We plan to invest Rs 5,000 crore to increase capacity in India: Satish Pai

Aditya Birla group’s Hindalco announced a 7 per cent revenue growth to Rs 39,383 crore for FY17 and a net profit of Rs 1,557 crore, thanks to a rise in metal prices and higher productivity at its facilities. In an interview, Satish Pai, managing director and chief executive officer of Hindalco, tells Dev Chatterjee how the company turned around and what its future plans are. Edited excerpts:

This is the fifth quarter of good performance for Hindalco. What contributed to this change?

The London Metal Exchange (LME) prices for aluminium were up 6 per cent during FY17 at $1,688 a tonne, compared to $1,592 a tonne in FY16. All our plants have also ramped up production to full capacity. 

We used the share sale money ($500 million or Rs 3,225 crore) to retire our debt (Rs 4,500 crore). Novelis refinanced $4.3-billion long-term debt, reducing our annual interest expense by $79 million. 

Our debt is now down to Rs 19,000 crore. All these factors contributed to higher profits and increased margins of about 18.6 per cent.

Most Indian companies are currently holding on to new investments. Will Hindalco invest in new capacity? 

We have drawn up plans to invest another Rs 5,000 crore to increase our capacity in India in the medium term. We believe the government’s increased focus on housing, electrification and infrastructure will lead to higher demand for our products. From a growth of 9-10 per cent in demand, we expect a growth of 21 per cent by next year.

How was the performance of Novelis? Do you expect its growth rate to continue, taking into consideration the current global prices when environmental and supply-side restriction in China are expected to drive LME further up? 

The demand from automakers for aluminium autosheet is robust and we expect all the top car makers in the US to use aluminium. 

There were lower can shipments, mainly because of weak growth in Brazil and West Asia. This impacted overall shipments.  

The earnings before interest, tax, depreciation, and amortisation (Ebitda) of the company grew by 13 per cent to $1.08 billion to FY17. However, revenues decreased marginally to $9.6 billion on account of a slight decline in shipments to 3,067 kilo tonne. 

In the future, we expect a similar demand for aluminium auto sheets from Indian car makers, but it will take time. The demand from Indian electric car makers will come first.

The country is getting ready for the roll-out of the goods and services tax (GST). How will this impact Hindalco in the coming years? 

The GST would be a big boost for the overall economy and for our company. 

It will reduce paperwork for us and the country will be like the European Union. We have made tweaked our software and have talked to our suppliers as well as our clients, so that the input credit can be given to all the parties seamlessly. Our products will be taxed at 18 per cent, slightly lower than before.