Hindalco sees higher growth on GST, govt’s infrastructure spending push
New Delhi: Hindalco Industries Ltd, India’s biggest aluminum producer, expects higher growth in the next fiscal year because of the implementation of the Goods and Services Tax (GST), and higher consumption of aluminum and copper because of a rise in budgetary allocation to the infrastructure sector.
For Hindalco, the government’s focus on infrastructure and electricity sectors is a big positive, managing director Satish Pai said in an interview. Electricity, packaging, building and construction, automobile, defence, and transportation are the sectors the aluminium producer has identified as growth areas for consumption demand, he said.
Hindalco on Monday reported a net profit in the December quarter from a loss in the year-ago period, but missed analysts’ estimates. Standalone net profit in the third quarter stood at Rs320.56 crore compared to a loss of Rs32.75 crore a year earlier. Net sales rose 13.7% to Rs9,914.81 crore from Rs8,715.94 crore a year earlier because of a rise in average realization for both aluminium and copper, weaker rupee and higher aluminium volume, Hindalco said in a statement.
Nineteen analysts polled by Bloomberg had expected Hindalco to report a standalone net profit of Rs396.4 crore while 18 analysts had expected sales of Rs9,400.7 crore.
Aluminium business revenue rose about 8.6% to Rs4,916.92 crore while copper business revenue rose 19.3% to Rs5,000.42 crore.
“Cost of production and the operations remain under control for us, which is the strongest point. Our cash part is looking good which is why we have paid now up to Rs1,000 crore of debt and we will finish paying Rs1,400 crore by March. Input costs have been good - while oil prices and coal prices of e-auction go up, on the other hand LME (London Metal Exchange) is also up. Overall, I think fourth quarter should be another good quarter,” Pai said.
Hindalco, which has a target of doubling its downstream aluminium capacity in five years, is facing stiff competition from cheaper Chinese imports.
The Aluminium Association of India has been lobbying the government for implementing a safeguard duty and minimum import price (MIP) in aluminium. “Process for MIP has been on... it takes time but we are hopeful that we are at end of the game,” Pai said.
Hindalco already supplies aluminium for bus bodies and other auto extrusions and sees opportunity for growth in the high-speed trains and railways bodies. “It is a 100 tonnes a month business and we want to take it to 1,000 tonnes a month,” Pai said.
Defence is another growth area the company is targeting, where a number of domestic firms are looking to start manufacturing in India.“This will be a big kicker for us,” Pai said.
The company’s Hirakud smelter in Odisha, which is in the process of increasing capacity to 135 Kilo-Tonnes Per Annum has potential to be expanded in future, Pai said.
“Our strategy in next five years is to get debt to Ebitda (earnings before interest, taxes, depreciation and amortization) down; that’s the biggest focus. We want to bring cost under control and expand in downstream,” Pai said.
Hindalco shares rose 1.65% to Rs185 on BSE on Monday, while the benchmark Sensex rose 0.06% to 28,351.62 points.