Axis Securities maintains a positive view on Hindalco despite near-term Novelis challenges, citing strong aluminium fundamentals and robust domestic operations as key growth drivers.

Despite near-term headwinds at Novelis, the long-term investment case for Hindalco Industries remains structurally strong, driven by favourable aluminium price dynamics and resilient domestic operations, according to Aditya Welekar, AVP at Axis Securities. Speaking to ET Now, Welekar said Novelis continues to be a long-term growth story, even as the company navigates execution-related challenges at its Bay Minette project in the US.

Novelis: Short-term pressure with long-term visibility

Welekar acknowledged near-term pressure on Novelis' margins, largely due to the Oswego fire incident and Bay Minette-related disruptions. The financial impact of these challenges is significant but manageable:

While the Bay Minette capex has escalated to $5.00 billion, Welekar believes most negatives are now priced in. "As the project nears completion and execution risk reduces, visibility on Novelis' earnings trajectory will improve," he said. The Bay Minette aluminium rolling mill, expected to come online in H2 CY26, will add 600 KTPA capacity. Nearly 60% of this capacity is already contracted in the beverage can segment, which earns EBITDA of around $1,000.00 per tonne, providing strong margin support.

Aluminium prices: Structural shift supports earnings

On aluminium prices, Welekar highlighted a structural change in global supply-demand dynamics. Several factors are contributing to this shift:

• China's capacity cap at 45 million tonnes
• Limited smelter additions outside China
• Power shortages in Europe and Africa
• ESG-driven constraints

These factors are pushing the market towards a sustained deficit. "With aluminium prices near $2,900.00-3,000.00 per tonne, Hindalco stands to benefit meaningfully. Every $100.00 per tonne move in aluminium prices boosts EBITDA and EPS by 4-5%," he said. Demand drivers such as electric vehicles, renewable energy, AI infrastructure and lightweighting across industries continue to support long-term aluminium consumption growth.

Bay Minette economics remain viable despite lower returns

Axis Securities has factored in management guidance that Bay Minette's internal rate of return (IRR) has moderated from double digits to high single digits. However, Welekar believes several factors should help maintain project viability:

"Any further capex escalation remains a key risk, but if execution stays on track from here, the long-term outlook remains intact," he cautioned. Novelis' EBITDA per tonne is expected to remain in the $450.00-500.00 range in the near term, with a step-up likely once Bay Minette starts contributing meaningfully. On a blended basis, EBITDA of $600.00 per tonne looks achievable by FY28, once the new capacity is fully ramped up.

Indian operations: Stronger, more stable growth engine

Welekar emphasised that Hindalco Industries' Indian aluminium and copper operations are emerging as a more stable and sustainable earnings driver than Novelis. The domestic operations show strong fundamentals across multiple metrics:

Upstream aluminium EBITDA in India has structurally shifted to nearly $1,500.00 per tonne, supported by elevated aluminium prices and first-quartile cost positioning. Captive coal mines are expected to raise coal self-sufficiency to 50% by FY28, while renewable energy usage could reach 30% by FY33, further strengthening cost competitiveness.

Downstream aluminium EBITDA has already crossed $60.00 per tonne, with management targeting a rise towards $300.00 per tonne as capacity expansion gains traction. In copper, while treatment and refining charges (TC/RC) remain weak, higher by-product and downstream conversion revenues are expected to cushion margins.

Investment outlook

While execution risks at Novelis remain a monitorable factor, Axis Securities believes any sharp correction could present a buying opportunity, backed by strong domestic operations and favourable long-term aluminium fundamentals. The combination of structural aluminium market changes and robust Indian operations provides a solid foundation for long-term growth despite near-term challenges.

Hindalco Industries has announced a significant change in the auditing arrangements for its wholly owned subsidiary Novelis Inc. The company disclosed that Novelis has selected Ernst & Young LLP (EY) as its independent registered public accounting firm for the upcoming fiscal period.

Auditor Appointment Details

The key parameters of this auditor change are outlined below:

Regulatory Compliance and Documentation

NovelisInc. has fulfilled its regulatory obligations by filing a Form 8-K with the U.S. Securities and Exchange Commission in connection with this auditor appointment. This filing ensures transparency and compliance with U.S. securities regulations, given Novelis Inc.'s status as a subsidiary with U.S. operations.

The appointment remains conditional upon the completion of required regulatory compliances and procedures, which is standard practice for such auditor transitions in the corporate sector.

Information Accessibility

The company has ensured public access to this information through multiple channels:

• SEC Form 8-K filing accessible through official channels
• Information available on Hindalco Industries' website at www.hindalco.com
• Details also published on Novelis Inc.'s website at www.novelis.com

This auditor appointment represents part of Novelis Inc.'s ongoing corporate governance practices and ensures continued professional auditing services for its financial reporting requirements.