Nalco's Capex zooms 283% from Rs 2.82 bn in FY15 to Rs 10.81 bn in FY18

At a time when corporates are scaling back on their capital spends, National Aluminium Company (Nalco) has bucked the trend. The central PSU’s Capital expenditure (Capex) has jumped by 283 per cent from Rs 2.82 billion in 2014-15 to Rs 10.81 billion in 2017-18.

According to India Ratings & Research, a ratings agency, slow Capex growth of corporates is due to weak domestic consumption demand, global overcapacity and negative impact of the Goods & Service Tax (GST) on working capital. The agency has forecast a decline in Capex over FY18 to FY20 for leveraged sectors like infrastructure, metals & mining and power compared with automobiles, oil & gas and telecom. Also, the 75 stressed corporates surveyed by India Ratings logged nine per cent side in Capex CAGR (compounded annual growth rate) between FY 13 and FY 17. Overall, Capex in the private sector is slackening and the trend is expected to continue till 2019-20.

In 2016-17 when government spending on Capex rose by only six per cent year-on-year, Nalco, a government-controlled entity, has proved to be an outlier. The aluminium major’s Capex witnessed a spike of 93.71 per cent in 2016-17.

Much of Nalco’s Capex has gone into the establishment of a wind power project in Tamil Nadu, adding a new stream to its alumina refinery at Damanjodi, development of Utkal captive coal block and revamp of the company’s ageing plant and equipment, said a company source.

Nalco is adding the fifth stream to its Damanjodi refinery in south Odisha’s Koraput district. The project estimated to cost Rs 55.4 billion, will add one million tonne in annual capacity. The refinery currently has a nameplate capacity of 2.275 million tonnes per annum (mtpa).

Nalco has lined up a Capex (capital expenditure) of Rs 11 billion for 2018-19. The Capex would be spent on a slew of projects- the one million tonne, fifth stream of Damanjodi alumina refinery, Utkal D & E coal blocks, wind power projects, JV (joint venture) projects and modernization & upgradation of plant equipment.

As per the terms of the memorandum of understanding (MoU) signed by Nalco with its parent ministry- the Union ministry of mines, the navratna company’s turnover is seen at rs 93.50 billion in this fiscal, 15 per cent higher than 2017-18.

The MoU has also set a target of 2.1 million tonnes for production of alumina with 100 per cent capacity utilisation & an optimum aluminium production target of 0.41 million tonnes. It sets a target of reduction in net carbon consumption as part of improvement in production efficiency, apart from giving thrust to commercialization of new R&D (research & development) products.