Aditya Birla Group company Hindalco Industries has done much better to cut down on demand and face the challenge of cheap imports. It has overcome the impact of demonetisation and is quite optimistic on domestic demand. Satish Pai, Managing Director, Hindalco, spoke to BusinessLine on the company’s strategy ahead. Excerpts:

How do you see the year gone by for Hindalco?

With the completion of major investments in capacity addition, it was a year of transformation for us. We have strengthened our balance sheet by prepaying debt.

Our Net Debt to Ebidta ratio has improved to 3.74 as of March end from 6.29 as on March 31, 2016. All our plants are running at full capacity. We have tied up about two-thirds of our coal need for the next five years.

What are the challenges you have faced?

We were very worried about coal and its availability because that accounts for a major cost.

With the government’s coal linkage auction strategy, much of this problem has been taken care of.

The movement of aluminium prices on the LME (London Metal Exchange) was our second worry.

However, various macro factors such as (US President Donald) Trump infrastructure spending and China cutting down output on environmental concern have supported prices on LME.

The third concern was on aluminium demand in India. Last fiscal, aluminium demand grew at two per cent and there was no growth in copper largely due to demonetisation impact.

If the country grows at 7 per cent, then, aluminium demand should grow by 10.5 per cent.

Has the private investment started reviving on the ground?

I think there is lot of optimism now. People are feeling more comfortable with government policies. Investments by small and medium sectors have picked up.

At the same time, there are many incidents that are pulling them back. Everybody agrees that GST is going to be huge positive, but they are worried on what is going to happen between June and July but we are bullish on Indian economy and plan to invest in downstream projects.

What is your investment in downstream projects?

In the next four-five years, we will invest ₹5,000 crore to double downstream capacity in aluminium and copper.

We are going to set up a new copper wire rod plant to take our overall capacity to 390,000 tonnes from 150,000 tonnes. Similarly, we will enhance aluminium downstream capacity to 600,000 tonnes from 300,000 tonnes.

It will take us about 4-5 years to complete the downstream projects.

The contribution of value-added products in our overall sales is 24 per cent and when we complete all these projects, it will touch 50 per cent.

What are the major initiatives of the Modi government for your sector?

The initiatives to improve coal production, bringing transparency in coal auction and auctioning the right quality and delivering them are some major positive initiatives.

The government initiative on skilling is also good because having more technically skilled people such as electricians and welders in plants is important.

Has imports come down?

Imports of both low cost aluminium and copper products continue from China and FTA countries. Nearly 54 per cent of aluminium used in India is imported while 30-34 per cent copper demand is met through imports.

The government should ensure that other countries do not benefit from India’s economic growth.

America has started anti-dumping investigation into aluminium imports from China.

Once the basis of anti-dumping is proved in the US, we can use it in India as well. The worry we have is that Chinese have excess production. And they can tap Indian market more efficiently with all the subsidised power and money.

Are you planning to cut debt?

We pre-paid loan worth ₹1,000 crore last fiscal. Another ₹4,500 crore was paid in April.

By the end of March next year, the consolidated net debt will be down at ₹19,000 crore with prepayment of more loans. We had debt of ₹27,000 crore. Our net debt to Ebitda will be 3.2 by FY’18-end from the current level of 3.74. We are also planning to reduce net debt to Ebitda level at Novelis to 3.5 from 3.9 by repaying loans.

What are your plans to bring down costs?

We will invest ₹100 crore to upgrade infrastructure at our plants in Utkal, Aditya (Aluminium smelter in Odisha) by upgrading the railway siding facility. With the GST coming in, we plan to set up a large centralised warehousing centre.

Though we have not decided on the location, the warehouse will come up somewhere in central India so that it makes sense to move goods cost effectively. It will result in huge saving as we are currently managing 40 warehouses across the country.

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