Move aimed to bolster balancesheet to withstand uncertainty in raw material costs
Hindalco Industries, an Aditya Birla Group company, plans to prepay another ₹4,000-crore debt this fiscal to further deleverage its balance sheet.
The company plans to bring down its net debt to Ebitda ratio to below 3 from the current level of 3.3. The net debt of ₹19,000 crore, excluding the cash reserve of ₹8,000 crore, will come down to ₹15,000 crore before the end of this fiscal.
Satish Pai, Managing Director, Hindalco Industries, told BusinessLine that the company has already prepaid ₹5,000 crore so far this fiscal and another ₹4,000 crore will be paid, including ₹1,300 crore of wholly-owned subsidiary Utkal Aluminium Refinery, in the current fiscal.
“Though we are ready to repay certain debt early we could not do so, as it will trigger the prepayment penalty clause,” he said. The idea is to build a strong balancesheet that can withstand the uncertainty over raw material and aluminium prices, he added.
Further, he said, it will bring down the interest outgo and boost profitability.
The US subsidiary of the company, Novelis, has a debt of $4.3 billion with a cost of borrowing much lesser than what is prevailing in India.
Of the total coal requirement of 16 million tonne per annum, the company has managed to secure 13 million tonne through Coal India linkage and extracts about 3 million tonnes from its own mine.
Though the domestic coal supply quality has improved, Pai said the process matching the quality as per the certification issued by the independent labs needs to evolve.
The company is in talks with the Railways to own wagons to transport coal to cut down on delays due to availability of rakes.
Hindalco expects aluminium prices to increase with China cutting down production to reduce pollution during winter.
Though this may support the benchmark LME prices, the recent rupee appreciation will partially negate the benefits.
The demand for aluminium in India remains uncertain with the GST rollout and ramp up of capacity by other companies such as Vedanta Aluminium and Nalco.
In fact, Hindalco had to export 60 per cent of its production in the June quarter due to weak demand in India, and incur lower realisations.