Further, in India, Hindalco is net debt negative. The gross debt in India is around Rs 8,000 crore. The company does not have any plans to reduce that anymore. In Novelis, once the Bay Minette project is over, they will be back to normal two-and-a-half type of net debt to EBITDA rates.
While Q1 revenue growth was largely in line with the guidance that you had earlier stated, given the recent fall in metal prices that we have seen recently, are you confident of achieving, let us say, 6% to 8% top-line growth guidance that you had given at the start of the year?
Satish Pai: So, I think that honestly in our commodity type of business, we are more interested in growing the EBITDA than the top line. So, if you look at it, this quarter our consolidated EBITDA of Rs 7,992 crore was up 31% year-on-year. Our focus is on profitability and margins more than just trying to grow the top line because the top line in a commodity business is very much driven by the price of aluminium and copper, which is not really in our control. So, what we try to focus on is the profitability.
The copper business numbers were at an all-time high. EBITDA has come at Rs 805 crore, much better than the guidance of Rs 600 per tonne given earlier. So, you are sticking to Rs 600 quarterly EBITDA guidance or are increasing it?
Satish Pai: Frankly this quarter the sales were much higher than expected. The demand was very strong, and operational efficiencies were good. So, we got a higher number, but there was also some amount of hedge accounting noise that came in, which can always go either way. So, on a consistent onward-going basis, we will stick with the Rs 600 crore guidance.
What is the outlook on the aluminium segment because EBITDA had benefited from the lower raw material costs? Will the benefits continue in Q2 and the rest of the financial year?
Satish Pai: No, in Q2, our costs are probably going to be flattish versus Q1 and we can already see that the aluminium prices have come down by about $200 a tonne. So, for Q2, you are going to see the EBITDA per tonne to come in a bit lower than what we had in Q1.
I want to get a sense of the entire headwind that could appear from the Supreme Court order. It has given power to the state government to levy the royalty on mining, any rough estimates as to how that will impact you?
Satish Pai: What we worry about more is on an ongoing or a prospective basis. We do hope that state governments and central governments as a combination do not put very onerous taxation on the mining industry because India needs more mines to open, more metal and more minerals. Any concern we have is on a prospective basis. We hope that taxations will remain reasonable.
FY25 capex plans and capex guidance and also the company sticking to the capex plan of 4.1 billion for executing Bay Minette project?
Satish Pai: Absolutely, we are very clear that Bay Minette is on track. The budget of 4.1 billion is on track and starting in around September 26 is also on track. So, no change there. And even on the India capex, the guidance of Rs 5,500-6,000 crore still remains the same.For Novelis, the company mentioned that the new contracts are repriced at a higher level. So, what kind of EBITDA margin can we expect for FY25?
Satish Pai: What you are saying is that the contracts are getting repriced at a higher rate. In the short to medium term, we are guiding $525 per tonne. And once the Bay Minette capacity comes in, we are expecting it to be around $600 per tonne. So, that is our guidance, no change there.But the net debt increased this quarter by almost Rs 4,000 crore on a sequential basis and this could be on account of the working capital pressures that might have come in at Novelis. But what is the debt situation right now? Do you have a plan to reduce debt or is it going to stay elevated? What is the roadmap?
Satish Pai: In India, we are net debt negative, our gross debt in India is around Rs 8,000 crore. We do not have any plans to reduce that anymore. We have no repayments due for the next two years. So, in India, we do not have any further plans to reduce any more debt. In Novelis, what will happen is that as the Bay Minette project continues to be executed, we have said that the net debt to EBITDA in some quarters could go up to three. But once the project is completed, we will be back at the normal two-and-a-half type of net debt to EBITDA rates.
