India's manufacturing sector is reviving: Debnarayan Bhattacharya

30 May 2016

Aditi Divekar and Dev Chatterjee
Business Standard

With domestic demand for aluminium moving into double digits, Debnarayan Bhattacharya, Managing Director, Hindalco Industries, who will take over as the vice-chairman of the company from August 1, talks about visible green shoots of recovery in India's manufacturing sector. He talks to Aditi Divekar and Dev Chatterjee about his plans to control capex and bring down net debt to EBITDA ratio. Edited excerpts:

Are you seeing any green shoots of recovery in the domestic market?
Yes. Consumption in India has increased. The construction sector, automotive segment, and also the electric segment have shown positive signals. It shows manufacturing sector in India is reviving.

How do you see Hindalco's performance in the coming quarters?
India's aluminium demand has already moved into double digits and we expect consumption to grow. Most areas of operational efficiencies will continue to remain so, but I'm concerned about the input costs. In the last quarter, Brent crude price was lower but it is now slowly going up. In such a case, we will be able to absorb rising input cost partially.

Hindalco has ramped up its greenfield projects. What is your capex for FY17?
Our aim is to control capex and keep it below Rs 1,000 crore. Conserving cash is an important focus for us as we want to strengthen our balance sheet going ahead. We want to bring down the net debt/EBITDA (earnings before interest, taxes, depreciation and amortisation) ratio. Currently, our consolidated net debt stands at Rs 58,000 crore.

Do you have any plans to refinance Novelis' debt? How do you see Novelis' performance this year?
The term loan of Novelis has already been refinanced. There are two senior notes. We are evaluating refinancing for one of the notes of around $1 billion. But, there is no urgency for refinancing. The other senior note is not due. Hindalco's Rs 24,000-crore standalone debt has already been refinanced.

As far as performance is concerned, Novelis has been doing well. So, I would expect its performance to be better than last year's.

What is your outlook on aluminium prices, premia, treatment charges, and refining charges?
Treatment and refining charges might soften going ahead, while aluminium prices on LME (London Metal Exchange) are seen range-bound. The premia of aluminium are expected to stay where they are, which means our revenues will not be lower than current levels and with the help of higher volumes, Hindalco will offset the impact of weak realisations.

What are the challenges that you see for Hindalco in the coming years?
The most important thing for Hindalco will be to hire the right people at the right places. We have a robust human resource plan for the company to make sure the firm meets its goals.