Metals & Mining News

Novelis may take bridge loans for higher capex, says Hindalco MD

Novelis Inc may have to take bridge loans for a year or two to fund the higher capital expenditure needed for its Bay Minette project, Satish Pai, managing director at Hindalco Industries said.

Novelis, a subsidiary of Hindalco, will now spend $4.1 billion on its integrated recycling and rolling plant being set up in Bay Minette, US as compared to $2.7-$2.8 billion estimated earlier. Novelis was to initially fund this capex through internal accruals.

Most of the cost overrun has happened due to higher civil and construction costs, Pai told reporters in a call on Tuesday. The amount of the bridge loans is not decided yet, he said.

The Bay Minette facility, scheduled to be commissioned in the second half of 2026, will initially have a capacity of 600,000 tonnes, of which 400,000 will be for cans, while the rest will be for automotive products. The company plans to eventually double capacity at the plant.

While the cost of production for the first 600,000 tonne of capacity will be around $7,000 per tonne, the cost for brownfield expansion — for the next 600,000 tonne — at the site would be in the range of $1,500 – $2,000 per tonne, Pai said.

Novelis currently has a net debt to operating profit ratio of 2.7 times, and the company plans to maintain it in the range of 2.5-3.0 times, Pai said.Hindalco also announced its earnings for the December quarter on Tuesday, and its consolidated net profit jumped 71% on year to 2,331 crore rupees, even though sales of 52,808 crore rupees were marginally lower on year.The cost of production for aluminium in India fell 3% sequentially in Oct-Dec, but Pai now sees this remaining flat in the current quarter. He also sees prices of aluminium remaining in the range of $2,100 – $2,300 per tonne on the London Metal Exchange.

Hindalco plans to spend 4,500 crore rupees on capital expenditure in India in the current financial year, and 5,000-5,500 crore rupees in the next.

Its shares today closed at 510.10 rupees on the NSE, down 12.4% from the previous close.

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