Hindalco plans Rs 2000 crore capital expenditure for FY20

Aditya Birla Group controlled entity Hindalco Industries with interests in aluminium and copper, is looking at a Capex (Capital expenditure) of around Rs 2000 crore for the next fiscal. Most of the envisaged expenditure will be on ramping up the capacity of the Utkal alumina refinery near Rayagada (Odisha).

“So this year's Capex has been around Rs 1,300 crores, whereas next year's will be around Rs 2,000 crores. So, the first use of the cash will actually go towards that growth Capex.  We will only repay more after we have done our growth Capex projects’’, Satish Pai, managing director, Hindalco Industries said at the company’s recent earnings conference call.

The alumina refinery is being ramped up to three million tonnes per annum. The expansion is slated to be completed by FY21 and is estimated to cost around Rs 5000 crore.

The Utkal refinery is fed by the company's captive Baphlimali bauxite mines with enough reserves to cater to the refinery's requirement for 25 years after its ramp-up. The mine contains a very low amount of silica which provides a cushion against rising caustic soda prices.

Hindalco's Aditya smelter is fed by alumina primarily sourced from Utkal Alumina Ltd, a 100 per cent subsidiary of Hindalco Industries Ltd. Group company Aditya Aluminium owns an aluminium smelter of 0.36 million tonnes per annum capacity supported by 900 Mw CPP (Captive Power Plant) at Lapanga in Sambalpur district. It also has an FRP (Flat-Rolled Products) facility for rolled products, extrusion products and wire rods.

In the December quarter of this fiscal, Hindalco’s aluminium Ebitda (earnings before interest, taxes, depreciation and amortisation) including Utkal was higher by eight per cent at Rs 1286 crore versus the corresponding quarter of FY18. Ebitda margins were at 21 per cent in the quarter and stood at 23 per cent for the April-December period, backed by supporting macros and better realisations. This was despite the business facing headwinds due to oversupplied domestic market on account of continuous surge in imports, rising input costs and the effects of the ongoing US-China trade war.