NATIONALUM - National Aluminium Co. Ltd. Share Price

Management Outlook & Major Points:
Nalco's management highlighted a robust outlook driven by strong financial performance (highest-ever quarterly turnover, PAT, and EBITDA) and strategic expansions. Key points include:

1. Growth Drivers: Rising aluminum demand in India (projected to reach 8.3 million tons by 2030) fueled by infrastructure, transportation, and electrical sectors.
2. Expansion Plans:
   • Refinery: 1 MTPA capacity expansion (5th stream) to commission by FY25-end, boosting alumina sales.
   • Smelter & Power Plant: 0.5 MTPA smelter and 1,200 MW CPP (via JV with NTPC) targeted by FY29-30.
   • Bauxite: Pottangi mine expansion (3.5 MTPA) to secure raw material.
3. Cost Optimization: Captive coal usage (Utkal D&E blocks) reduced reliance on costly e-auction coal, improving margins.
4. Commodity Prices: Alumina prices averaged $641 in Q3 (vs. $562 in 9M FY25); volatility expected due to global supply swings (e.g., Australian disruptions, US tariffs).
5. ESG Initiatives: Biodiversity conservation, wind/solar energy projects, and social programs (education, healthcare).
6. Financial Strength: Zero debt, leveraging balance sheet for CAPEX (Rs.17,163cr smelter, Rs.13,000cr power plant).
7. Risks: Global aluminum surplus by 2025-end, LME volatility, and input cost pressures (caustic soda, coal).

Management remains confident in sustaining growth via operational efficiency, expansions, and downstream diversification (value-added products).

Question 1: "The slide where you mentioned the CAPEX projects. So I just wanted to understand the total CAPEX that has been committed for these projects... And the sort of CAPEX outlet that we could expect over the next three to four years."
Answer: Total CAPEX for ongoing projects includes Rs.5,677 crores for refinery expansion and Rs.1,961 crores for Pottangi mines. Smelter expansion (Rs.17,163 crores) and a power plant (Rs.13,000 crores via JV with NTPC) are planned. Annual CAPEX for FY25 is ~Rs.1,500 crores, rising to ~Rs.2,000 crores next year.

Question 2: "Is there a possibility of getting further enhancement on EC for coal blocks, and what kind of coal security are we targeting in the future?"
Answer: Current coal requirement is 7 million tons/year; captive blocks Utkal D & E will supply 4 million tons by FY25. No further EC expansion planned, but blending 50% captive and 50% linkage coal ensures operational efficiency.

Question 3: "How does alumina pricing work (M-1, M-2)? What are the regional premiums in export markets?"
Answer: Alumina prices averaged $641/ton in Q3 FY25, driven by spot sales amid rising prices. Export markets focus on Asia and Europe. Prices fluctuate with global supply-demand (e.g., Australia's supply disruptions earlier) and are expected to stabilize at $450"“$500.

Question 4: "Will the new refinery expansion's cost/margin profile differ from existing operations?"
Answer: Costs for the new refinery will mirror existing operations due to proximity to mines and shared logistics. Savings from reduced caustic soda usage (6"“7 kg/ton) and employee costs will offset depreciation from capital expenditure.

Question 5: "What is the current cost of production for alumina and aluminum (in $/ton)?"
Answer: Alumina production cost: Rs.21,000"“22,000/ton ($265"“$280). Aluminum production cost: Rs.1.6"“1.65 lakhs/ton ($2,000"“$2,060), including transferred alumina at cost and captive power.

Question 6: "Will debt be raised for smelter and power plant CAPEX, altering the capital structure?"
Answer: NALCO plans to leverage debt for smelter (Rs.17,163 crores) and power plant (Rs.13,000 crores) projects, targeting a 70:30 debt-equity ratio. Strong net worth (Rs.17,500+ crores) supports financing without compromising stability.

Question 7: "What IRR or incremental EBITDA is expected from the Rs.30,000 crores smelter and power expansion?"
Answer: The 0.5 million-ton smelter and 1,200 MW power plant aim to boost revenue by Rs.11,000"“12,000 crores annually. IRR and EBITDA specifics await finalized technology (e.g., Rio Tinto's AP-60) and green power integration (30% mandate).

Question 8: "How will employee costs trend given retirements and pay commissions?"
Answer: Employee costs (~Rs.2,100"“2,200 crores/year) will remain stable despite ~200 retirements over five years. Pay commission impacts post-2027 are unaccounted for, with no current provisions.

Question 9: "What caused higher depreciation in Q3, and is this a one-off?"
Answer: Depreciation rose due to a Rs.106 crore impairment charge for Rajasthan wind power assets (lack of PPA). Excluding this, depreciation remains linked to ongoing projects like refinery expansion.

Question 10: "What is the lithium project update in Argentina via KABIL?"
Answer: Non-invasive exploration in Argentina's lithium blocks concludes March 2025. Invasive exploration and pilot studies will follow, with mining decisions by mid-2027. Financial details remain premature.