Adani-IHC foray may rejig India's aluminium market mix

Bhubaneshwar: Adani Group's diversification into aluminium production through a $11.5 billion venture with Abu Dhabi-based investment group International Holding Company (IHC) is expected to make it a pivotal contender to Aditya Birla Group's Hindalco Industries and Anil Agarwal's Vedanta Aluminium Metal in India's duopolistic aluminium market.

Hindalco and Vedanta have been dominating aluminium supply to India's fast-growing automotive, electrical, and clean energy markets, together accounting for nearly 90% of domestic production.

Adani Group's 2 million tonne smelting capacity, expected to come on stream in about five years, will add nearly 50% to India's current aluminium output of about 4.2 million tonnes.


"Aluminium is a very energy-intensive business, and as one of the lowest-cost producers of energy, it will be one of the biggest competitive edge that we bring to the table," said Karan Adani, managing director at Adani Ports and Special Economic Zone Thursday. "As digitisation and manufacturing in the country increases, the demand for aluminium will go up, and we see that as a big long-term opportunity."

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Even as the second-largest producer of aluminium globally, India is a net importer of the base metal. Both Vedanta and Hindalco are also expanding their aluminium production capacity as domestic demand is seen rising by at least 50% from the current levels by the turn of this decade.

"Even with such a large capacity, we are still importing aluminium...this is a sign there is enough demand for everybody to be in this market," said Adani.

Apart from the smelter, Adani's aluminium project will also have a 4-million-tonne alumina refinery, a 4 GW captive power plant, and a 1-million-tonne downstream aluminium park.

ET was the first to report about Adani and IHC's aluminium project in India in its Thursday edition.

The facility will be built in two stages, with an investment of ₹66,000 crore in the first phase, and ₹44,000 crore in the second. The aluminium facility construction and operation is expected to create more than 53,000 jobs in Odisha, which houses more than half of the country's bauxite.

The facility will be owned equally by group flagship Adani Enterprises and IHC subsidiary International Resources Holding (IRH). The project will be funded with 70% debt and 30% equity.

FACILITIES

Bauxite for the unit will be sourced from three mines - Ballada, Kutrumali, and Sasubohumali, of which the Sasubohumali mine is likely to be operated by the Odisha Mining Corp. This mine, in the Rayagada district, has the highest reserves of bauxite among the three, said senior state officials aware of the details.

Bauxite is the primary raw material used in the production of aluminium. Bauxite is first converted to alumina in refineries, which is further converted to aluminium at smelters.

For alumina, Adani will set up its refinery in the Rayagada region itself to take advantage of its proximity to one of the bauxite mines. The refinery will be spread across 3,200 acres. The aluminium smelter, meanwhile, will be spread across 4,100 acres in the Sundargarh region.

"This 7,000 plus acres will include the township being planned and the downstream park," an official said.