India Operations Deliver Record Profit Amid Global Headwinds

The record-breaking results from Hindalco's India operations highlight strong domestic demand and efficiency, even as the company faces international challenges. Success in its aluminum upstream, downstream, and copper divisions reflects a strategic focus on securing resources and innovating products.

India Segment Achieves New Heights

Hindalco's Indian operations reported their highest-ever revenue and profit in the March quarter. Profits rose 11% year-on-year to ₹3,549 crore, with revenue surging 34% to ₹35,016 crore. Earnings before interest, tax, depreciation, and amortization (EBITDA) for the segment increased 17% to ₹6,610 crore. For the full fiscal year, the India business's EBITDA reached a historic ₹22,671 crore, driven by favorable market conditions and strategic efforts.

Consolidated Performance Affected by Novelis Plant Fire

On a consolidated basis, Hindalco's net profit for the March quarter fell 51% to ₹2,597 crore, largely due to losses from its subsidiary Novelis following a fire at its Oswego plant. Despite this, consolidated revenue for the quarter hit an all-time high of ₹78,133 crore, up 20% year-on-year, boosted by higher base metal prices. Consolidated EBITDA also achieved a record ₹11,197 crore, a 9% increase from the previous year. For the full fiscal year, consolidated revenue grew 15% to ₹2,74,944 crore, with EBITDA at a record ₹38,097 crore. Novelis plans to restart its Oswego plant in the coming weeks.

Valuation and Market Standing

Hindalco Industries has a trailing twelve months (TTM) P/E ratio of approximately 14.6, positioning it competitively within the metals sector. The company's market capitalization is around ₹2.47 lakh crore. Its P/E ratio of 13.48 is slightly above the industry average of 13.39, indicating it is fairly valued compared to its peers. The stock has demonstrated strong performance, with a one-year return of about 70.76%, significantly outperforming the Sensex. Despite recent analyst rating adjustments to 'Hold' from 'Buy', its consistent long-term returns and status as a Nifty 50 constituent remain positive.

Debt Leverage and Margin Concerns

While India operations are strong, consolidated financials show increasing leverage. Hindalco's consolidated net debt to EBITDA ratio rose to 1.8 times from 1.1 times last year, raising concerns about balance sheet pressure amid high capital expenditure. Analysts from InCred have downgraded Hindalco, citing a weaker outlook for aluminum prices that could impact profitability. Additionally, high electricity costs for Novelis in the U.S. are expected to keep its EBITDA per tonne under pressure. The company's significant capital expenditure cycle may lead to higher leverage, potentially limiting valuation upside as Hindalco's stock has historically traded at a lower EV/EBITDA multiple.

Analyst Views and Future Plans

Analyst sentiment on Hindalco is mixed, with some brokerages downgrading ratings to 'Hold' or 'Reduce' due to concerns over aluminum prices and increased debt. However, other analysts maintain 'Buy' ratings. The average target price from 18 analysts is approximately ₹963.89, suggesting potential downside from the current trading price. The company anticipates the Oswego plant restart soon and expects its Bay Minette cold mill commissioning to be completed in the second half of 2026.