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Hindalco Earmarks Rs. 5,000 Cr. CAPEX for FY-24, Revises Investment Owing to Novelis’ Performance

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Hindalco Industries, a major Indian Aluminium manufacturer and a part of the Aditya Birla Group, has earmarked an investment of Rs. 5,000 crore to be made in the course of the current financial year.

This information was shared by Mr. Satish Pai, Managing Director, Hindalco Industries in the company’s earnings call for the closing quarter of FY-23.

Hindalco had initially planned a CAPEX of USD 7.9 billion to be invested between FY-23 and FY-27. In April 2023, the company decided to cut down this amount significantly to USD 4.5 billion, which will be invested between FY-24 and FY-28. This was done in light of financial challenges faced by the company’s US-based subsidiary, Novelis.

Expansion in Odisha Envisaged, Chakla Coal Mine to be Developed

Major Share to be Invested for Capacity Addition at Aditya, Hirakud Facilities

A large share of Hindalco’s planned CAPEX will go towards capacity expansion at its Aditya Aluminium facility in Sambalpur, Odisha and Hirakud-FRP Plant in Odisha.

Speaking of this investment, Mr. Pai said, “We are guiding at around Rs. 5,000 crores. Last year, we spent around Rs. 3,000 crores. And a large part of the capex is going to be the rolling mill expansion in Hirakud and Aditya, which adds 170 KT of sheet capacity.

Chakla Coal Mine to be Commissioned by FY-26, Expected to Bring down Coal Linkage Requirements

In addition to the above mentioned projects, the company will be spending a part of this CAPEX to develop Chakla Coal mines in Jharkhand. Briefing Hindalco’s investors, Mr. Pai said, “On our new mine status, Chakla mine is progressing well and is expected to be commissioned by FY ’26.

While Mr. Pai maintained that Hindalco is in the process of signing new coal linkages, he added that the commissioning of Chakla Coal mine would significantly reduce Hindalco’s dependence on coal linkages post-FY-26.

Hindalco had won the Chakla Coal block through e-bidding in 2021.

Company’s Cash Flows to Fund Hindalco’s Expansion Plans

Hindalco’s CAPEX plans for FY-24 will be funded through its cash flows. Speaking on this matter, Mr. Pai stated that the expenses for Hindalco’s expansion plans for FY-24 will be met by the company’s ‘generated cash flows’, that is, through monies that the company makes from its usual course of operations. He added, “Our treasury at the end of March ’23 and ’24 should be more or less at similar levels”.

Novelis’ Financial Uncertainty Changes Hindalco’s Investment Plans

Novelis, Hindalco’s Atlanta-headquartered subsidiary, accounted for 66.52% of the company’s consolidated revenue for the year ended 31st March 2023. Therefore, it is a prime contributor to Hindalco’s top line. However, Novelis’ financial performance has been uncertain, and its income from operations fell by 16% on a Year-over-Year (YoY) basis from FY-22 to FY-23. Moreover, Novelis’ debt stood at Rs. 33,671 crore as of 31st March 2023.

Owing to Novelis’ financial performance, Hindalco’s management decided to curtail its overall planned investment to be made from FY-24 to FY-28. Major part of the company’s revised investment amount, that is about USD 3.3 billion, will be utilised for developing a greenfield rolling capacity for Novelis, debottlenecking, and the development of recycling facilities. The remaining amount, that is USD 1.2 billion will be invested in India during the aforementioned period.

Earlier, Hindalco had earmarked about USD 4.7 billion to be invested in Novelis alone, while about USD 3.2 billion had been planned to be invested in India from FY-23 to FY-27. Due to the revision of Hindalco’s CAPEX, several projects worth about USD 1.6 billion have been deferred, which include setting up rolling facilities in Europe and Brazil, and a downstream facility in China. In India, the company’s upstream Aluminium projects have been deferred due to Hindalco’s CAPEX revision, while downstream projects will be executed as initially planned.

About Hindalco Industries Ltd.: Mumbai-headquartered Hindalco Industries Limited is a key player in the Indian Aluminium and Copper manufacturing space. One of Asia’s largest producers of primary Aluminium, the company reported a consolidated revenue of Rs. 2,23,202 crore from its operations for the year ended 31st March 2023.