Furthermore, in India, Hindalco is a negative net debt. Gross debt in India is around Rs 8,000 crore. The company has no plans to cut back. In Novelis, once the Bay Minette project is completed, they will return to the normal two-and-a-half net debt to EBITDA rate.
While Q1 revenue growth is generally in line with the guidance that you’ve talked about before, given the drop in metal prices that we’ve seen now, do you believe we’re going to get, let’s say, 6% to 8% top-line growth guidance. that has been given at the beginning of the year?
Satish Pai: So, I think to be honest in the commodity type of business, we’re more interested in growing EBITDA than the top line. So, if you see, this quarter the consolidated EBITDA was Rs 7,992 crore up 31% year-on-year. Our focus is on profitability and profit more than just trying to grow the top line because the top line in the commodity business is very driven by the price of aluminum and copper, which is not really under our control. So what we try to focus on is profit.
Copper business numbers are at an all-time high. EBITDA has reached Rs 805 crore, better than the guidance of Rs 600 per tonne given earlier. So, do you stick with the monthly EBITDA guidance of Rs 600 or increase it?
Satish Pai: Frankly this quarter sales were higher than expected. The demand is very strong, and the operational efficiency is good. So we got the higher numbers, but there was also some hedge accounting noise coming in, which could have been done either way. So, going forward, we will stick with the Rs 600 crore guidance.
What is the outlook for the aluminum segment as EBITDA benefits from low raw material costs? Will the gains continue in Q2 and the rest of the financial year?
Satish Pai: No, in Q2, our costs will probably be flattish versus Q1 and we can already see that aluminum prices have dropped by about $200 tonne. So, for Q2, you will see the EBITDA per ton will be lower than it was in Q1.
I want to get a sense of all the headwinds that can be seen from the Supreme Court order. It has empowered state governments to impose royalties on mining, any rough estimates of how that will affect you?
Satish Pai: Of greater concern is the ongoing or prospective nature. I hope the state government and the central government as a combination do not impose too heavy a tax on the mining industry because India needs more mines to open, more metals and more minerals. Any concerns are on a prospective basis. We hope that taxes will remain reasonable.
FY25 capex plan and capex guidance and also the company remains with the 4.1 billion capex plan to execute the Bay Minette project?
Satish Pai: Indeed, we are very clear that Bay Minette is on track. The 4.1 billion budget is on track and starting around September 26 is also on track. So, nothing has changed. And even in India capex, the guidance of Rs 5,500-6,000 crore still remains the same.For Novelis, the company stated that the new contract is again priced at a higher level. So, what EBITDA margin can we expect for FY25?
Satish Pai: What you’re saying is that these contracts are priced higher. In the short to medium term, we are guiding at $525 per ton. And if Bay Minette capacity comes up, we expect about $600 per ton. So, that’s our guideline, there’s no change.But the net debt increased this quarter by almost Rs 4,000 crore on a sequential basis and this could be on account of what capital pressure may come to Novelis. But what is the current state of debt? Do you have a plan to reduce your debt or will it keep rising? What is the roadmap?
Satish Pai: In India, we are in negative net debt, our gross debt in India is around Rs 8,000 crore. We have no plans to reduce it any further. We have no repayments for the next two years. So, in India, we have no more plans to reduce our debt again. At Novelis, what will happen is that as the Bay Minette project continues to be implemented, we say that net debt to EBITDA in some quarters could triple. But once the project is completed, we will return to the normal two and a half type of net debt to EBITDA rate.
