Hindalco Industries expects its consolidated debt to peak at about ₹80,000 crore before beginning a sustained reduction from the next quarter, as major capital projects near completion and cash generation improves. The company also aims to reduce Novelis’ net debt-to-EBITDA ratio to around 2.5 times by FY31.
Satish Pai, Managing Director of Hindalco Industries, said the company had broadly reached the peak of its borrowing cycle. “Debt will start coming down from next quarter. We have made a firm commitment that in Q4 the net debt-to-EBITDA will be at four (times),” he said, according to a report by The Hindu BusinessLine.
The deleveraging plan follows a period of significant investment by Novelis, Hindalco’s downstream aluminium subsidiary, in capacity expansion and the restoration of its Oswego facility after a fire. Hindalco expects the completion of these projects to improve earnings and free cash flow, allowing a greater share of available cash to be used for debt repayment.
Pai said debt commitments linked to the Bay Minette project were also approaching completion. The company expects the combination of project completion, stronger operating performance and improved cash generation to support the reduction in leverage over the coming years.
The company’s financial performance is expected to draw support from its diversified operations, which include upstream aluminium, downstream aluminium, copper and specialty alumina. Hindalco said weaker London Metal Exchange aluminium prices could weigh on the upstream business, but improving contributions from downstream operations and other segments were expected to provide some protection.
Hindalco expects its downstream aluminium business to have about 600,000 tonnes of capacity in extrusions and rolled products by FY28. These operations are expected to generate EBITDA of $300-350 per tonne, translating into more than ₹2,000 crore annually, according to the company’s projections.
Together with copper and specialty alumina, the company expects businesses that are not directly linked to London Metal Exchange aluminium prices to generate nearly ₹6,000 crore in EBITDA over the next two years. This diversification is significant for industrial users of aluminium and copper, including sectors connected to construction, manufacturing and infrastructure, although the company’s announcement did not provide any specific change in product pricing or customer supply arrangements.
Hindalco also expects its costs in India to ease in the fourth quarter as coal availability improves. The company is continuing with its copper expansion plans despite weak treatment and refining charges, supported by long-term copper concentrate supply agreements.
Investments in copper recycling are intended to strengthen the company’s raw-material security. Hindalco said the completion of its major investment cycle, improving operating profitability and stronger free cash generation would form the basis for reducing leverage. The company’s next stated financial milestones are the expected reduction in net debt-to-EBITDA to four times in the fourth quarter and the longer-term target of 2.5 times for Novelis by FY31.
