understand how we progress back towards our longer-term EBITDA per tonne of $600 per tonne over the next several years.

Next question is from Ashish Kejriwal from Nuvama Institutional Equities.

Sir, is it possible to share the revenue of alumina, which we sold?

Sorry?

Is it possible to share the revenue of alumina, which we sold?

We have given the volume, but we haven't shared the revenue.

Is it possible to share that?

No, we don't give out that. So we can only give you the volume. Sorry about that.

So to put it different way, is it possible to share how much alumina price changes for you in this quarter versus last quarter? I don't want the absolute number, but even the change, if you can give, because we sell on a spot as well as on a contract basis. So I was just wondering what kind of change we have seen in alumina prices for third quarter versus second quarter.

You're talking about Q3 -- Q2 to Q3, what was the alumina price movement, is it?

Yes, yes, for us.

Q2 to Q3. I think that was -- it follows the index. We -- I think the index was around INR 375 in Q2 and the index has been around INR 700 in Q3. So that broadly should tell you the pricing. And as I was saying, currently, in January, February, it's running at INR 500.

Understood. But I think we -- do we think that we sell everything on spot basis or there is a contract basis also?

No, no. Quite a lot of it is on contract basis. And some parts of it have even got linkage to LME. So you're absolutely right. Unlike NALCO or something, we do not have the full advantage of the index.

So that's what, sir, I was asking. If it is possible to share the delta which we have witnessed in our average alumina price?

We would rather not give that.

No issues, sir. So second question is our alumina refinery that's coming on December 2027. And we have already signed with OMC. So this is for 1.5 million tonnes bauxite -- how much volume, is it 2 million tonne or the entire 6 million tonne we have signed MOU with them?

We have signed for 3 million tonnes of bauxite. That's enough for 1 million tonnes of alumina.

Okay. And any pricing also we have spent or this will be decided on something different basis?

There is a formula for the pricing. So there is a formula for the pricing. I'll get Subir maybe offline to explain that to you.

Sure. And thirdly, in terms of Novelis when Dev and Steve was talking about scrap prices, is it fair to assume that the high scrap prices have already hit or will hit in our P&L in fourth quarter and thereafter, maybe that will be the -- assuming that no more further scrap prices does not move, that will not change on an increasing trend from first quarter onwards?

I think that is what Steve just answered in the previous question. I mean it's difficult to say, but he think it has peaked the scrap prices.

So sir, pricing is different, sourcing is also getting difficult or we are able to source it at a higher price also?

Steve, do you want to take that?

Yes, yes. So, yes, so we're not worried about sourcing. From a volume standpoint, we're getting what we need in the marketplace. It is just more about the pricing itself. As Dev said, one of the drivers in the fourth quarter is our ability to process more scrap metal through the system. In our fourth quarter, which still, even if the pricing that we see today is an advantage from an overall operating cost efficiency standpoint.

And sir, lastly, on this only when we are saying that normally we do recycling 61% of the volume, any -- and we have commissioned few recycling plants also, so any guidance which we can give for FY '26 that how much we will produce through the recycling route?

Yes. So we -- as you know, we're commissioning our auto recycling facility at Guthrie, Kentucky. That's underway and progressing. So that will increase the overall volumes throughout 2026 as we get to full capacity of 240 Kt. And then the other one that we're commissioning is our 100% owned UAL recycling facility. That started in the month of January, and again, will progress over the following several quarters. So there is a good momentum in both operating efficiency at our current facilities and new capacity coming online to absorb more scrap volume.

Due to paucity of time. We'll have to take that as the last question. Participants may connect with the Investor Relations team for further questions. I would now like to hand the conference back to Mr. Satish Pai for closing comments.

Yes. Thank you, everyone, for your attention. I guess, this quarter sort of shows the benefit of our integrated business model between upstream and downstream because as we see the downstream has a little bit of the headwind, the upstream had the tailwind. So the consolidated results come out quite well. So with that, I thank you for your attention.

Thank you very much. On behalf of Hindalco Industries Limited, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.