Hindalco's domestic biz fires up Q2 earnings, net profit up 18% q-o-q

The jump in profitability, driven by a higher inventory drawdown—from ₹3,080 crore to ₹1,644 crore—released about ₹1,436 crore in working capital, aiding cash flows and margins. It underscored the company’s ability to harness rising aluminium prices and operational efficiencies, even as copper sales declined and its crown jewel subsidiary, Novelis, grappled with a disruptive fire at its US plant and flattish profitability.

Managing director Satish Pai attributed the uptick to “disciplined cost management and robust contributions from the India business". This came when the global aluminium market was buoyed by prices on the benchmark London Metal Exchange surging from $2,350-2,400 per tonne in April-June to $2,450–2,550 in the September quarter.

Consolidated revenue surged 13.5% year-on-year (y-o-y), propelled by higher aluminium realizations and 15% volume growth across upstream and downstream segments. Net profit was up 21.3% y-o-y.

With this performance, Hindalco led its segment, dwarfing pure-play state-owned Nalco's net profit of ₹1,430 crore and diversified group Vedanta's ₹1,798 crore of profit.

“Inventory movement improved by ₹1,436 crore, indicating a further drawdown in stock and a positive impact on working capital, cash flows and profit," said Suman Kumar, assistant vice-president metals and mining at Philip Capital.

India aluminium

The India upstream vertical—Hindalco's domestic powerhouse—saw revenue swell to ₹10,078 crore, up 10% y-o-y, and Ebitda to ₹4,524 crore. Volumes ticked up 341 kilotonne (kt) in Q2, fueled by post-monsoon demand for infrastructure and the automotive sector.

Downstream aluminium, Hindalco's value-added arm, revenue was at ₹3,809 crore, 20% up y-o-y, and Ebitda was up at ₹261 crore on higher shipments of extrusions and flat-rolled products for renewables and electric vehicles (EVs).

Copper lagged, with its revenue declining to ₹14,563 crore and Ebitda down to ₹634 crore, squeezed by volatile copper treatment charges and energy costs. “There was no reduction in copper sales. Rather, driven by EVs, the copper market demand is quite strong," Pai said.

Novelis boost

Contributing over 60% to the group revenue, Novelis remained Hindalco's stabilizer, posting 2.6% sequential revenue growth at ₹41,418 crore and 3.6% Ebitda rise to ₹3,685 crore, flat y-o-y, but resilient, given the headwinds.

Shipments held steady at 950 kt, with record beverage can volumes, buoyed by 63% recycled content leadership. Automotive sheets rose 5% to 180 kt, tapping EV lightweighting trends.

A 16 September fire at its Oswego, New York, plant—confined to the hot mill—inflicted a $650 million ( ₹5,500 crore) hit. Its restart is slated for end-December, with full ramp-up likely in four to six weeks. Insurance covers property and business interruption, subject to deductibles, mitigating much of the sting. Hindalco will make an equity infusion of $750 million into Novelis, to be raised as debt through its subsidiary in Holland, AV Minerals (Netherlands).

“Novelis' sequential Ebitda per tonne improved despite this, driven by can volumes and efficiency programmes targeting $125 million run-rate savings by FY26-end," managing director Pai noted.

Mitigation measures to offset the impact of Trumps' tariffs impact are also being taken up and should come into play by the end of this year.

Measures include relocating some manufacturing from Canada to the US, Pai said.

Globally, Novelis raised $850 million in low-cost debt ($750 million 2033 Senior Notes at 6.375%; $100 million tax-exempt bonds) to fund expansion. Bay Minette CapexAt the heart of Novelis' growth narrative—and Hindalco's $10 billion global capex push—lies the Bay Minette greenfield plant in Alabama in the US.

This 600 kt integrated rolling-recycling facility, the first US-built in 40 years, hit major milestones in Q2: equipment installation and workforce training advanced, keeping it on track for commissioning in the second half of 2026. Its capex has been revised to $5 billion ( ₹42,000 crore), a 22% hike from February 2024's $4.1 billion revised amount, and 100% over the original number set in 2022. Pai said contingency plans aer ready and the company is confident of sticking to the revised capex guidelines.

“The Street is sceptical regarding the economics of the project; upward revision of capex could impact return ratios. Novelis' second cost revision for the Bay Minette project, now pegged at $5.5 billion, largely due to U.S. inflation and higher labor costs. This cost overrun can be a bit of concern amongst investors and needs to be watched," said Kumar.

“Capex revisions were made, considering the complexity of the project. But we intend to stick to the revised guidance now. By February 2026, we intend to commission the cold-rolling mill, and by September the hot-rolled mill," Pai said.

According to Aditya Welekar, senior research analyst, metal, at Axis Securities, the company's India business has stood strong and that has covered up whatever weakness there was at the foreign subsidiary.

“The only issue was the commentary at Novelis, which was slightly negative because of the downgrade in their internal rate of return—from double-digit to high single-digit," Walekar said. "There will be an equity infusion of about $750 million from Hindalco to Novelis to keep the Novelis balance sheet in good shape and maintain their net debt-to-Ebitda under 3.5x. It’s essentially to ensure the credit ratings remain stable. The Indian balance sheet is very strong. They can easily generate help to fund Novelis at this point of time."