Hindalco to infuse about $250 million more into Novelis

Mumbai: Hindalco Industries plans to infuse another $200 - $250 million into Novelis after the second fire at its Oswego unit in November, managing director Satish Pai said Thursday. The Aditya Birla Group company has already infused $750 million into its US-based subsidiary in December.

“We are going to put in a billion dollars of equity to Novelis and this is going to help them during the next six to eight months as they come out of the Oswego fire, their working capital requirements, cost to serve and we think that will be enough,” Pai said after the company’s quarterly earnings.

Of this, a large part of the cost-to-serve is because Novelis is working with other suppliers to service the needs of a large auto customer.


“We have been taking care of most of our customers to the best of our ability, and that has been coming at us at a fairly significant cost, because we are doing that procurement of metal for them,” Pai said.

Two fires at Novelis’ Oswego unit in the US – in September and November – is expected to impact total free cash flows by $1.3 - $1.6 billion before insurance, Novelis said earlier this week. The impact on earnings before interest, tax, depreciation and amortization is likely to be $150 - $200 million on the EBITDA on an adjusted basis.

Novelis clocked in an adjusted EBITDA of $348 million in the December quarter, down 5% on year. Of this, the fire at the Oswego unit had an impact of $50 million, while tariffs had an impact of $34 million, Pai said. “Q3 is normally seasonally low for us because of the holiday season, that is why if you look at it year-on-year, the EBITDA of Novelis was more or less in line with Q3 of last year,” he said.

Robust Earnings

A robust performance in its India operations helped Hindalco cushion the impact of a loss at Novelis. The company’s consolidated net profit fell 45% on year to Rs 2,049 crore, even as consolidated revenue from operations was 14% higher on year at Rs 66,521 crore.

While the consolidated bottomline was impacted by the Oswego disruption, it was partly offset by cost efficiency benefits at Novelis, and record profits by the India business, Hindalco said in a statement. Profit in the India business was at an all-time high of Rs 3,581 crore, up 24% on year.

Hindalco’s consolidated EBITDA for the period rose 5% compared to the previous year. “Hindalco sustained its growth momentum amid global volatility, led by all-time high performance by its India business,” Pai said in a statement.

Hindalco announced its earnings after market hours on Thursday, and its shares closed at Rs 964.30 rupees on the BSE, down 0.1% from the previous close.