Hindalco Industries Limited (HINDALCO) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day, and welcome to the Earnings Conference Call of Hindalco Industries' second quarter results for FY27. As a reminder, all participant lines will be in the lesson-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing start and zero on your touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Subir Sain, Head of Investor Relations at Indalco. Thank you, and over to you, sir.

Good morning and good evening, everyone. Thank you for joining us. On behalf of Indalco Industries, I welcome you all to our Q2 FY27 earnings call. We will be referring to the Q2 investor presentation available on our website. Please note that certain statements made during this call may be forward-looking and should be read in conjunction with the Safe Harvest Statement on slide 2 of the set presentation. The presentation highlights our consolidated performance for the quarter, along with our segment-wise performance review of Novellis and our India Aluminium and Copper businesses. The corresponding segment information of prior periods have been restated accordingly for a comparative analysis, wherever applicable. Joining us today from Hindalco are Mr. Sathish Pai, Managing Director, Mr. Bharat Goenka, Chief Financial Officer. From Novelis, we have Mr. Steve Fisher, President and CEO, and Mr. Dev Ahuja, Chief Financial Officer. Following the management's remarks, we'll open the floor for questions and answers. Post this call and audio replay will also be available on company's website. With that, let me now hand over the call to Mr. Pai to take you through company's performance and key highlights of the second quarter of FY27.

Hello, everyone. I would like to take this opportunity to wish everyone a happy and healthy festive season. Thank you for joining Hindalco's Earnings Con Call today. On slides 5 to 9 of this presentation, you can see our achievements and progress across quarterly metrics of safety and sustainability for this quarter. Let me take you through the key highlights of these initiatives. At Hindalco, safety is always our highest priority, and I am pleased to report that there were no fatalities this quarter across all our Indian operations. Our LTIFR for this quarter stands at 0.16, showing significant improvement over the prior period. I am also pleased to share that Aditya Illumina Refinery was honored with the British Safety Council Award 2026, a testament to our unwavering commitment to occupational health and safety. We also launched an AI-powered behavior-based safety observation app in 22-plus regional languages to strengthen critical risk identification while developing 40 certified taproot experts to enhance incident investigation and root cause analysis across our businesses. At Hindalco, we continue to make strong progress on circularity and responsible waste management. This quarter, 62% of the total waste generated was recycled or reused, impacted by the higher rainfall at certain plants and temporary logistical challenges. We achieved 93% recycling rates for bauxite residue excluding Utkal, 77% recycling of ash, and 110% recycling of copper slag this quarter. We have made consistent progress in improving water efficiency across our operations through a series of focused interventions. In our aluminum business, higher recycling rates of 33% were recorded in this quarter, up from 30% a year ago, with increased rainwater harvesting across the sites that helped us reduce freshwater consumption on a year-on-year basis. In our copper business as well, specific water consumption, specific freshwater consumption improved year on year due to continued recycling and higher rainwater harvesting this quarter. Biodiversity conservation remains an integral part of our sustainability agenda. At the end of Q2 FY27, a cumulative tree plantation has crossed 6.8 million trees with nearly 5.4 lakh saplings that were planted this quarter to strengthen greenbelt coverage and enhance local biodiversity around our operations. We have implemented conservation programs for special status species across 10 high priority sites, reinforcing our commitment to biodiversity conservation and ecosystem protection. We also commenced implementation of no net loss project at our Belgravi plant aimed at restoring 123 hectares of habitat and strengthening local biodiversity in the region. Renewable energy remains a key pillar of our decarbonization strategy. As of the end of Q2, we have 643 megawatts of renewable energy capacity across solar, wind, and hydral resources, along with 35 megawatts of pump storage tie-ups under our round-the-clock renewable energy program. By FY27 exit, our renewable energy portfolio is set to reach 884 megawatts, complemented by 125 megawatts of RDRTC capacity, accelerating our transition to a cleaner and more sustainable energy mix, and building a more sustainable and future-ready Endalko. Our aluminium-specific greenhouse gas footprint stood at 19.4 tonnes of CO2 per tonne of aluminium in Q2, lower than the comparable period last year. Now let me give you a glimpse of the current broader economic environment on slide 11. IMF projects global growth at 3.1% in 2026, slowing from 3.5% in 2025 as the global economy remains resilient but divergent in its performance. A significant drag is arising from the Middle East and Central Asia region, where growth is expected to contract by 0.3% in 2026 after expanding 3.7% a year earlier, reflecting the economic disruptions caused by the prolonged conflict and energy supply constraints. The negative supply shock arising from the conflict and its impact on global economic activity has been partially offset by strong investments in artificial intelligence and the broader technology sector. The U.S. economy is expected to grow by 2.3% in 2026, supported by resilient domestic demand and continued investment. While in China, it is projected to slow down to 4.5% from FI amid weak domestic demand and ongoing structural challenges. Global growth remains vulnerable to escalating geopolitics, continued commodity price volatility, higher financial conditions, and increasing trade fragmentation. Global inflation is projected to rise from 4.1% in 2025 to 4.7% in 2026, driven primarily by higher energy and food prices before easing begins again in 2027. India continues to demonstrate resilience of its domestic economy despite a challenging global environment. RBI focused GDP growth for FY27 at 7.1% against 7.8% in FY26. Recent high-frequency indicators suggest that economic activity continues to maintain momentum. Manufacturing remains steady despite cost pressures, while the services sector continues to benefit from robust domestic and external demand. Investment activity continues to strengthen, aided by government infrastructure spending, improving private sector capex, and strong credit growth. Rural consumption is expected to be supported by resilient non-farm activity, although deficient monsoon conditions and strong El Nino effects pose risk to agricultural output and rural demand. Urban demand remains healthy, backed by stable employment conditions. Meanwhile, external headwinds, including geopolitical tensions, elevated commodity prices, supply chain disruptions, tighter global financial conditions, and trade-related uncertainties, continue to weigh on growth outlook. Inflation prospects have become less favorable with the CPI inflation projected at 5.2% in FY27, driven by food and fuel price pressures, deficit monsoon conditions, El Nino-related risk, and volatility in the global crude oil prices. With signs of inflation becoming more broad-based, the RBI has raised the policy repo rate by 25 basis points to 5.5% and shifted its policy stance to calibrated tightening, signaling its focus on containing inflation while ensuring macroeconomic and financial stability. Moving on to the industry outlook on slides 12 to 14. On slide 12, from a pricing perspective, the quarter was marked by significant volatility. Looking ahead, the global aluminium market is expected to remain in deficit through calendar year 26. Current estimates point to a deficit of around 0.8 million tons, significantly higher than earlier expectations. Any further disruptions in the Middle East could tighten supply further and provide additional support to aluminum prices. While capacity restarts and new supply additions are expected to gradually rebalance the market, the medium-term outlook remains constructive. Looking at the global aluminum market in Q3 calendar year 26, Chinese aluminum production grew about 3% year-on-year to nearly 11 million tons, supported by capacity additions in Yunnan. Partially offset by capacity rationalization in Shandong. In the rest of the world, production declined 6% to around 8 million tons, primarily due to disruptions stemming from the Middle East conflict and the closure of Mozaal, partially offset by higher production in Indonesia. As a result, the global aluminum production stood at approximately 19 million tons, down 1% year on year. On the demand side, aluminum consumption in China increased 4% to around 12 million tons, supported by continued strength in new energy vehicles and healthy export demand for semi-fabs and finished products. However, the construction sector remained weak amid ongoing challenges in the real estate market. Outside China, consumption declined 2% to around 7 million tons, reflecting softer demand in Europe, Middle East and North America, partially offset by growth in India. Overall, the global aluminium consumption reached approximately 19 million tons, up 1% year on year. With demand continuing to outpace supply, global aluminium markets remained in deficit by roughly 0.5 million tons this quarter. Turning to India, demand remains resilient and continues to be among the strongest growth markets globally. Aluminium demand in Q2 FY27 is estimated to be around 1.7 million tons, representing growth of approximately 6% year-on-year. This growth is primarily driven by the automotive sector supported by healthy vehicle production and sustained demand across both passenger and commercial vehicles. Overall, India continues to outperform most global market and remains one of the most attractive long-term growth opportunities for aluminum demand. Turning to the Indian copper industry on slide 14, in India, refined copper demand remained relatively subdued during the quarter, declining 3% year-on-year to 388 KT. While demand from building and construction and power sectors continued to grow, this was partially offset by softer demand from consumer durables and electrical equipment segments. On the copper concentrate side, Q2FY27 continued to witness extremely tight copper concentrate markets, with spot TCRCs remaining at negative levels in the range of minus 48 to minus 58 cents per pound. The market continued to be affected by the structural gap between expanding global smelting capacity and constrained growth in mine supply. Coming to slide 14, our consolidated business EBITDA was up 52% year-on-year at 13,869 crores this quarter, and the consolidated profit after tax was up 59% on a year-on-year basis at 7,534 crores. At Indalko India Business, our business segment EBITDA was up 66% year-on-year at 9,011 crore this quarter, whereas the quarterly profit after tax was at 5,852 crore, up 91% on a year-on-year basis this quarter. On slide 17. It's encouraging to see the earnings from our non-LME-linked business, namely Novelis Aluminum Downstream Copper, continuing to grow, reaching 6,860 crores this quarter, with momentum continuing to accelerate. These businesses have a much lower correlation to LME price movements and are driven by factors such as value-added products, recycling, innovation, customer relationships, and operational performance. Our growth is increasingly being driven by three key factors, that is, recovery at Novelis, strong operational performance in our copper business, and the continued expansion of our aluminum downstream portfolio into new products, applications, and premiumization. Coming to our business-wise performance this quarter on slide 17 to India, upstream aluminum shipments were up 1% year-on-year, and revenues were up 33% year-on-year. Our quarterly EBITDA stood at 7,009 crores, up 55% year-on-year, backed by favorable macros, and our strong performance across the value chain. This delivered an EBITDA per ton of 2,125 this quarter F. EBITDA margins were at 52% and continued to be among the best in the global industry. Our hedging position in aluminum for the rest of FY27 stands at around 29% on the commodity at $3,000 per ton and 21% in the currency at $93 per dollar. Our Indian downstream aluminum business continues to deliver a strong performance, while quarterly shipments were up 6% year-on-year at 119 KT. Aluminum downstream delivered a quarterly EBITDA of 329 crores, up 26% year-on-year this quarter versus 261 crores in the prior period. This was driven by product mix and premiumization. The resulting EBITDA per ton stood at $289 per ton this quarter. Copper performed exceptionally well during this quarter, delivering another strong set of results. Overall, metal shipments were at 116 kt, up 2% year-on-year, while CCR volumes were stable at 96 kt. Quarterly copper EBITDA reached a record 1,673 crores, a significant 164% increase year-on-year, driven by strong operational performance, healthy domestic demand across segments, despite elevated LME prices. In addition, higher realization from sulfuric acid and other byproducts, along with certain one-time gains, further supported earnings during this quarter. Copper is expected to deliver underlying quarterly EBITDA of around 1,200 crores on a normalized basis, underscoring the strength and resilience of this business. Turning to cash flows and capital allocation in slide 20, our business continued to generate strong cash flows of 23,322 crores during the period, representing a robust 57% year-on-year increase. At the same time, we invested 20,719 crores in capital expenditure, up 83% year-on-year as we continue to advance our growth and capacity expansion projects. These investments are focused on strengthening our competitive position and delivering long-term value creation. Importantly, we continue to maintain a strong balance sheet with ConsolNet debt to EBITDA at 1.8 as of September 2026. Providing us flexibility to fund growth while maintaining a disciplined approach to capital allocation and shareholder returns. Now, let me conclude today's presentation with some key takeaways. At Novelis, our second quarter performance once again reflected the strength and resilience of the underlying business. We have now normalized production at the Oswego Hot Mill and through September 2026 received cumulative insurance recoveries of $519 million. Importantly, our long-term EBITDA per ton guidance of $600 remains unchanged. We are confident that the strength of the business supported by cost restructuring will drive a return to positive free cash flow and mark the beginning of our de-leveraging journey by the end of FY27. We also achieved a major milestone at Bayminet, where our 600KT greenfield rolling and recycling facility produced its first cold-rolled coil in September. Commercial shipments are expected to commence in the first quarter of FY28. Bayminet will further strengthen our operating footprint, expand our recycling capabilities, and position Novelis for the next phase of long-term profitable growth. Turning to our India business, we continue to deliver record-breaking performance with industry-leading profitability across both our aluminum and copper businesses. This performance reflects the strength of our integrated business model, our relentless focus on operational excellence, disciplined cost management, and consistent execution across market cycles. On the growth front, all our key upstream expansion projects are progressing well and remain aligned with our strategic ambition of doubling upstream capacity. These investments will further strengthen our integration and cost leadership, our goal of delivering four-fold increase in downstream EBITDA by FY30. A key aspect of our transformation is the growing contribution of non-LME-linked businesses, as our portfolio increasingly shifts towards value-added products, recycling, innovation-led solutions, stronger customer partnership, and operational excellence. Our earning profile is becoming more resilient and less correlated to movements in LME prices. We are also making steady progress on strengthening our resource security. As the Chakla, Bandha, and Meenakshi mines become operational, we will enhance raw material self-sufficiency, lower production costs, support margin expansion, and further strengthen the earnings profile of our upstream business. With over 50,000 crores of expansion projects currently under execution across our businesses in India, and another 50,000 crores of growth opportunities under evaluation, we are preparing for the next phase of our growth journey. These investments of over 1 lakh crore in growth projects over the next five years reflect our confidence in India's long-term demand outlook and reaffirm our commitment to creating sustainable value. Overall, Hindalco is exceptionally well positioned for the future. Backed by our integrated business model, strong resource-based, disciplined capital allocation, and strategic investments across the value chain, we are well-equipped to capitalize on emerging growth opportunities. We remain committed to our purpose of engineering better futures while delivering sustainable growth, enhanced profitability, and long-term value creation for our stakeholders. Thank you very much for your attention, and the forum is now open for questions.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touch phone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will read for a moment while the question queue assembles. First question is from the line of Tanakin from HSBC. Please go ahead.

Thank you very much for the opportunity. Can you, sir, give us some clarity on when do you expect to have detailed timelines on the 50,000 crores of expansions that are being evaluated in the India business?

Yeah, Pinakin, I think that, you know, our focus right now is to get the first set of projects completed. So just so that we can recap. The copper recycling plant in Pakhajan commissions in December of this year, and then starting from the alumina plant that in Aditya refinery commissions in December of 27, the 180 KT Aditya first line commissions in December of 27, So these three big projects are our focus. And then the next Aditya line will commission in December of 28. And the copper smelter will commission in December of 28. So this is in that first 50,000 crores. Once we are doing this, we will then start for Mahan. The Mahan expansion, we are now going through the ECE and trying to get the licensing and all sorted out. So that will be the next big project. And then, of course, we have downstream further copper recycling expansion from 50 KT to 150 KT. So it would be fair to say that every... Year and a half, we will be starting one more project. What we are trying to do, Pinakin, is to stay on the console net deck to EBITDA at about the two lines that we have committed to you. So, as we go along, we will give you, as some of these new projects get approved for execution. Sure, got it.

I'm sorry, I'm talking about the smelting, you may like the accessory assets.

I'm sorry to interrupt, Mr. Panakin, but your voice is breaking. Can you come in a good reception area?

Yeah. So just for purpose, I think that you highlighted this.

Please, I'm still unable to hear you, Mr. Panakin.

Yes, Mr. Panakin.

I would request you to please check your connection and come follow back in view. Will you go on to the next question, which is from the line of Sumangal Navatia from Kotex Securities. Please go ahead.

Yeah, good evening and thanks for the chance. My first question is, on the cost, if you could guide us, how are costs moving for the aluminium division in the coming quarters? And what are the timelines for the captive coal mine commissioning both Chakla and Vanda? Is it on track for end of F527? And on the copper division, I mentioned something that 1200 crores is a sustainable run rate for copper. Can you just elaborate on that? What has changed in terms of quarterly EBITDA run rate? One, of course, is sulfur, but some elaboration will help. Thanks.

All right. Let me remember all your questions, Sumangal. So starting with the cost. So... Q2 costs were up roughly 5% about Q1. So the cost up was two main factors, coal and CP coal. The coal, it's a monsoon quarter, and we got badly impacted in the northern region. So it was basically Renu Sagar, Renu Koot, and Mahan, because the rainfall was very heavy, and the demand for the northern plants was very strong. So we had a low linkage materialization, and had to buy a lot of coal on the spot auctions. So on the Odisha side, we didn't have an impact. Long story short, that led to a 5% increase in the cost of production of aluminum Q2 to Q1. We expect Q3 to Q2 to also be around that 5% because the northern area, the coal is still not stabilized. So October continues to be very hot. We are slowly at mid-November starting to see some signs of improvement. So I think Q3 to Q2 will also be 5% up. And in Q4, we will start to see the price go down as the coal prices and coal availability improve in Q4. Now, of course, as your second question is, what is important for us is to get Chakla and Banda started so that by next monsoon, we are not under this pressure. So Banda, the box cut has already happened. It's a high stripping ratio. So first coal should start to come out towards the second half of the next financial year. Chakla, we are expecting still that we will be getting coal by sometime middle of next year. Then, on copper, you heard right, we think that it's about $1,200 to $1,300 in the next coming quarters, largely driven by sulfuric acid pricing, along with precious metal sales, and of course, I think that the copper downstream products pricing is also helping.

Understood. Sir, if you can just elaborate, what is the proportion of sulfuric acid realization, say, in a normalized year like FY25-26 versus what is it today?

See, right now, I think we are running at roughly 16,000 rupees a ton. Last year, in the same quarter, it was around 7,000 rupees a ton. Let me tell you, even 7,000 is quite high. So, you know, we were normally, if you go before that, it used to be around 3,000 or 4,000 rupees a ton. So, sulfuric acids and sulfur prices are really high right now.

Okay, and in terms of contribution to our EBITDA, what is the proportion and what is the volume that we kind of produce and sell?

So, I think contribution, let's say that, you know, it's like 50% comes from other stuff, 50% comes from copper, more or less. Volumes of sulfuric acid is 300,000 tons a year.

A month.

A month, sorry. A quarter. 300,000 tons a quarter.

Understood. Understood. I have just one more question on Novalis. Now, given that we are seeing so many moving parts with respect to tariffs and Osrego and recoveries of insurance, Overall, the predictability of earnings and margins have really gone down for us. Is it possible now, since we are going back to normalized level, at least for, say, F528, give us some guidance on volumes and some range of margin that we are expecting given the current tariffs and current scrap spreads?

Yes, Samangal, I'll take this one. So I don't know why you were saying there are so many moving parts, because we have been pretty clear to say that right now we have some headwinds from tariffs, but we are working with a clear plan, and by fourth quarter, tariffs would come down to a fairly marginal level. So that's swing factor number one, right? So we are giving you predictability, to be clear. Number two, Oswego fire impact. We are saying that Oswego Fire impact, and now, sorry, on the Yongju Strike impact. On the Yongju Strike impact, we have told you that we have a 20 million impact in Q2, and you can broadly expect a similar impact in Q3, and after that, it's over. So that's swing factor number two for you, right? Then the third thing is insurance recoveries. Now, insurance recoveries, you can expect that we have another 47 million of insurance recoveries that will fall into EBITDA, and that should pretty much be by this fiscal year end. I don't know what else is in your mind a swing factor, but we have clearly called out these factors. Having said that, we will gain as, you know, the supply chains normalize. So I'm telling you one more thing now, which is actually on the positive side, that right now we are still facing some impact of our customer supply chains not having normalized, which are putting some kind of some negative color on shipments for the time being. But that is in the course of normalization, and the shipment's momentum, based on the underlying markets, should pick up pretty well, starting from Q4 of this fiscal. So I think that we have sliced and diced all the factors for you, and I hope that that should help.

Got it. That's helpful. Thanks and all the best.

Thank you.

Thank you. Next question is from the line of Jashandip Singh Shadda from Nomura. Please go ahead.

Yeah, hi. Thank you for the opportunity. My first question is regarding, you know, your hedging. How's your hedging position? And also, if you can give some sense on, you know, the regional premium and how do you see them, you know, in the near future? My first question will be likely on this.

Yeah, so the second, let's say H2 of FY27, the remaining six months, we are hedged 29% at $3,000 per tonne. And if we now go into FY28, we are about 26% hedged at 3,168. So that's our position. Now, MJP had spiked up. I think the MJP is correcting. I think Q3 MJP is already about 270-ish. And I think that, you know, we expect MJP to be in that $200, $250 range in Q4.

Thank you, sir. My next question, you know, would be largely on the pottery lining capitalization. So, any rough estimate how much it would have added to the beta per ton? And also, the India business depreciation seems to have increased significantly. So, is this just, you know, this quarter or should we start building higher depreciation going forward?

Now, it's the impact of the pottery lining. So, basically, what we have done is we have capitalized the pottery lining, which is more or less, we were the only company in the aluminum business not doing it. All our competitors do it. So, the impact roughly adds about 130 crores to the EBITDA line, and it adds 130 crores. To the depreciation line. So that's why you're seeing the depreciation a little bit up and the positive impact in the EBITDA line is 130 crores. So you will see this now going forward. In Q2, there was a little bit more additional catch-up of the Q1 as well, which is why the number was slightly higher. But on an ongoing basis now, You are seeing probably 130 crores additional due to the pot relining being amortized and the depreciation correspondingly going up by the same amount.

Understood, sir. And just one last question, you know, in the presentation, last quarter, I believe you were showing or estimating close to 1 million ton of deficit. Now it has, I think, come down to 0.8 million ton. So, you know, how are you seeing LME prices over the next year? And just one bookkeeping question, what will be your run rate of CapEx over the next couple of years?

The next couple of years. So let me first start with your first question was on the LME prediction. So look, 0.81 million, this is a call that's being made in the last few months. It really depends on, I would not read too much into the difference, but next year is the interesting one. So if the Middle East supplies get normalized, and if the expected Indonesian volumes come, and there's a big if in that, that one and a half million tons additional will come or not, then the LME week, the consensus was, in some ways, the LME next year could be between 2600 and 2800. So, that's the next year's outlook. Difficult to say because one geopolitical event, as you know, changes that whole scenario very quickly. What was the second question? Sir, it was this year will be around 12,000 crores. Next year will be substantially higher, which I'll give you the number in the February board when we have done our budgeting. But next year will be high, and the year after will be at the same levels. Because of all these projects that I mentioned to you, the sort of CapEx outflow in FY28-29 will be quite high.

Understood, sir. So, it's fair to say that, you know, by next year, you will hit your peak net date. And just one last, if I can squeeze, for your upcoming mentors, for the internal calculation, what sort of LME prices are you building in for IRR?

I think we took 2650 or, yes, about 2600 we took.

Understood, sir. And you will hit peak net date by next year, right?

Sorry, peak? Uh, net debt or key debt. No, you see, console net debt to EBITDA, let's just stick with our commitment that we will keep the console at around two. Now, what's going to happen is that Nobelis in Q4, we have said, will reach about four. And then over the next two years, they're going to go through a deleveraging cycle, ending up between 2.5 to 2.8 is the plan. And the India, which is now negative, once we get into our growth capex, it won't remain negative. It will become one, one and a half. But the console then for us, what we are trying to do is to keep it at what we committed, which is around two. Thank you so much. I'll join back to you. Yeah, thank you.

Thank you. Next question is from the line of Pallav Agarwal from Antic Stock Broking. Please go ahead.

Yeah, I agree, sir. So the first question was, could you quantify the one-off in the copper segment? Is it correct to assume that, you know, from 1,600, if you assume that 1,200 crore is a normal one, so this quarter is a 400 crore of one-off?

So there is, it's not a single one, one, one off. There were a couple of things that happened. We had a certain amount of copper slack sales where we, you know, our accruals and what we realized by selling was higher. There's a certain amount of derivative noise, there's a certain amount of precious metals, extra sales. So all that put together, there was about roughly 350 to 400. What we think is not on a sustainable basis, repeatable.

Sure, sir. Also, you know, if I look at the aluminium upstream, you know, EBITDA on a sequential basis, you know, given the fall in the LME and the 5% increase in cost, you know, probably the EBITDA decline could have been higher. So, did we get the benefit of some higher premium or to what led to the better than expected performance over there?

We got higher premium. So, we realized a higher net premium, one, because of the exports that we were doing, which went to high premium countries, not MJP. And the second is the value-added upstream parts, which is the conductor cables and things, we got a better pricing on it. So, the VAP and the premiums resulted in the EBITDA per ton being higher.

Sure, sir. Also, in terms of, you know, the copper pricing, you know, so you said concentrated availability is tight, which is reflecting in the low TCRC or negative TCRC. But the entries on the London Metal Exchange don't seem to be declining to that extent. So, you know, where's the disconnect between the two?

The London Metal Exchange, you're talking about the copper inventories. People, especially in the US and all, have been hoarding copper because they are worried about. So I think that, you know, for us, let me be one thing is clear. The copper concentrate availability is tight. But for people like us, we are now very comfortable because we have got large miners with which we have long term contracts. So we have no problem in getting the concentrate. But the overall supply demand, because of the huge Chinese melting capacity, TCRTs are negative. Sure. Yeah, okay.

Thank you so much.

Yeah, thank you.

Thank you. Next question is from the line of Indrajit Agarwal from CLSA. Please go ahead.

Hi, a few questions. First on copper, you mentioned 1200 crore quotient rate. What kind of sulfuric acid price are you taking?

So we are taking high sulfuric acid, Indrajit. I mean, somewhere between 14,000-15,000. I think we are seeing that in Q3 and Q4. So we are taking it. At these higher levels.

Sure. Makes sense. Second, on, you mentioned about 2600 to 2800 LME, just to understand where do you think is the 90th percentile cost of today is, and what is the kind of cash cost Indonesian capacities could have?

So the international world, we are not really clear, but the average on the, let's take the first, the higher side of the cash cost is roughly around $2,000 to $200 per ton.

That helps. Thirdly, on the Consol Capex, with Novelis tapering off, Consol Capex may not rise next year. Is that understanding correct? Even though India rises, but...

Yeah, that's fair point, because this year the Novelis Capex is very high. Next year, it will go back to normal maintenance plus project around 500, 600 million levels. So, yes, the Consol Capex may not go up that much. You're right.

And lastly, on the relining image adjustment at aluminum of 130 crore, the quarter is underage. Is this the first quarter we have done? So, sequentially, EBITDA improvement looks better optically than what the underlying number is?

I think we had to restate or we did not. I am just checking. No, so you are right. It looks better because this is the first quarter we did it.

Of 130 crores. All right. Thank you. That's all for myself. Thank you and happy to have you.

Thank you. Next question is from the liner Satyadeep Jens from Ambit Capital. Please go ahead.

Hi. Thank you. Mr. Pai, just one more question on the LME. Yeah, expectations. I know a lot of people expect LME to go down on higher supplies. Now, when you strategize, would you, I know you have a hedging strategy, you'd like to keep something open, but if generally the expectation is prices go down, would you like to hedge more, and would Mahan? 370, would you still want to go ahead if we see more capacity and prices come down, the 370 that you have on board which you are evaluating?

Yeah, I think that look, fundamentally, these things you have to take a 10, 15, 20 year view. We think that aluminium demand, let's take India, is going to grow at 7 to 8%, which is fairly conservative. The second thing is that general aluminium demand worldwide is growing at 3%. It's also very clear that nobody in the Western world is adding any smelting capacity. So the only places left is India and Indonesia. So, and then if you go and look at our cost curve, Satyajit, once we are Chakla Bandha and Meenakshi running, we have locked in, except CP Coke, our cost curve at very attractive levels. So, we will, you know, LMEs can swing up and down, but we will be the last man standing. So, yes, we think that taking advantage of the backward integration of oxide and coal is the reason why we should do the investment. There can be some years where it goes down, but the fundamental demand of aluminium, we think the long-term trend is good.

In the brownfield opportunity, after you reach this 2 million ton between Aditya and Mahan, how much opportunity would be there beyond this?

So, look, in the downstream now, we still have the capability to add another cold mill in Aditya, which is another 170 kt. So, on top of 600, we can add 170 of rolling capacity. And then on the extrusions, we are already looking at in Kuppam and Silvassa with the auto demand and the consumer electronics. So, you know, if we get to 2 million tons of aluminium, we will get to about 1 million tons of downstream capacity in India.

In the brownfield optionality, after this, after 2 million ton on the, sorry, after 2 million ton for the upstream, what optionality do you have between Aditya and Mahan?

No, no. Oh, you're talking about upstream optionality or downstream? Okay, upstream. Upstream. See, upstream, we can easily add another 360 KT in Mahan. We have checked, we have the land. So, Aditya land, we put the rolling mill, so we don't have any more land in Aditya after this 360 expansion. But in Mahan, we can do another 720 KT expansion.

Okay, just one more question on this bookkeeping. Of the 50,000 crore that you have in India, how much have we already spent and what was the royalty payment? I know Noblesse, I think, was about $11 million. Overall, the Indalko level, what was the royalty payment? In order of 50,000 crores, how much has been spent so far?

Indalko was also the same level, $11 million, because we pay on an early basis till we hit the cap of $225 crores. That's how the royalty thing has been set up. And of the capex of 50,000, we were calculating, I think we have probably spent about 20 at the end of this financial year.

Thank you. Next question is from the line of Ashishen from Macquarie. Please go ahead.

Hi, sir. Good evening. Sir, my first question is on the aluminum abitta for this quarter. Is it possible to give a break-up in terms of how much is sulfuric acid lead and how much is pure copper and copper downstream?

You are talking about the copper abitta, it's not aluminum abitta.

Yes. No, no. Sorry. My bad. Copper abitta. Yeah.

No, I don't think we want to give you a break-up there. I think it's fair to say that we have given you that the underlying run rate on a going basis is around 1,200 to 1,300.

Okay, sir, just to confirm that, did you say earlier in the call that 50% of EBITDA this quarter was copper-led? Did I hear you write on that?

Yes, more or less. See, we get money from the, so copper is sold, we don't sell too much cathode, so we convert it to rods, and then we convert it to other downstream things. So, when I look at the premiums on all of that and put it here, roughly 40-50% will come from copper products, the rest will come from sulfuric acid, precious metals, etc.

Sir, this is in spite of TCRC being where it is.

If I was selling cathodes, I would be losing money.

Got it. Sir, secondly, in terms of the cost curve, for 3Q and 4Q, what is the outlook on other cost? Coal, you explained, but what is the outlook on the other cost drivers? From aluminum business point of view.

It's only C.P. Coke. All the rest, we don't expect too much variation from the current levels. Actually, caustic prices. But C.P.

Coke is also trending higher.

Yes. These are the two that are high, but C.P. Coke, we don't expect that it's going to go up a lot more than current levels. It's already high. The coal is the one that needs to come down. So that's got a nearly 40% impact on the cost curve.

Okay, sir. Thank you so much, sir. Thanks. Yeah, thank you.

Thank you. Next question is from the line of Rashi from Citigroup. Please go ahead. Thank you.

I know if I missed this, but did you indicate the alumina sales in the quarterly expectations going forward?

Yeah, the alumina sales, we sold 194 KT in Q2, and in Q3, we should sell in the similar range, 190 to 200.

Got it. And on the capital expenditure, how much did you spend in India in the first half?

About 6,000 crores. And this year, I think our expectation is we would spend about 12,000 by the end of the year, 12-13,000.

Got it. And what did you mean? You said that India had a net cash balance. How much was that?

16,000 crores. We are sitting with treasury of 16,000. Net cash is 9.

Net cash is 9.

Yes, because we have long-term loans of about 6-7,000 crores.

This is only India books.

That's only the India. That's why net debt to EBITDA is minus 0.35 in India.

Understood.

Okay, thank you.

Thank you.

Thank you. Next question is from the line of Satesha from Investec. Please go ahead.

Hi, sir. Thanks for the opportunity. Sir, you did indicate broad outlook on aluminium. Can you please help us with your thoughts on aluminium as well?

So, aluminium, the good news is the aluminium index is starting to trend slightly up. It had been low for the last two quarters. Currently, it's running above $350. So, we expect that it should be firmer, closer to $400 next year.

And, sir, what will be the underlying variables which will drive that?

See, when the Middle East capacity went off, that's when the alumina demand went down because the third-party alumina market is largely driven by people who are not integrated, which is the Middle East smelters, because everyone else, and China, everyone else is more or less backward integrated.

Sure. Sir, second is you indicated with respect to the aluminum EBITDA bump this quarter, you attributed it to higher premia and higher value-added products. Is it possible to give some color on how is it on spot basis? How do you see this on Q3 basis? And is this something which is sustainable?

I mean, the value-added products are, of course, sustainable. So, that will happen. But the premium may not be because MGP has already come down in Q3. So, we had managed to get quite a good premium on the export side in Q2. In Q3, already the MGP is down by more than $100. The percentage of VAP should continue.

Sure. And the last question you did indicate on the incremental projects will take one new project every one and a half years. Just wanted to understand, say, hypothetically, if we go ahead with Mahan 370KT first, it would be contingent to what variables on the projects which are due for commissioning in the 27 and 28? Is it we are looking at a particular utilization level or is it more contingent to the balance sheet?

It's actually an execution capability and the balance sheet. Because, you know, we are working with one large EPC contractor as our partner. So really, I would like to use the crew that's finishing Aditya to go and do Mahal. So we have to phase it because the capacity to execute large projects is quite limited in the country right now. So we have to be careful. So execution capability and the balance sheet. Both are the two things. Utilization, no. I mean, if you produce the aluminum, the market is there.

Perfect. This is quite helpful. Thank you so much. All the very best. Thank you.

Thank you. Next question is from the line of Rahul Gupta from Morgan Stanley. Please go ahead.

Thank you for taking my questions. Two questions. First, downstream EBITDA burden has been largely stable over the past couple of quarters. How should we look at in the second half? That's my first question.

Yeah, it should start to go up because we are qualifying quite a few products. In Aditya FRP right now. Aditya FRP is now at the 50% loading level. So in the next two quarters, we would like to get many products under qualification, battery foil, the ULG foil, the can body stock. So as those volumes pick up, the EBITDA per ton should cost 300.

Thank you so much. My second question is slightly longer term. When you talked about the newer upstream projects that you have been undertaking is on the back of the estimate of 2,600 LME prizes. Can you help us understand with all the backward integration and also moving downstream, what kind of IRRs are you thinking about at 2,600 LME prizes?

At least sort of teams. At the 2600, because there is a certain amount of inflation in capex and cost of execution as well, so at 2600, we want to be at least in the teens.

Got it. So, just a follow-up, when you talk about around 1 trillion rupees of capex over the next few years, that does take into account the inflation over the next few years, right?

Yes, yes, yes.

Got it. Thank you so much. I wish you a very happy festive season.

Yes, thank you.

Thank you. Next question is from the line of Jashandib Singh Chadha from Nomura. Please go ahead.

Yeah, hi, sir. Thank you for the opportunity again. Sir, around 50% of the copper EBITDA came from, you know, non-copper materials. So, can you give us a similar number for, let's say, last quarter and on an average run rate, how much is it?

See, look, last quarter was at similar levels. I mean, you will have to go down to when TCRCs were, if I go last year, the picture changes because TCRCs were 15 to 17. So then the contribution from the copper side will go up. But it's fair to say that the copper value chain is fairly diverse. So, you do get a little bit of one goes up, the other goes down, and sort of balances out. So, you can't really average it over the last five years and say where it has been.

Thank you, sir. The next question is on Ellumina strategy. I see that it might be in the last quarter, but ElluChem, you know, you have terminated that. So does that change your speciality Ellumina strategy or the forex downstream target? And how should we look at that?

Not at all, because we are, you know, we just commissioned the PPT hydrate plant, which the technology was fully indigenously developed. Of course, it took us five years to do that. We were hoping with Alucem for the tabular alumina, we would shortcut that. But so we are, A, we are out looking for other people who can help us fast track that. And B, we have our internal program to develop tabular alumina. We are, of course, going to launch the white fused alumina project very soon. So, our plan to get to about a million tons of specialty alumina is not changed.

Understood. One last thing. I believe you answered this earlier, but I would like to ask you in separate ways. So, most of Indalko and your peers are putting up capacity and you were saying that even for Banas, there is a lot of demand. So, utilization is not an issue. So, if you can, you know, just maybe tell the demand drivers in the domestic market, which sector, which, you know, region you are looking mainly demand coming from for aluminum over the next couple of years, that would be great.

Yeah, that's a good question. Requires a more detailed answer, but I'll just give you a highlight. Historically, the electrical sector, which is conductors and cable, were nearly 40% of the aluminum demand. We are now starting to see auto sector becoming significant. We are starting to see packaging sector become significant. We are starting to see industrial and home appliances becoming significant. So as this Indian economy grows and urbanization come in, and now, by the way, data centers are starting to become significant. So all these other drivers are starting to come in. So it's fairly, you know, how should I put it? Indian demand is now starting to replicate Japanese or European or U.S. demand in many ways. For many years before, it was very much concentrated on the conductor cable market, which was nearly 40 percent of our aluminum. Now it is much more broad based.

And I'll get in touch with you, you know, often also to get, you know, details further. But if you have to put a number, let's say, demand number for next five years, what will be the cadence that you will be building for demand?

We normally work with, I always say, it can go up and down. India grows at roughly 7% CAGR. So that's the number we use.

And let's do that. Thank you so much.

Thank you. Ladies and gentlemen, we take that as the last question for today. For any further questions, please connect to Hindarko IR team. I now hand the conference over to Mr. Pai for closing comments.

Thank you very much. So, another good quarter, and I think for me, the upstream business did well, but in the coming quarters going ahead, we believe the recovery of Novelis, the ongoing strengthening in the copper business, and the aluminum downstream are going to be important. So, overall, the strength of Hindalco is in its diversified business model, with at least four pillars driving the growth. So, thank you very much for your attention, and happy Dhanteras and happy Diwali to all of you.

Thank you. Ladies and gentlemen, on behalf of Endargo Industries, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.