12 August 2017
With the aim to have a healthy balance sheet that could allow organic expansion in Novelis auto business going ahead, Hindalco Industries aims to prepay about Rs 9,000 crore debt this financial year and further lower its net debt-to-EBITDA (earnings before interest, taxation, depreciation, and amortisation) ratio by March 2018. In an interview with Aditi Divekar, Satish Pai, managing director of Hindalco Industries, talks about growth prospects for Novelis and zero monetary benefits on account of GST roll-out. Edited excerpts:
Novelis witnessed record shipments in the June quarter. What are the revenue growth prospects for the company? Any capex plans at Novelis?
We expect demand from the auto sector to continue to grow in North America as well as Europe, with China being seen as a bright spot. We will also watch how the China auto market picks up in the coming months. After all, it is the world's largest auto market, even larger than the US. In the aluminium cans business, Brazil and Asia are showing strong growth prospects.
Overall, we see increased growth prospects from the auto business with firm support lent by the cans division. There are good opportunities for organic growth in the auto business for Novelis and we are currently watching the space.
In May Novelis formed a joint venture (JV) with Kobe SteeI for its UIsan plant. What was the rationale behind this JV and will we see more such JVs?
At the Ulsan plant in South Korea, which caters for the cans and speciality market, we were unable to sell a 200,000-tonne capacity. It, therefore, made sense to do a JV with Kobe so that it can use this capacity and we can reduce our fixed costs. However, you will not see any more of that.
Hindalco made a prepayment of Rs.4,500 crore in the June quarter. What is the company doing to lighten its balance sheet?
We plan to prepay Rs.9,000 crore in the current financiaI year. Of that half was done in the June quarter. Due to this, our repayment cycle is clear until 2023-25. Also, as the cash comes in, we aim to bring down the net debt to Ebitda ratio for Hindalco and Utkal to 3 from 3.3 at present and for Novelis to 3.5 from 3.65 today. We will achieve these ratios in March next year. As of June 30, the consolidated net debt of the company stands at Rs.66.717 crore.
What is your outlook on global aluminium and copper prices?
The prices of both metals have helped in higher realisations in the June quarter. There is scope for global aluminium prices to go up further if China cuts its aluminium capacities. Currently, there is an anticipation of this capacity reduction. So in aluminium, we will need to wait and watch what China does with its capacities.
Dr. Pragnya RamGroup Executive President, Corporate Communications & CSRAditya Birla Management Corporation Private LimitedAditya Birla Centre, 1st Floor, 'C' WingS.K. Ahire Marg, WorliMumbai 400 030.
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