We have prepayment plans of Rs 9,000 cr debt in current fiscal: Satish Pai

He talks about growth prospects for Novelis and zero monetary benefits on account of GST roll-out

With the aim to have a healthy balance sheet that could allow organic expansion in Novelis auto business going ahead, Hindalco Industries aims to prepay about Rs 9,000 crore debt this fiscal and further lower its net debt to EBITDA ratio by March 2018. In an interview with Aditi Divekar, Satish Pai, managing director of the Aditya Birla Group company, talks about growth prospects for Novelis and zero monetary benefits on account of GST roll-out. Edited excerpts:

Novelis witnessed record shipment in June quarter. Going ahead, what are the revenue growth prospects for the company? Any capex plans at Novelis?

We expect demand from the auto sector to continue to grow in North America as well as Europe with China been seen as a bright spot. We will also watch how China auto market picks up in the coming months. After all, it is the world's largest auto market, even larger than the US. In the aluminium cans business, Brazil and Asia are showing strong growth prospects. Overall, we see increased growth prospects from the auto business with firm support lent by cans division. There are good opportunities for organic growth in the auto business for Novelis and we are currently watching the space. 

In May, Novelis went into joint venture (JV) with Kobe Steel for its Ulsan plant. What was the rationale behind this JV and will we see more such JV going ahead?

At the Ulsan plant in South Korea, which caters to cans and speciality market, we were unable to sell 200,000-tonne capacity. It, therefore. made sense to do a JV with Kobe so that they can use this capacity and we can reduce our fixed costs. However, going ahead you will not see any more of that. 

Hindalco made a prepayment of Rs 4,500 crore debt in the June quarter. What efforts is the company taking to lighten its balance sheet?

We plan to make a total prepayment of Rs 9,000 crore in the current financial year of which half is already done in June quarter. Due to this,  our repayment cycle is clear until 2023-2025. Also, as the cash comes in, we aim to bring down the net debt to EBITDA ratio for Hindalco and Utkal to 3 from 3.3 at present and for Novelis to 3.5 from 3.65 today. We will achieve these ratios in March 2018. As on June 30, the consolidated net debt of company stands at Rs 66,717 crore.

What is your price outlook on global aluminium and copper prices? Prices of both metals have helped in higher realisations in June quarter.

There is scope for global aluminium prices to go up further if China actually cuts its aluminium capacities. Currently, there is an anticipation of this capacity reduction. So in aluminium, we will need to wait-and-watch what exactly China does with its capacities. In copper, good demand and mines disruption have taken prices higher. We expect copper prices to remain elevated going ahead.

Is Goods and Services Tax (GST) helping you in cost reduction like it is for some other metal companies?

No. There is no monetary benefit due to GST for us as overall logistics cost for us remains same. We are hoping for logistics efficiency through GST and it will take a few quarters for that change to reflect. The first returns have to be filed by August 20 and here we will come to know how the supply chain has responded to GST implementation.