With demand back to pre-COVID-19 levels, Hindalco eyes expansion, debt reduction

The company is looking to reduce net debt to Ebitda ratio to below 3, in the next financial year

Moneycontrol News
February 10, 2021 / 05:30 PM IST
 
 
live
  • bselive
  • nselive
Volume
Todays L/H
More





Hindalco Industries, India's largest aluminium producer, will focus on doubling its downstream capacity, de-leveraging its balance sheet and shareholders return in the next few years,  its top executive said.
The company had in December 2020 announced plans to invest Rs 7,000 crore in the next few years to double downstream capacity to six lakh tonnes a year.


"Our net debt to Ebitda ratio will be 3.1 by March 2021. We expect this to come down to below 3, in the next financial year," Managing Director Satish Pai said on February 10, while addressing the media after the company announced its third quarter results. In June 2020, the ratio was 3.8.


The company reported a 76.2 percent year-on-year (YoY) jump in December quarter standalone net profit to Rs 340 crore. In the corresponding quarter of the previous financial year, the profit was Rs 193 crore.


The number, however, came lower than the market expectations as a CNBC-TV18 poll had estimated it at Rs 380 crore.


Pai noted that demand for aluminium, at nearly a million tons a month, was back to its pre-COVID-19 levels.


Increasing investment, lowering debt

 

Hindalco will invest Rs 730 crore on a 34,000-tonne extrusion plant at Silvassa. The fully automated plant includes three extrusion presses and will enable Hindalco to service premium customers in the building & construction, auto & transport, electrical, consumer and industrial goods sectors.




On the debt front, Pai noted that the company has paid back $500 million of the $1.1 billion bridge loan it had taken for the Aleris acquisition. "We did that in the third quarter. We will clear the remaining part of the loan in the fourth quarter," Paid said.


Hindalco's North American unit Novelis had acquired the US-based aluminium rolled products manufacturer Aleris Corporation in April 2020. The deal, which marked Novelis' entry into the high-end aerospace segment, had been closed at an enterprise value of $2.8 billion.



Novelis is at present integrating operations of Aleris and expects higher synergy benefits than earlier expected. Earlier the company had expected annual synergy benefits to be $150 million a year. "Half of it was to come from traditional segments, including from admin and supply chain. The rest would come from the synergy of the Chinese operations,"  Pai had said.

The company now expects the savings from traditional synergy items to increase to $150 million. "We have already achieved a run rate of $54 million at the end of the third quarter," said Pai.