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Hindalco Industries Ltd.
BSE Code   500440
ISIN Demat   INE038A01020
Book Value   259.37
Dividend Yield %  1.02
Market Cap   885507.03
P/E   21.62
EPS   18.22
Face Value 1  
Year End: March 2015


Business Overview

FY15 was a mixed year for the Global economy. The US economy continued to be resilient and grew at around 2%, while Chinese growth momentum continued its downward trajectory with the economy growing at 7.4% as compared with double digit growth during the last decade. The rest of the developed world grew at a moderate pace amidst various hiccups on the economic front, viz. Middle East crisis, oil crash, Euro zone uncertainty etc., to name a few. Growth found support in easy money policies adopted by several central banks such as ECB, US Fed, BOJ and Chinese central bank.

The emerging markets trudged along their recovery path struggling to gain momentum throughout FY15. India was no exception. The recovery has been slow but is expected to gain momentum as the reforms start showing their impact.

The commodity sector was also a mixed bag. Aluminium fundamentals improved in 2014, with large-scale smelting curtailments by global majors supporting aluminium price recovery, and the global primary aluminium industry swinging back to a deficit position for the first time in seven years. The average aluminium LME price for the year was around 6% higher than FY14. On the other hand, copper LME price was around 8% lower than the brvious year due to slowdown in Chinese demand growth and higher mining output. Aluminium  realisations were strong on the back of supportive LME and high regional brmium. The average brmium at $ 390(MJP) was almost 47% higher than FY14.

Strong demand, attractive financing deals on account of lower interest rates and strong contango and supply curtailments led to an unbrcedented rise in aluminium brmium.

While the crude prices witnessed a sharp decline during the year, in India, coal prices increased substantially with rising demand and shortage of coal; the acuteness of shortage was accentuated by regulatory developments and infrastructure bottlenecks.

FY15 was an extremely challenging year for your Company. Even as the three greenfield and three brownfield projects continued their ramp up, braving the teething troubles and coal sourcing challenges (Aditya and Mahan), the Subrme Court ruling that led to deallocation of the coal blocks posed a serious challenge from a long term perspective.

The deallocation of all the coal blocks was a major setback for your Company. This not only created uncertainty over the availability and cost dynamics of the new smelter projects, but also made the rationale behind the choice of smelter locations void. The existing smelter at Hirakud also lost its access to Talabira-I captive coal block from April 2015. While the economics of Aluminium smelters has been affected by deallocation of coal blocks, the bauxite value chain continued to play its part as per the plan; and Utkal alumina project is delivering world-class alumina at a very competitive cost.

Though deal location of coal blocks did not have a direct impact on coal cost during the year FY15, this development contributed to further affecting the sentiment in the already tight availability scenario of coal in the country, leading to sharp increase in coal prices in the domestic markets. Logistical bottlenecks further impacted coal availability and the landed cost of coal at the Company's power plants. Inspite of these odds, your Company performed remarkably well. The revenues and operating profits of standalone Hindalco increased by over 24% and 37% respectively, even as projects were ramping up in a challenging environment. Your Company registered a turnover of US$ 17.1 billion 104,281crore) and an PBITDA of US $ 1.6 billion 10,049 crore). Subsequently, during the first round of coal block auctions, your Company won 4 coal blocks. The details of these are as below:

This was a significant development post deallocation. The objective in this round of bidding was to optimise the coal sourcing keeping in mind smooth ramp up of the projects and logistic challenges in getting imported coal to the plant.

Novelis, your Company's wholly owned subsidiary also faced several headwinds as it continued to ramp up its production from newly commissioned facilities. Rising brmium, lower SHFE impacting competitiveness in the Asian markets, unfavourable foreign exchange movements and higher start-up costs were some of the challenges that it faced during the year. Despite these headwinds, Novelis has progressed remarkably on its strategic path and the strategic investments in auto and recycling are expected to deliver in the coming years.

Business Highlights


Your Company, over the last few years, has achieved significant scale and has developed a strong business portfolio that can weather the commodity cycles much better. Six projects that were commissioned during 2013 and 2014, are under ramp up. Utkal Alumina is already a world class asset with a cost structure that is amongst the best in the world.

A unique strategy to take Indian aluminium market to the next level is already in place and soon your Company shall be producing world class products such as can body stock and ultra thin gauge foils from our facilities in Hirakud and Mouda respectively. This would not only enhance your Company's product portfolio but would also re-define the Indian aluminium market.

Some of the highlights of FY 15 are:-

• Strong revenue growth on the back of strong volumes and realisations:

•  Consolidated Revenues up 19% at Rs. 1,04,281 crore.

•  Standalone Revenues up 24% at Rs. 34,525 crore.

• Consolidated Profit before interest and debrciation up 8% at Rs. 10,049 crore.

• Standalone PBITDA up 19% at Rs. 4,299 crore.

• Aluminium EBIT up 44% to Rs. 1,349 crore on the back of record Aluminium production volumes as the plants ramped up.

• Record operating profits registered by Copper business as production volumes grew to record levels:

• Copper production increased 17% and DAP production increased 30% over FY 14.

•  Copper EBIT at Rs. 1,516 crore, up 62%


• Registered record sales of $11.1 billion on the back of record shipments of 3,050 kilotonnes.

• Adjusted PBITDA increased two percent to $902 million.

• Delivered record automotive shipments following the launch of three new finishing lines.

• Achieved an average recycled content input rate of 49 percent during the year (53 percent in the fourth quarter).

At Novelis, the projects are getting readied to capture the growth in emerging markets and enhance product portfolios across the globe.

These projects will enable your Company to leverage the exponential growth in new product markets such as automobiles (BIW).


Your Company's subsidiary in Australia, Aditya Birla Minerals Limited (ABML) had an extremely challenging year in a debrssed copper pricing scenario.

• Copper production sharply declined on account of decline in head grade and stoppage in production at Nifty copper mines due to the unfortunate sinkhole incident in March 2014.

• As a result, ABML registered an operating loss of A$35 Million in FY15.

Hindalco Earnings per share (EPS)

The standalone basic and diluted Earnings Per Share were at Rs. 4.48 per share in FY15 as compared with Rs. 7.09 in FY14. The consolidated EPS was Rs. 4.14 per share as compared with Rs. 10.91 per share in the brvious year. The decline was primarily on account of higher finance charges and debrciation attributed to commissioning of greenfield projects. The EPS also got impacted due to lower net income on account of certain exceptional items.




Aluminium has widesbrad uses throughout the economy and is equally important to both the industrial and consumer sectors. On the industrial side, aluminium is heavily used in electrical power transmission, machinery and equipment, and construction. Housing, in particular, makes heavy use of the lightweight material as a substitute for steel and wood in doors, windows and siding. On the consumer side, aluminium is used in a variety of retail products, including cans, packaging, air conditioners, furniture and vehicles.

In addition, there is major transformation underway in the automotive industry, which is positive for aluminium consumption. The automotive sector is expected to use more aluminium in the production of passenger and commercial vehicles. The regulatory brssures for lighter and more fuel-efficient cars have driven auto makers and aluminium producers to invest in newer adhesive technology. As a result, over the past five years considerable progress has been made in aluminium-intensive vehicle production.

Global demand for aluminium has historically tended to outperform that for other metals. The weak price performance in some of the recent years has been more due to supply side developments than any issues with demand. In 2014, global aluminium consumption rose 5.5% YoY, the fastest pace in three years, despite the slowdown in Chinese consumption growth to around 8%.

China accounted for 44% of global primary aluminium consumption in 2014, up from 23% in 2005. As the country continues to develop towards a more consumer-focused economy, aluminium consumption is expected to become more consumer-driven.

Aluminium consumption in the USA has recovered well since the financial crisis, rising by over a third in the five years to 2014. However consumption still remains 20% below br-crisis peak levels.

European demand has struggled to grow in recent years, as it has been affected by the ongoing economic malaise there. In 2014, Aluminium market was in a deficit of around 0.7 Mn tonnes, the first deficit in last 7 years.

Indian aluminium demand rose by 38% in the five years to 2014. India is currently the world's fifth-largest consumer of aluminium, behind China, the USA, Japan and Germany, and it is expected that the strong demand fundamentals have potential to elevate the country to the No. 3 position by 2016.

It is estimated that since the beginning of 2012 to date, nearly 2.8 million tons of capacity have been curtailed outside of China (about 11% of 2013 production ex-China), led by international players, including Rusal and Alcoa. The year 2014 witnessed over 750,000 tonnes of smelter closures outside of China ,mostly in higher-cost producing areas such as Europe. In addition to these permanent shutdowns, Brazilian aluminium output last year declined by 350,000 tonnes as power shortages caused by droughts made smelting less economical. Russian producer Rusal also cut back production at seven smelters last year. Brazil and Russia are the major countries with spare capacity that could return to the market, making producers there the key ones to watch as an indication of whether market deficit and higher returns can hold.

While smelting capacity additions in China have led to ever higher aluminium production, elsewhere capacity growth has not resulted in a surge in output in recent years. Over 4m tonnes of new smelters have been commissioned outside China since 2008. However, ex-China aluminium production in 2014 was still 3.2% below the 2008 level, as closures of higher-cost facilities almost entirely offset the new, lower-cost supply.

Strong contango and low financing cost coupled with strong demand and low load out rates from warehouses due to various reasons including logistic challenges ensured high regional brmiums, which reached historic high, even as LME aluminium inventory declined by over 1.25m tonnes in 2014. The year 2014 also witnessed a deficit of around 0.7 Mn tonnes (difference between annual production and consumption), after almost 7 years.

However, during the last quarter of the year, heightened risk averseness led to dumping of commodities across the board. The resultant rise in USD, coupled with surging Chinese exports following slowing demand growth in China resulted in a sharp decline in LME, which dropped sharply by almost 10%. This was also accompanied with significant decline in regional brmium, which have declined by over 70% over last few months, resulting in a large decline in all inclusive aluminium realisations putting brssure on margins.

Operational Review

Against this backdrop, your Company's aluminium business operational performance was truly creditable, especially in the wake of specific challenges it faced during the year. The projects continued to ramp up, even as coal availability remained constrained due to various reasons. There was a spike in coal prices as all the players scrambled for coal security amidst infrastructure challenges.


Your Company's Alumina production at 2.3 Million tonnes was 35% higher than in the brvious year, primarily on account of increased production from Utkal. Utkal is ramping up fast to its full capacity and already is amongst the lowest cost alumina producers globally.

Primary Metal

In FY15, Primary aluminium production increased by 36% to 834 KT (kilo tonnes or thousand tonnes). This increase was primarily on account of production from Mahan and Aditya smelters, which contributed 93 KT this year. The brownfield expansion of the smelter at Hirakud was fully ramped up by the third quarter of the year, which also contributed to higher metal production.

Value Added Products (VAP)

• The value added downstream production grew by 10% over last year to 300 KT. This growth was in line with your Company's focussed strategy of value maximisation.

New Facilities: An Update -

During the current financial year, the three greenfield projects are well on their way towards full capacity utilization. Mahan smelter has ramped up to over 90% of its envisaged capacity, even as the ramp up was impacted on account of constrained coal availability in the country. Aditya smelter is now operating at over half of its full capacity level. Both these smelters are expected to deliver strong efficiency gains as they reach optimum capacity utilization rates.

Utkal alumina refinery has excelled on operational front and is already counted as one of the low cost refineries in the world.

Your company's brownfield projects in India - Hirakud FRP and Mouda Foil mill - are expected to significantly contribute to your Company's strategic goal of higher VAP proportion.

Your Company won 4 coal blocks namely Kathautia, Dumri and Gare Palma IV/4 & Gare Palma IV/5 during the recently concluded rounds of coal auctions. With these blocks, the company has significant flexibility with regards to optimisation of coal sources. In the subsequent rounds, the company would continue to strive to improve its coal security further.

Novelis also progressed well on its strategic expansion plan that entailed an investment of USD 2 Bn and included rolling capacity expansions at Brazil and Korea that would take Novelis' rolling capability to around 3.6 Mn tonnes. The automotive finishing line expansions in the US, Europe and China are also over and are geared to produce auto body sheet (BIW) - the next big driver of aluminium rolling sheets. Novelis' thrust on sustainability and recycled aluminium is unchallenged. Your company has invested significantly in recycling initiatives and has developed high-tech recycling capabilities, expanded aluminium scrap buying foot print globally, widened scope of recycled scrap that can be used, and developed close loop recycling systems with end users to improve efficiencies. Novelis has also developed alloys for higher re-cycled content. All this has already shown results and the company processed 53% scrap (as a % of input) in the last quarter of FY15 as compared with 46% in FY14.

Novelis is well positioned to reap the benefits of these investments and all the facilities are ramping up on expected lines.

Financial Performance

In FY15, the consolidated turnover of Aluminium business increased by 20% to Rs. 83,139 crore - a fallout of strong volume growth & higher realisations.

The turnover of the standalone aluminium business increased by 40 per cent to Rs. 14,105 crore vis-a-vis Rs. 10,050 crore in the brvious year, primarily due to higher metal volumes, and better realisations.

The consolidated Earnings before interest and taxes (EBIT) stood at Rs. 4,226 crore which was 12% higher than the brvious year.

The standalone Aluminium EBIT improved 44% to Rs. 1,349 crore even as increased input costs continued to put brssure on margins which were also impacted by ramp-up related teething troubles. Your company also witnessed cost push on account of rising coal costs, declining bauxite quality and rise in freight, a consequence of diesel price deregulation.

The cost brssures were to some extent cushioned by adopting multiple initiatives, including:

• Continuous improvement in operational efficiencies,

• Higher sale of special hydrate/alumina,

• Optimization of logistics costs.  


After a slowdown, the Indian recovery is on the mend and the economy is expected to grow at over 7.5% in FY16 and FY17. This would result in aluminium demand growth on account of stronger consumption and investment. The government's thrust on power sector that went through a challenging phase bodes well for aluminium industry as power sector is a strong demand driver for aluminium consumption in India. Rapid urbanization, as the country continues to develop towards a more consumer-focused economy, should augment consumer-driven demand and will help to sustain growth in aluminium demand into the next decade.

Outside India, the fastest growth in aluminium consumption is likely to be seen in Asia due to the emergence of consumerism among the rising middle classes.

The US demand is expected to remain strong growing at a CAGR of 4-5% over next few years, as the housing recovery gains traction, car sales continue to improve and aluminium demand benefits from new applications, particularly in the automotive sector.

The light weighting of vehicles is driven by the Corporate Average Fuel Economy (CAFE) legislation in the United States, finalized in 2012. The CAFE legislation mandates that vehicle manufacturers achieve 54.5 miles per gallon (MPG) on their fleet of cars and light duty trucks by 2025 — almost double the MPG compared to the 2011 standards.

Western Europe is expected to grow moderately amidst economic uncertainty. The aluminium demand is expected to grow at around 2.5%.

Aluminium serves a variety of consumer-related end markets; and in China, aluminium penetration for consumer products is still low, with lots of upside potential as the general wealth level increases. However, the short term outlook is shrouded with uncertainty, especially against the backdrop of decelerating Chinese demand growth.

In 2015, Chinese aluminium demand is expected to grow at around 6-7%, a substantial slowdown from the double-digit increase of the past decade. Demand growth will be strongest in consumer-related sectors. Transport and packaging should both see 8-9% growth, while the power sector is likely to report more than 7% growth. The other two industries - machinery and consumer durables - are expected to be the laggards as they have begun to slow last year. The construction sector is also likely to remain subdued. Recently, the Chinese National Energy Administration has released details of a new standard which will regulate the use of lower voltage aluminium cables. The directive will be effective from September 2015 and is expected to cause consumers to shift from copper to aluminium cables, as aluminium is cheaper. This should drive the use of aluminium in electrical sector.

Japanese demand too is expected to be muted due to weak growth in the transportation sector.  Supply of aluminium outside China is expected to be limited with not many new capacities expected outside China.

China's rapid economic growth has been accompanied by environmental degradation. Energy and environmental policies have been in place since the 1990s to encourage energy conservation, coal diversification and environment friendly development. Nevertheless, economic growth has assumed more importance and environmental pollution has continued to worsen. This is expected to change under NDRC's policies but the pace and timings are being debated among analysts.

Despite weaker than expected demand, Chinese primary producers in Xinjiang and Shandong are ramping up production at a rapid pace. Although around 667,500 tonnes of primary capacity has been closed in 2015 so far, China has added 2M tonnes of additional primary capacity in the first half of 2015. This supply increase along with weakening demand growth has led to surge in exports.

Overall the demand supply scenario for primary aluminium globally looks encouraging over long term as demand continues to be robust with expectations of around 6% growth.

However, over short term, Chinese supply is expected to continue to impact Rest of the World demand-supply dynamics adversely.

The fact that the energy prices globally are lower is also resulting in decline in aluminium production cost and this is also putting a downward brssure on aluminium prices.

Aluminium prices on LME have declined quite sharply over the last few months due to confluence of many  factors such as heightened risk averseness, European region uncertainty related to Greece, slowing demand growth from China and rising exports from it. The regional brmium has also crashed from all time highs. The brmiums across the regions have declined over 70%. This was primarily on account of large inventory de-stocking, which was the result of carry trade becoming less attractive, which in turn can be attributed to various factors such as change in LME warehousing rules, flattening of forward curve resulting into decline in contago, tightened regulatory environment that discouraged warehousing and impending spectre of Fed increasing interest rates resulting in higher financing costs.

As a result, all-in realisations have declined sharply in recent months. This scenario may continue for a while and hence over short term, realisations may remain under brssure.

On the positive side, the reduction in prices of crude-derivatives in the recent months is expected to help on the cost front. In the recent quarters, coal availability in India is showing signs of improvement. With the expected growth in output of public sector coal mining companies and the likely operationalisation of captive coal blocks, coal availability in the country may improve further, which will ease the cost-side brssures.

The outlook for aluminium business is cautiously optimistic. The investment phase of the company has been largely completed and all the new projects are inching towards their full capacity levels. The cancellation of earlier allocated coal blocks has affected the cost dynamics of the new facilities adversely. The operating costs are not yet optimal as projects are ramping up. This, coupled with the recent weakness in the prices, is expected to keep margins under brssure. However, your Company is trying to mitigate these adversities through a sharp focus on cost reduction in its day-to-day operations, optimization of logistics costs, and by identifying high-impact, capex-light interventions to improve its structural cost position.

Copper Business

Industry Review

Copper has the highest level of conductivity out of the base metals and is used extensively in power transmission, particularly in smart grids and other technology-intensive power transmission systems. Copper is also extensively used in infrastructure and housing in the form of pipe, electrical wire and building materials.

The global refined copper demand increased by around 4.5% in 2014 to 21.5 Mn tonnes. Production growth exceeded consumption growth rate, resulting into a surplus of around 350 KT. This mismatch was primarily on account of slowdown in Chinese copper consumption growth. In China, which accounts for over 44% of global copper consumption, the growth rate declined from around 10% in 2013 to 7% in 2014. Growth in other emerging markets too was lack lustre leading to the surplus. Many western countries registered a demand pick up as their economies continued with the recovery and grew moderately.

As a result, the utilization rates of smelters were under brssure. This resulted in strong treatment & refining charges, a major value driver for custom smelters such as your Company's copper business.

Business Performance

Your Company's copper business delivered a record performance in FY15, registering highest ever cathode production. Strong operating gains on the back of enhanced efficiencies, aided by various strategic initiatives for value maximisation and waste to wealth initiatives, enabled the business to register best ever operating performance, with EBIT surpassing Rs. 1500 Crore mark for the first time in the history of the business.

The Revenues of the copper business increased by over 15%, primarily on account of higher volumes and increased proportion of value added products.

The business registered an EBIT of Rs. 1516 Cr - an improvement of 62% over Rs. 938 Crore it achieved in the brvious year. Copper EBIT has grown almost 2.5 times over last 4 years and has validated your Company's portfolio business model.

Copper Outlook:

In the short-term, marginally higher pace of copper supply growth relative to demand is expected to keep the market in surplus till 2017. Industry experts forecast growth in refined copper consumption to be 3.5% in 2015, driven largely by China and North America, with the demand estimated at 22 Mn tones in 2015. Chinese demand is expected to be around 10 Mn tonnes, while the demand in Europe and North Americas is expected to be 3.7 Mn tonnes and 2.2 Mn tonnes respectively.

Chinese demand is expected to grow at a relatively modest rate of around 3-3.5% after a strong growth in brvious decade with the next growth driver expected to be renewable energy and investments surrounding the sector.

Indian copper demand is expected to be around 650 Kt in 2015, 8% higher than the demand in 2014. The demand growth is expected to pick up going forward with the government's thrust on manufacturing sector, smart cities and power sector. Indian per capita consumption of copper stands at around 0.5 Kg as compared with the global average of 2.4 Kg/person and this puts in perspective the potential demand.

Refined copper production is broadly expected to keep pace with the demand. Again China, continues to be at the forefront with around 7.5 Mn tonnes production in 2015. The production growth will largely come from Asian region, contributing over 50% of CY 2015 production, which is estimated to be around 22 Mn tonnes

Overall, industry experts are expecting a small surplus market with production marginally higher than demand.

On account of surplus and risk averse macroeconomic environment the copper prices are expected to remain subdued over next 1-2 years. In the short term, suspected metal financing scam in China may continue to debrss the prices as traders fear exodus of metal out of China, even as exchanges stocks declined.

Overall mine production capacity is forecast to rise from 18 Mt in 2013 to 21 Mt by 2015, an increase of 17%. Higher mining production and lower concentrate demand has resulted into higher TC/RC. The benchmark TC/RC for 2015 is higher than 2014 benchmarks

The last few years have been relatively better for custom smelters due to improved concentrate availability and the trend is expected to continue reflecting in strong TC/RC. Higher TC/RC coupled with revival in demand especially from power and housing sector, augurs well for your Company.

With an improvement in Indian GDP, the co-product prices are also expected to be supportive and this should help the copper business. With increasing thrust on agriculture sector, the demand for DAP and sulphuric acid is expected to increase.

With an improvement in Indian GDP, the co-product prices are also expected to be supportive and this should help the copper business. With increasing thrust on agriculture sector, the demand for DAP and sulphuric acid is expected to increase.

Financial Review and analysis

Hindalco's consolidated revenue stood at Rs. 104,281 crore as compared with Rs. 87,695 crore in FY14. Profit before debrciation, interest and taxes stood at Rs.10,049 crore as compared with Rs.9,303 crore in FY14. This increase was contributed by volumes growth across both businesses and the stellar performance by copper business even as aluminium faced several challenges on the cost front and weakness in demand in certain global geographies following macroeconomic headwinds. There were also certain one-offs that affected both Hindalco-standalone and Novelis.

Standalone revenue for the year increased 24% to Rs. 34,525 crore. Profit before interest and debrciation was Rs. 4,299 crore vs. Rs. 3,616 crore in FY14, a jump of 19%.

Other Income

• Standalone other Income at Rs. 882 crore was lower as compared with Rs. 1124 Cr in FY14 on account of lower treasury corpus.


• Consolidated Interest expenses increased from Rs. 2,702 crore to Rs. 4,178 crore. In standalone business, finance costs increased from Rs. 712 crore in FY14 to Rs. 1,637 crore in FY15 due to higher interest capitalisation post ramp up of greenfield facilities.


• Consolidated debrciation increased marginally from 3,553 crore to Rs. 3,591 Crore.

• Debrciation stood at Rs. 837 crore compared to Rs. 823 crore in brvious year, reflecting the change in manner of calculation of debrciation w.e.f. 1st April, 2014 by considering revised useful life of assets to bring it in line with the Schedule II of the Companies Act, 2013.


• The provision for tax was at Rs. 322 crore in standalone business and Rs. 256 crore in consolidated business.


• Net profit at the consolidated level was lower at Rs. 854 crore, because of higher interest cost and exceptional items. Exceptional items in the Standalone results included additional levy on coal extracted from Talabira-I coal block imposed by the judgment of the Subrme Court, provision for diminution in the carrying value of investments in ABML, and liability provided towards Renewable Power Obligations (RPO) under the Electricity Act, 2003. The exceptional items in the Consolidated results, in addition to items included in standalone, mainly relate to the sinkhole incident and change in macro-economic conditions at ABML that has resulted in impairment of fixed assets, write down in value of inventories and expenses incurred towards restoration of operations.

• Net profit for the standalone stood at Rs. 925 crore compared to Rs. 1,413 crore in brvious year.

Profit before exceptional items at Rs. 1,825 crore was lower by 12% compared to FY14 mainly due to higher interest.

Risk management

Hindalco's financial performance is significantly impacted by fluctuations in the prices of Aluminium, Alumina, exchange rates and interest rates. Your Company takes a very structured approach to the identification and quantification of each such risk and has a combrhensive board approved risk management policy. The company has also put in place an elaborate ERM (Enterprise Risk Management) framework.

Internal Controls

A strong internal control culture is pervasive throughout Aditya Birla Group. Regular internal audits at all locations are undertaken to ensure that the highest standards of internal control are maintained.

The effectiveness of a business internal control environment is a component of senior management performance appraisals. The principal aim of the system of internal control is the management of business risks, with a view to enhancing the shareholders' value and safeguarding the Group's assets. It provides a reasonable assurance on the internal control environment and assurance against material misstatement or loss.


Both Aluminium and copper are widely used metals with bright consumption prospects. The recent emphasis on greenhouse emissions have brought in new game changing concepts such as light-weighting in the automobile industry further augmenting the consumption growth. Your Company's business model is geared to ride on these changing patterns and today boasts of a de-risked portfolio through a strong accent on conversion business.

Given its focus on value added products, your Company also has a strong commitment towards product development. It has developed several pioneering applications in the Indian context and Novelis is the global leader in FRP space.

Sustained access and availability of resources is critical to the businesses of your Company. Hindalco follows holistic approach to address the multi-dimensional facets of resource sustainability throughout the value chain. As it continues to serve the increased demands of the society for sustainable metals, your Company recognizes the limited availability of resources and impact of resource extraction. Its strategy is to have a good mix of captive sources as well as long-term sourcing arrangement based on long term cost and sustainability parameters. Its mining practices, regeneration activities and community engagement are aimed at minimising the environmental impact with a focus on improving socio economic life.

Safety continues to be a critical focus area for your Company. Even as the major safety parameters showed an improving trend during FY15; the policies and practices of the Company are continuously being finetuned towards achieving its goal of 'Zero Harm'. Line managers are responsible for setting expectations in terms of safety performance, for conducting safety training, for conducting effective accident investigation, and for ingraining safety, health and environmental aspects into the fabric of how work is carried out on a daily basis.

Improving operational efficiencies, adoption of technological advances are important for efficient use  of raw materials. Your Company believes in systems and work practices that contribute to conserving resources, energy and environment and ensuring health and safety.

Aluminium is a 100% recyclable metal and does not degrade in quality on recycling. Your Company's wholly owned subsidiary Novelis brsently uses nearly half of its input in the form of recycled scrap - a sharp jump from 39% three years back. It has also announced the commercial debut of Evercan™ high recycled-content aluminum beverage can sheet. Novelis has invested in major recycling initiatives, including advanced equipment and technology to process diversified scrap. Your Company's Copper business in India also has a focused approach on recycled material and recycles a substantial proportion of the scrap generated in the process again.

Your Company continues to maintain its thrust on inclusive growth as it believes in triple bottom line accounting and trusteeship management concept. It has carried out several projects aimed at development of neighbouring communities and society with focus areas being health care, education, sustainable livelihood, infrastructure and social reform.

Human capital

Aditya Birla Group is one of the brferred employers in the country. In the last few years, for its people practices, it has got several accolades from the global agencies like AON Hewitt, Fortune, SHRM etc. Few of them were "Excellence in Developing the Leaders of Tomorrow" in the First People Awards 2012 (Strategic Human Resource Management, SHRM) India, Ranked No. 4 in the Global "Top Companies for Leaders" survey and ranked No. 1 in Asia Pacific for 2011 (Aon Hewett, Fortune Magazine and RBL), 2nd Best Employer in India (Aon-Hewitt Survey 2011) etc. The People oriented best HR Practices enable the group to attract and retain the best of available talent.

Your Company firmly believes that people are its most valuable asset and it is ensuring that all the HR systems, processes and practices are helping people both personally and professionally. Currently, your Company is managing a pool of around 22,000 people across 17 locations. For managing people, it has well laid down HR Policies in place including talent management, employee engagement, performance management, rewards and recognition alongwith all the necessary support systems for the robust implementation of the people practices.

Training and Development

The Learning and Development function is well integrated with the overall HR Function and the  Business Objective. Across locations, your Company has full fledged learning infrastructure to support its learning objectives. Its Strategy aims at equipping all people across Units with business linked knowledge, technical and behavioural based learning events.

For Managers and the talent pool, your Company works closely with the 'Gyanodaya- Aditya Birla Group's Learning University' and as per need nominates people to other learning institutes / professional bodies for professional development.

Summing Up

Over the years, your Company has successfully demonstrated benefits of integrated approach with low cost upstream operations and significant abilities and reach in downstream business. The robustness of Novelis' de-risked business model and focused approach to leverage the dominance in its chosen product segments has yielded desired outcome in challenging times.

During FY15, Utkal Alumina has established itself as a world class asset ensuring alumina production at very competitive cost which in turn is fed mainly to the two new age smelters. The cancellation of the earlier allocated coal blocks, instrumental in determining  the choice of location of the smelters, has dented the earlier envisaged cost structure significantly. Your company is striving hard to dilute the impact of this setback and has been actively pursuing all possible strategic options to secure long term supply of coal at competitive cost to partially offset this loss.

The company expects to increase production significantly as the new state of the art facilities achieve their targeted capacities. However, during the ramp up, the plants will be operating at suboptimal efficiencies and this will have some bearing on costs. The deallocation of Talabira-I coal mine that used to supply coal to Hirakud smelter will also impact the cost of production.

FY16 onwards, following the full ramp up of the projects, the reported financial performance will be significantly impacted as interest and debrciation flow through the P&L statement. As a result, the short term outlook appears challenging for domestic aluminium business.

In the coming years, the focus will be on operational excellence and increasing the productivity of new assets. We believe that the strong business portfolio comprising de-risked copper business and technologically intensive portfolio of Novelis, with focused approach would go a long way in ensuring a robust future for your Company.

Cautionary Statement

Statements in this "Management's Discussion and Analysis" describing the Company's objectives, projections, estimates, expectations or brdictions may be "forward looking statements" within the meaning of applicable securities laws and regulations. Actual results could differ materially from those exbrssed or implied. Important factors that could make a difference to the Company's operations include global and Indian demand supply conditions, finished goods prices, feedstock availability and prices, cyclical demand and pricing in the Company's principal markets, changes in the Government regulations, tax regimes, economic developments within India and the countries within which the Company conducts business and other factors such as litigation and labour negotiations. The Company assumes no responsibility to publicly amend, modify or revise any forward looking statements, on the basis of any subsequent development, information or events or otherwise.

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