Hindalco Industries cuts FY22 capex to Rs 2,400 cr on Covid-19 impact

Company sees strong demand from packaging, industrial, transportation sectors

With the demand outlook for aluminium looking strong, Hindalco Industries will largely focus on organic expansion both globally as well as in the domestic market in the coming quarter. For FY22, however, the company would have to slightly scale down the capital expenditure to Rs 2,400 crore.

“We lost a few months to the second wave of Covid in the beginning of this fiscal. Due to this, we will have to end capex for FY22 about Rs 300 crore lower than planned,” Satish Pai, managing director at Hindalco Industries, told Business Standard.

The Aditya Birla Group company, early this month acquired Ryker Base Pvt. Ltd. (Ryker) – a wholly owned subsidiary of Polycab India Limited for an enterprise value of Rs 323 crore. The acquisition will strengthen Hindalco’s copper rod manufacturing capacity by providing a time-to-market advantage, allowing the company to cater to the growing demand from electrical and electronics sectors.

At Novelis, the company in October, invested approximately $130 million to upgrade its operations in Oswego, NY to meet growing customer demand for sustainable, aluminum flat rolled products.

“Calendar year 2021 is going to end in a global aluminium deficit of 1 million tonnes and this deficit is expected to grow since demand is strong from packaging, industrial, transportation,” said Pai.

The company's consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) was at an all-time high of Rs 8,048 crore, up 56 per cent year-on-year and 19 per cent sequentially. The company clocked a record high EBITDA but refrained from giving any guidance for coming quarters.

Despite the Covid cases on a rise both in Europe and China, Hindalco Industries does not see much impact on its business in those regions.

“Europe cases are going up but they are managing well since they have a high degree of vaccination. We are not expecting any demand problems in Europe and the US going forward. In China, our business is only 200kt of auto and most of our auto demand in China is flat out so we do not expect any impact to our business in China as well,” Pai clarified.

Alongside, though the Union mines ministry recently tweaked mining norms allowing captive ore producers to sell to third parties, Hindalco Industries will not be participating in the sale of the commodity.

“Our annual consumption of bauxite is about 10 million tonnes and since we have four smelters, we will not be selling any bauxite to third parties. In fact, we will now be diverting some of our ore to the Belgaum smelter for which we usually have to import since ore availability is an issue there,” said Pai.

Hindalco Industries has four smelters—Utkal, Renukoot, Moori and Belgaum. The company is, however, into the sale of value added products. It will continue to sell alumina to its existing customer Vedanta Limited.

The September quarter has been a tough one for aluminium producers such as Hindalco Industries due to coal shortage issues. However, the Aditya Birla Group company was able to escape the crisis. “We were able to keep a 30-day inventory of coal since we had stocked it well before monsoon. Due to this, though we were in a tight position, we were comfortable and were able to tide over the situation. Now the coal issues have eased so there is no shortage,” said Pai.