Hindalco Industries: Adding Sheen

Hindalco Industries, with revenue of over Rs 1.16 lakh crore continues to be among the leading business conglomerates in the aluminum and copper manufacturing business. Under the leadership of Managing Director Satish Pai, who took over as the CEO of Hindalco’s Aluminium Business in 2013, the company has witnessed a phenomenal growth.

In 2018, Hindalco’s US subsidiary Novelis  signed an agreement to acquire US aluminium maker Aleris for $2.58 billion. This was Hindalco’s second biggest deal – after Novelis – and it is poised to create the world’s second-largest aluminium maker. On completion of the deal, Hindalco’s consolidated revenue is expected to rise to about $21 billion.

At present, Hindalco has four coal mines, which have a total of 4 million tonne (MT) capacity annually. The company plans to mine at least up to 8MT of its coal requirements from its own mines, with its planned acquisition of new coal mines. Hindalco is also adding 200KT automotive capacity in Kentucky, US, where the capex incurred is a over $300 million. In China, the capex incurred for expansion of the auto capacity stands at about $180 million for a 100KT brownfield plant expansion.

The continued growth has come with its own set of challenges, too. One of the bigger challenges Hindalco faced in 2018 was the move by the Bombay High Court on the petition filed Maharashtra State Pollution Control Board (MSPCB) ordering the company to shut down its bauxite mine at Dhangarwadi in Kolhapur district for alleged violation of Air (Prevention and Control of Pollution) Act. However, the firm argued that the MSPCB had passed the order without giving the company any chance to present its view and, hence, it was in violation of natural justice.

“The only place in the world that’s growing, is a huge economy, doing very well, is India. And I want that, because of the free trade agreements we have signed, we do not do anything that will make India a dumping ground. That’s our biggest fear. That’s the biggest risk factor,” said Pai speaking in a media statement referring to factors that posed the biggest risk to the business.

Hindalco’s net profit, including that of its Utkal Alumina unit, rose 54 per cent year-on-year to Rs 725 crore for the July-September period, the Aditya-Birla flagship company said in its exchange filing.

The company’s revenue rose 5.4 per cent on a yearly basis to Rs 10,833 crore. Revenue from its aluminium segment rose 17.6 per cent over the last year to Rs 6,135 crore. The revenue from the copper business, however, declined nearly 7.6 per cent year-on-year to Rs 4,710 crore. The company attributed the decline in copper revenue to a maintenance shutdown at one of its smelters in July 2018 and lower realisations. The business environment was “challenged” by rising input costs and a surge in imports, it said in a separate statement.

Hindalco also reported a net profit of Rs 4.13 billion for the June 2018 quarter, up 30 per cent from corresponding period last year as revenues increased and expenses slipped marginally improving operating profits. As far as the new marketing initiatives are concerned, Mumbai-headquartered company has increased its market presence by way of direct marketing of its products Petcoke, Sulphur and Polypropylene.