Nalco to scale up downstream portfolio, plans Rs 55.2-bn project

National Aluminium Company (Nalco) is placing high stakes on downstream aluminium business. After co-developing a downstream park with Odisha Industrial Infrastructure Development Corporation (Idco) and planning joint ventures with foreign players- Almex and Rusal, the navratna company has pledged an investment of Rs 55.2 billion on a major downstream complex at Kamkhyanagar in Dhenkanal district.

Billed as the largest investment in metal downstream space in Odisha, the project will be funded wholly from Nalco's internal accruals.

“Nalco's focus is on constant value addition. There is huge demand for value added aluminium products. Apart from catering to the demand, product diversification will also shore up our margins”, said Nalco’s chairman & managing director T K Chand.

For the planned downstream complex, 188 acres of land has been identified. The land allotment is subject to appraisal by Industrial Promotion & Investment Corporation of Odisha Ltd (Ipicol). Nalco expects to complete the project within 48 months of taking possession of land. The project has the potential to generate employment for 1761 people, both direct and indirect. The complex will house facilities for aluminium foils, rolled products and extrusions with a combined envisaged capacity of 170,000 tonnes per annum. Aluminium alloy wheels, a key component for the automobile industry, will also be rolled out from this plant.

 

Nalco’s enhanced focus on downstream applications could mark the beginning of a strategic shift in the company’s strategy. Over the years, alumina sales have propelled the company’s profitability for years besides being a key driver of its Ebitda (earnings before interest taxes, depreciation and amortisation). The alumina vertical has 46 per cent share in the company’s gross turnover. Also, it accounts for nearly 80 per cent of the Ebitda. Nalco has gained massively from the rupee slump and rally in global alumina prices.

“Nalco is possibly looking for a safe bet in aluminium downstream products. Volatile prices and currency fluctuations are a worry for metal focused companies though Nalco with a huge cash surplus and robust export earnings offsets that risk”, an analyst said.

Nalco had recently announced an investment of Rs 1.31 billion on a wire rod manufacturing unit. The facility, envisaging a capacity of 40,000 tonnes of alloy grade material, is coming up at the aluminium park at Angul. The company has designed the unit to meet the growing demand for aluminium in power sector, especially power transmission.

Within the downstream aluminium park, Nalco has firmed up plans to forge a joint venture with Canadian firm Almex for production of auto grade aluminium. The project to cost Rs 2.5 billion, will source metal from Nalco’s smelting complex located in the vicinity. The project between Nalco and Almex is envisaged to have an annual production capacity of 60,000 tonnes. Nalco, on its part, has committed supplies of 50,000 tonnes each year of molten aluminium to downstream companies who chose to install their units at the park. That apart, the navratna company has also offered to lend its brand name to the products manufactured within the park. To position the park as attractive and globally competitive for investors, Nalco has announced pricing discounts on sale of molten aluminium and ingots to the downstream buyers. The aluminium major is providing a pricing discount of Rs 5000 per tonne on aluminium ingots and Rs 4000 a tonne on molten metal.

Separately, Nalco has initiated talks with Rusal for a downstream unit. Nalco had solicited Russian technical knowhow to help the Angul aluminium park achieve global standards in manufacturing. The aluminium park is modelled on Sohar Aluminium Park in Oman where molten metal is fed to the downstream units.