Hindalco Industries is an Indian aluminium and copper manufacturing major and one of the top companies in the world, with company valuations of over $26 billion. The company is listed in the Forbes Global 2000 at #643 rank. The Hindalco share price has outperformed its benchmark index- Nifty Metal, over the long term by a good margin.
The recent bullish cycle in metal stocks from March 2020 to March 2022, aided by increased commodity prices, witnessed Hindalco share price rise by over 650 percent.
This blog will look at the long-term outlook of Hindalco share price and critical fundamental parameters to help you make an investment decision. Let’s first look at the company’s history.
Hindalco Industries Limited is a metal flagship company of the Aditya Birla Group and has cemented its position as an industry leader in aluminium and copper manufacturing facilities.
The history of Hindalco Industries dates back to the 1950s when the late visionary and architect of the Birla Group, GD Birla, set up India’s first integrated aluminium manufacturing facility at Renukoot, eastern Uttar Pradesh, in 1962. Then, during the tenure of the late Aditya Vikram Birla, Hindalco Industries achieved the pole position in aluminium manufacturing in India.
Under the current leadership of Mr Kumar Managalam Birla, the group chairman, Hindalco became the leader in non-ferrous metals by making strategic acquisitions and expansion of manufacturing facilities. Over the years, Hindalco has expanded its operation out of India and operates in 10 countries with 50 established units.
Hindalco’s combined aluminium and speciality aluminium production capacity is 5.61 million MT. And copper production capacity is 7.46 million MT. It is a consistent profit-making company, and in the FY 2021-22, it achieved a sales turnover of ₹1,95,059 crores and EBITDA of ₹30,056 crores.
Hindalco Industry’s operation is spread across three different segments aluminium, copper, and chemicals. It also has two R&D centers for undertaking new product development, process refinements, quality assurances, and meeting environmental standards. But first, let’s look at the business of Hindalco Industries.
Hindalco is one of Asia’s largest integrated primary producers of Aluminium, with its own captive bauxite ore mines, mining operations, refining, smelting, and recycling. It manufactures primary aluminium through ingots, wire rods, billets, flat-rolled products, foils and packaging, and extrusions.
Hindalco’s copper division is known as Birla Copper and operates one of the world’s largest single-location custom copper smelters. In addition, the division manufactures copper cathodes, rods, and precious metals.
Hindalco operates an all-weather deep water jetty in Dahej, Gujarat, having an annual cargo handling capacity of 4.5 million MT.
Hindalco manufactures specialized chemicals viz, coarse alumina hydrate, metallurgical alumina, special alumina, and alumina hydrate. The chemicals are exported to a wide range of customers across 32 countries.
Hindalco can manufacture di-ammonium phosphate (DAP) and Nitrogen Phosphorous Pottasium (NPK). The products are marketed under the brand Birla Balwan.
Hindalco produces a range of acids that comes from Hindalco’s copper production process. The by-product includes sulphuric acid, phosphorous acid, phosphogypsum, copper slag, and aluminium fluoride.
Hindalco Management Team
The company’s management team is led by Chairman Kumar Mangalam Birla and Mr Satish Pai, the Managing Director.
The company’s copper division is led by Mr Rohit Pathak- CEO of Copper Business. The Chemical business is conducted by Mr Saurabh Khedekar, and Mr Praveen Kumar Maheswari is the Chief Financial Officer.
Mr. Satish Pai is an IIT Madras alumni and was the driving force company’s three mega greenfield projects that established Hindalco as the biggest aluminium producer in Asia. He joined Hindalco in August 2013 as tHindalco’sHindalco’s aluminium business, and in 2016, he became the Managing Director of Hindalco, looking company’s entire value chain.
Before joining Hindalco Industries, Mr Satish Pai spent 28 years at Schlumberger, looking after its global operations.
Hindalco’s Merger and Acquisition
Hindalco Industries acquired Novelis Inc. in 2007 for about $6 billion. It is an Atlanta-based company leading producer of rolled aluminium and aluminium recycling. The company operates as a subsidiary of Hindalco and is listed on both New York and Tronto stock exchanges.
The acquisition helped Hindalco to improve its value chain as the company serves customers in the food & beverages segment, automotive, aerospace, consumer electronics, foils, and packaging.
In May 2020, Hindalco, through its subsidiary, Novelis Inc, acquired US-based rolled products major Aleris Corporation at an enterprise valuation of $2.8 billion. The acquisition made Hindalco one of the largest aluminium manufacturing companies in the world. Aleris’s acquisition strengthened Hindalco’s position in other premium product segments, notably aerospace.
In the FY 2021-22, revenue from operations was at ₹ 1,95,059 crores, up by 47.78% from ₹ 131,985 crores in FY 2020-21. Hindalco Industries reported a compounded sales growth of 14% in the last five years.
Hindalco Industries has three business segments, Novelis, copper business, and aluminium business, each contributing 65%, 19%, and 16%, respectively, to the revenue in FY 2021-22. In the Q1 FY23, the consolidated income from operations stands at ₹58,018 crores, up by 40.28% year-on-year.
In FY 2021-22, the EBITDA was ₹30,056 crores, up 59% from ₹18,896 crores in FY 2020-21. In the last five years, Hindalco Industries reported a compounded profit growth is 48%. Segment-wise, Novelis contributed 52%, the aluminium business contributed 43%, and the copper division contributed 5% to the EBITDA.
Profit after tax (PAT) during the FY 2021-22 came at an all-time high level of ₹13,730 crores, compared to ₹ 3,483 crores a year earlier, a y-o-y growth of 294%. In the Q1 FY23 quarter, EBITDA stands at ₹8,640 crores, up 34.16% from ₹6,440 crores in Q1 FY22. While, net profit came in at ₹4,119 crores, up by 47.79% from ₹2,787 crores a year earlier.
Interest coverage ratio: The consolidated Interest coverage ratio on 31 March 2022 stands at 7.87 times vs. 5.06 times on 31 March 2021. Higher earnings and refinancing Novelis’sf Novelis’s long-term debt helped to improve the interest coverage ratio, strengthening its ability to meet interest obligations.
Current ratio: The consolidated current or liquidity ratio as on 31 March 2022 stands at 1.28x compared to 1.39x the previous year.
Debt-to-equity ratio: The consolidated debt-to-equity ratio as on 31 March 2022 came down to 0.81x from 0.99x a year earlier, reflecting a solid balance sheet position.
Operating and net profit margin: The company’s profitability margin, wherein the operating profit margin in FY 2021-22 improved to 14.61% vs. 13.61% in FY 2020-21. And the net profit margin improved to 7.04% vs. 2.64% in the previous year.
In FY 2021-22, the company continued to invest in building capacities, and the net capital expenditure made during the period was ₹5,355 crores.
Shares of Hindalco Industries were listed on 1 August 1997, and the current face value is ₹1. The shares are listed on the Bombay Stock Exchange, and National Stock Exchange and GDRs are listed on Luxembourg Stock Exchange.
Hindalco share price largely mirrored the metal index or the metal cycle, during which the shares price witnessed sustained growth. As a result, the 5 and 10 years CAGR of Hindalco share price is 13% and 8%, respectively.
Available data shows the Hindalco share price rose from near ₹85 levels at the start of 2004 and is trading closer to the ₹400 level. Moreover, it touched an all-time high level of ₹636 in the recent metal bull cycle.
At the start of this decade, 2020, Hindalco share price made a low of ₹85 on 23 March 2020 due to widespread panic selling in the market caused by the pandemic. After that, however, the Hindalco share price bounced back, giving investors a return of over 600% in the next two years.
Hindalco Industries is a consistent dividend-paying company, and in the last three financial years, the company paid ₹4, ₹3, and ₹1 as final dividends to shareholders.
The metal stocks, including Hindalco, are considered cyclical stocks, meaning the price performance of the stocks swings as per the business cycle of an economy. A cyclical stock moves up or down depending on economic growth trends. And Hindalco share price also reflects that trend.
In the short-term, inflationary pressure, fears of recessions, supply chain disruptions, and worsening geopolitical situations can impact global IMFs. As a result, the IMF’s world economic outlook forecasts that global economic growth will slow from 3.2 percent in 2022 to 2.7 percent next year.
However, despite the globalHindalco’s, Hindalco’s Q1 and FY 2023 performance look encouraging in terms of revenues from operations and EBITDA, with 40.28% and 34.16% year-on-year growth, respectively. Nevertheless, volatility and an uncertain business environment have continued to impact Hindalco share price in the last six months.
Through investments in expanding domestic capacities and acquisitions over the years, Hindalco Industries has helped create a diversified business empire in upstream and downstream segments. In addition, the acquisitions have helped gain technological capabilities in manufacturing premium products. As a result, it has become the cash cow for the company. It is a significant development and can aid in appreciating Hindalco share price.
However, some notable threats can impact the company’s profitability and Hindalco share price in the short term. It includes the risk of global slowdown, falling commodity prices, and a rise in the cost of thermal coal over availability.
Better targeting of opportunities can reduce the impact of threats. For instance, India’s aluminium consumption is less than the global average, increasing demand for aluminum parts in automotive and expansion of the domestic manufacturing market through government initiatives can aid in the growth of Hindalco share price.
The details shared above are based on Hindalco’s quarterly and annual reports and are for information purposes only. However, we suggest doing your due diligence before you make investment decisions.
Disclaimer Note: The stocks and financials mentioned in this article are for information purposes only. They shouldn’t be considered as a recommendation by Research & Ranking. We will not be liable for any losses that may occur.
What are the business segments of Hindalco Industries?
Hindalco Industries is one of the largest producers of aluminum products. It has three business segments: Novelis- which handles the company’s global operations; India’s aluminum business; and copper business.
How has Hindalco share price performed in the last three, five, and ten years?
In the last three, five, and ten years, Hindalco share price has given a CAGR return of 29%, 8%, and 13%, respectively. At the start of this decade, Hindalco share price fell to ₹85 level due to widespread panic selling caused by the pandemic. However, the share price has recovered since and has given investors returns of over 600%, and it made an all-time high level of ₹636.
What is the market capitalization of Hindalco Industries?
As of October 2022, the market capitalization per the latest Hindalco share price is $10.63 billion or ₹88,471 crores.
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