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Hindalco expects domestic aluminium demand to rise 7%

LiveMint logoLiveMint 30-05-2017 Shailaja Sharma

Mumbai: Hindalco Industries Ltd, India’s biggest aluminium producer, expects domestic aluminium demand to rise 7% in the current fiscal year, led by the government’s infrastructure push and the likelihood of higher power sector orders, managing director Satish Pai said in an interview on Tuesday.

Aluminium demand in India rose just 2% in 2016-17.

Implementation of the goods and services tax (GST) from 1 July will also be a big boost for the Indian economy and lead to higher growth at Hindalco, Pai said.

The Kumar Mangalam Birla-led company focused on reducing debt on its balance sheet in fiscal 2017, ramping up capacity utilization, and tying up coal supply for its plants.

“2016-17 was a transformative year for Hindalco for three reasons—one, we have now strengthened the balance sheet... Second, operationally we are at full capacity, costs are under control and macro environment has been favourable, even LME (London Metal Exchange) has been high. And third, we tied up for 5 million tonnes of coal to take care of two-third of fuel supply, giving us visibility and security of fuel supply,” Pai said.

Pai said he expects demand for aluminium to be higher this year on account of a pick-up in sectors including urban transportation, packaging, and building and construction.

About 54% of the aluminium used in India comes from cheaper imports from China and the Middle East, but domestic producers such as Hindalco and Vedanta Resources Plc have ramped up capacities and are lobbying for a ban or charge on cheaper imports.

Hindalco on Tuesday reported a 25.6% rise in fourth quarter net profit, helped in part by higher aluminium prices. Aluminium prices have risen about 15% this year on expectations China will close illegal smelters, Bloomberg reported on Tuesday.

Hindalco’s standalone net profit rose to Rs502.52 crore in the quarter ended 31 March, from Rs400.09 crore a year earlier. Revenue from operations rose 26.8% to Rs11,747.09 crore, from Rs9,262.73 crore a year earlier.

Both profit and revenue beat Street estimates. Thirteen analysts polled by Bloomberg had expected Hindalco to report standalone net profit of Rs467.9 crore and 14 analysts expected sales of Rs10,603.9 crore.

Revenue at its largest aluminium business rose 9.4% to Rs5,547.98 crore during the quarter, and at its copper business rose 47.9% to Rs6,202.20 crore from a year earlier.

For the full year ended 31 March, Hindalco reported consolidated revenue of Rs1.02 trillion, up about 1.4% from Rs1.01 trillion a year earlier.

Hindalco raised $500 million through a qualified institutional placement (QIP) in March and prepaid about Rs5,536 crore of debt from the proceeds.

It also refinanced $4.3 billion of long-term debt at its subsidiary Novelis Inc. Hindalco said consolidated net debt-to-Ebitda (earnings before interest, tax, depreciation and amortization) ratio as of 31 March improved to 3.74x from 6.29 a year earlier.

Hindalco’s shares closed up 0.92% at Rs203.15 on the BSE on Tuesday while the benchmark Sensex index rose 0.16% to end at 31,159.40 points.

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