The Q3 results of Hindalco Industries (Hindalco) met consensus estimates. But there were some warnings from analysts. Novelis was impacted by fire at its Oswego plant and also suffered tariff impact. The other worry is that high capex could lead to uncomfortable leverage over the next four years. Also, if aluminium prices moderate from current peaks, it would affect revenues and margins.
Good returns from India operations offset issues at Novelis. Consolidated revenue was ₹66,521 crore, up 14 per cent Y-o-Y and up 1 per cent Q-o-Q. Operating profit was ₹7,975 crore, up 5 per cent Y-o-Y, but down 11 per cent Q-o-Q. The net profit was ₹4,659 crore, up 23 per cent Y-o-Y, but down 5 per cent Q-o-Q.
Upstream realisations of operating profit per tonne grew by 6 per cent Y-o-Y and 3 per cent Q-o-Q to $1,572 per tonne due to higher London Metal Exchange (LME) aluminium prices. The Q4 cost is expected to rise 1 per cent Q-o-Q. Downstream aluminium operating profit grew 55 per cent Y-o-Y to ₹233 crore, but declined 11 per cent Q-o-Q with shipments of 108 kilotonnes, up 9 per cent Y-o-Y, but down 4 per cent Q-o-Q. The downstream operating profit per tonne grew 35 per cent Y-o-Y to $241per tonne (down 9 per cent Q-o-Q). The copper operating profit was down 23 per cent Y-o-Y at ₹595 crore, (down 6 per cent Q-o-Q). Shipments grew 2 per cent Y-o-Y.
In Q4FY26, 64 per cent of estimated aluminium production is hedged at $2,807 per tonne and for currency exposures, 26 per cent is hedged at ₹88.18 to the dollar. For FY27, 21 per cent of production is hedged at $2,925 per tonne.
The coal blocks at Bandha and Meenakshi mines are on track to produce from FY27 and FY29, respectively. Coal production from Chakla has seen a delay of about one quarter due to pending regulatory clearances but will start from April. Chakla, Bandha, and Meenakshi may together supply 20 million tonnes per annum of coal.
At Novelis, the adjusted operating profit was $348 million, down 5 per cent Y-o-Y and down 18 per cent Q-o-Q with $54 million estimated impact from Oswego fires and $34 million hit from tariffs. Adjusted operating profit stood at $430 per tonne, up 6 per cent Y-o-Y, but down 4 per cent Q-o-Q. The fire and tariff impacts together amounted to around $65 per tonne. Shipments declined 11 per cent Y-o-Y at 809 kilotonnes, with 72 kilotonnes lost due to the fire. There was a net loss of $160 million.
The India expansion projects are on track. The FY26 capex was guided at ₹10,000 crore, including ₹2,000 crore for Banda mine acquisition. Capex will rise in FY27 and beyond to ₹10,000 crore - ₹12,000 crore. Management targets keeping net debt/operating profit below 2 times despite high capex over the next four years. This will be a key monitorable.
The Oswego hot mill would restart operations in late Q2CY26. The impact is estimated at 150-200 kilotonnes in lower shipments with 72 kilotonnes already adjusted. Adjusted operating profit impact is $150-$200 million, and the free cash flow (FCF) impact is negative $1.3 billion - $1.6 billion, including operating profit impact. The company estimates 70-80 per cent of lost cash flow and operating profit impact will be recoverable through insurance in future.
The Novelis FY26 capex guidance is at $1.9 billion - $2.2 billion. Novelis’ Bay Minette project execution and Oswego recovery will be crucial. Once Bay Minette is commissioned, Novelis should be able to deleverage. But Novelis gross debt may touch $8 billion for a while until insurance payouts are received.
The consolidated net debt increased by ₹24,000 crore in the 9MFY26 with Novelis net debt up ₹17,000 crore. Higher LME prices also led to higher working capital costs. The forex impact on dollar debt also led to a rise in net debt. India net debt rose ₹7,000 crore, with higher working capital requirements and higher concentrate inventory, but some of this may reverse in Q4FY26.
 "Higher capex likely to increase debt burden for Hindalco Industries")
