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Recommendation Rationale

* List of Expansion Projects: Hindalco has a list of expansion projects lined up for the future. Aditya alumina refinery (850 ktpa), 180 ktpa phase I Aluminium smelter at Aditya, and the copper recycling (50 ktpa) plant are on track for FY28 commissioning. The company announced a 193 ktpa phase II expansion at Aditya Aluminum (to be operational by FY29). FY26 capex guidance is at Rs 8,000-8,500 Cr. Capex will rise from FY27 (Rs 11,500 Cr guided for FY27) as expansion projects pick up pace. Novelis’ FY26 capex guidance is maintained at $1.9–$2.2 Bn. While the company underlined its focus on keeping the consolidated net debt/EBITDA below 2x during the capex phase over the next four years, execution at Bay Minette without further cost escalation will be critical. IRR at the project is now projected at high single digits from mid-teens.

* Copper business: The company’s 300 ktpa brownfield copper smelter expansion is expected to be commissioned by FY29 in Gujarat, and management envisages that the Tc/Rcs will improve from the current low levels in the next few years as it embarks on the smelter capex. Copper smelting capacity will rise to 721kt from 421kt post this 300kt expansion. In line with the smelting capacity, the CCR expansion of 300 KT is also under execution over and above the existing 540 ktpa rods capacity. This will lead to a $100/t addition to EBITDA/t over the base of FY24.

* Novelis: Bay Minette project is on track for partial start-up by the end of FY26, and full commissioning is expected by H2CY26. However, the project capex is now revised upward from $4.1 Bn to $5.0 Bn (a 22% increase). The projected IRR has now dropped from mid-teens to higher single digits, though management expects it to remain better than the cost of capital.

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