Hindalco Shares Slip 6% on Novelis Fire's Significant Financial Impact

Hindalco Industries saw its shares decline by 6% in intraday trading on Thursday, reaching ₹778.10 on the BSE. This downturn happened in a generally strong market, largely driven by profit-booking after an announcement from Novelis, Hindalco's wholly-owned subsidiary. Novelis stated that a fire incident at its aluminium recycling facility in Oswego, New York, in September is projected to negatively affect its free cash flow for the fiscal year 2026 by an estimated $550 million to $650 million. The impact on adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) is expected to be between $100 million and $150 million.

Novelis recorded $21 million in related charges during the second quarter of fiscal year 2026 and anticipates restarting its Hot Mill by the end of December 2025, followed by a production ramp-up period of 4-6 weeks. In its Q2FY26 results, Novelis reported a 10% year-over-year increase in net sales to $4.7 billion, primarily due to higher average aluminium prices, with total rolled product shipments remaining stable. Analysts at ICICI Securities noted that while Novelis's quarterly performance was in line with expectations, the fire accident poses a significant volume and EBITDA impact. They also highlighted concerns regarding increased capital expenditure for the Bay Minette project, which could elevate leverage ratios. ICICI Securities maintains a cautiously optimistic outlook, given Novelis's substantial contribution to Hindalco's overall revenue and EBITDA.

**Impact** This news is significant for Hindalco Industries' investors as it directly impacts its subsidiary's financial performance, leading to a notable drop in the company's stock price. The substantial cash flow and EBITDA forecast revisions necessitate a reassessment of the company's near-term profitability and financial outlook. Rating: 8/10

**Difficult Terms Explained** **EBITDA**: Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures a company's operating profitability before accounting for financing costs and non-cash expenses. **Free Cash Flow (FCF)**: The cash generated by a company's operations after accounting for capital expenditures (money spent on assets like buildings and equipment). Positive FCF indicates financial strength. **Capital Expenditure (Capex)**: Funds spent by a company to acquire or upgrade physical assets such as property, industrial buildings, or equipment. **IRR (Internal Rate of Return)**: A metric used to estimate the profitability of potential investments. It represents the discount rate at which the net present value of all cash flows from a project equals zero.