The stock of aluminium major Hindalco slipped last week as the company’s Chairman was summoned by a special court. This related to alleged irregularities over the Talabira-II coal block allocation in 2005. The stock has been under pressure since the de-allocation of coal blocks by the Supreme Court in August 2014.
In the ongoing coal block auction, Hindalco won the Dumri coal block in Jharkhand. It had also won many blocks in the earlier auction rounds. This is positive, but there are concerns whether the high price paid will affect profitability.
Local coal-related issues are a drag, but there are a few positives for the company. One is the pick-up in global aluminium prices and a positive outlook with a supply deficit projected for this year.
Second, the performance of US subsidiary Novelis, which brings in around two-thirds of the company’s revenue, is improving. Last month, Novelis reported increased aluminium shipments globally, higher revenue and profits. The company will be a beneficiary as auto makers replace steel bodies in their vehicles with lighter aluminium.
Third, the company’s copper segment should benefit as local demand picks up. Also, easing prices of imported coal should reduce Hindalco’s power cost.
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