HINDALCO –

A GEM OF ADITYA BIRLA GROUP

Prepared by – Mithil Gandhi

The Aditya Birla Group

Despite a choppy global economy, AB Group turned in a solid performance

in FY 2011-12, anchored by our 133,000 strong workforce comprising 42

nationalities spanning 36 countries.

Consolidated revenues were a little over USD 40 billion, reflecting a 14%

growth.

Existing Businesses,

Non-ferrous metals

Cement

Chemicals

Textiles

Telecom

Mining

Windpower

Retail

Non-Ferrous Metals

Hindalco Industries Ltd: A global leader in AL & Cu with $15.85 b (Rs 72K

Cr) revenues with AL & Cu making, Cu mining, Al rolling & power assets of

~ 1100 MW

Novelis Inc: global leader in rolled aluminum products and the largest

recycler of aluminum in the world with $11.1 b revenues

Hindalco Almex Aerospace Ltd: Hindalco-Almex Aerospace Limited (HAAL)

manufactures D.C. cast hard aluminium alloys for applications in the

aerospace, sporting goods and surface transport industries

Cameroon Alumina Limited: CAL intends to set up a bauxite mining and

alumina refinery project in Cameroon

Cement, Chemical & Textiles

Ultra Tech cement:

2nd largest cement player in India with an installed capacity of 52 Million Tonnes

Per Annum & net turnover of Rs. 18,166 Cr

Company diversified its presence in Middle East through acquisition of ETA star

cement, Dubai, which has cement manufacturing capacity of 3mtpa.

Power generation: 700 MW

Grasim:

Domsjö Fabriker (Sweden): Pulp supplier for VSF business

180,000 tpa Greenfield plant in Turkey to increase capacity & solidify leadership

in this segment

Grasim Bhiwani Textiles Limited (GBTL): Yarn & Fabric making facility in India.

Manufacturing of Polyester Viscose fabric catering the market under brands

GRASIM & GRAVIERA as also exporting it’s fabric to various reputed brands

Chemicals: Caustic making

Mining, Wind-power, telecom & retail

Essel Mining & Industries Limited:

largest iron ore mining companies in the non-captive private sector and the

largest producer of noble ferro alloys in India

coal mining business: 20-MTPA Bhubaneshwari coal project

Ferro-chem division: largest producer of high-quality noble ferro alloys in India

Wind Power: Wind power generation assets of 75-MW at Dhule in Maharashtra,

Idea Cellular: India’s third largest mobile operator and ranks among the top

10 country operators in the world with a traffic of over 1.5 billion minutes a

day & revenue in excess of $4 billionn & subscriber base of over 121 million

in FY 2013

Aditya Birla Retail Limited: Operates over 509 supermarkets and 14

hypermarkets

Hindalco – A global Non-ferrous giant

Hindalco – Business Highlights

For FY 12, consolidated Revenue at Rs 80,821cr has been the highest

ever, a growth of 12% Year-on-Year, aided by better product mix and

depreciation of Rupee.

PBIT stood at Rs 8,973 crore as against Rs 8,441 crore in FY11.

Net profit attributable to the shareholder increased to Rs 3,397 cr, up by

38% over FY11.

The increase in profit is primarily attributable to the strong performance at

Novelis and Copper Business in India

Of the total annual revenue of Rs 80,821 crore,

Aluminium Business contributed Rs 62,059 crore, up 10% over the last year. Aluminium EBIT

for FY12 remained flat at Rs 4,495 crore compared to Rs 4,469 crore in FY11.

In the Copper Business, revenue was higher at Rs 18,364 crore, a rise of 16% from Rs

15,882 crore in FY11. The Copper EBIT was Rs 1,119 crore vs. Rs 1,082 crore in FY12.

Hindalco – Products

Aluminum:

Bauxite

Aluminia

Primary Aluminium (Ingots, wire rods, billets)

Aluminium extrusions

Aluminium rolled products

Aluminium Foil & Packaging

Captive Power

Copper:

Copper Cathodes & rods

Fertilizers (DAP and NPK complexes)

Acids

Others: Precious metals

Cargo Handling

Hindalco – Value chain

Hindalco - Operations

Bauxite Mining:

Captive bauxite mines in Jharkhand, Chhattisgarh, Maharashtra and Orissa, provide the raw material to alumina refineries located at Belgaum in Karnataka, Muri in Jharkhand and Renukootin Uttar Pradesh

Manufacturing Locs: Muri: Alumina refinery of 450,000 tpa capacity & 30 MW coal-based captive power plant

Alupuram: Aluminium Smelter operates at a capacity of 8,000 tpa

Belur: Aluminium Plant 45,000 tpa

Taloja: sheet rolling plant with capacity of 50,000 tpa & recycling facility of 20,000 tonne

Kollur: foil plant of 4,000-tpa plant

Belgaum: alumina plant of 350,000 tpa

Silvassa: 30,000-tpa aluminium foil and converted products plant

Dahej: copper unit comprises copper smelters, a captive power plant, oxygen plants, by-products plants, utilities and a captive jetty

Hirakud: aluminium smelter 161,400 tpa & power plant of 368 MW

Renukoot: 700,000 tpa alumina refinery, 345,000 tpa aluminium smelter & 78.1MW power plant

Ranusagar: 742 MW power plant

Hindalco - Projects

Greenfield:

Madhya Pradesh - Mahan Aluminium Project: 359-ktpa aluminum smelter and a 900-

MW captive thermal power plant

Orissa - Aditya Alumina and Aluminium Project: The project includes a 4.2 million-tpa

bauxite mine, 1.5 million-tpa alumina refinery at Kansariguda and 359-ktpa smelter at

Lapanga

Orissa - Utkal Alumina Project: Construction of 1.5 million-tpa alumina refinery at &

90 MW captive co-generation plant

Jharkhand - Jharkhand Aluminium Project: A smelter–power plant complex with a

capacity of 359 ktpa powered by a 900-MW captive thermal power plant

Brownfield:

Primary metal: Hirakud: Expansion of smelter from 155 ktpa to 213 ktpa and power

plant expansion from 367.5 MW to 467 MW

Alumina capacity: Belgaum: specials alumina production from Belgaum will be

ramped up to 316 ktpa from 138 ktpa

Subsidiaries & their products

Aditya Birla Minerals:

Copper mining

Birla Nifty

Birla Mt Gordon

Novelis:

Al Recycling

Al Rolling

Al Continuous treatment

Hindalco-Almex Aerospace Ltd

Al Cast billets

Al Cast slabs

Aditya Birla Minerals

Aditya Birla Minerals is Hindalco’s 51% own subsidiary

The realizations suffered on account of 10.5% appreciation of Australian

Dollar vis-à-vis USD.

Even though average copper prices during FY12 were slightly higher than

the previous year in USD terms, prices were weaker in terms of Australian

Dollar.

The Standalone basic and diluted Earnings Per Share were at Rs 11.7 per

share in FY12 as compared with Rs 11.2 in FY11.

The Consolidated EPS was Rs 17.7 per share as compared with Rs12.8

per share last year.

Novelis

100% subsidiary of Hindalco posted robust numbers in with multiple

challenges in the Novelis’ core markets viz US and Europe.

Net income, excluding special items, of $ 218 million, up 6% YoY.

Adjusted EBITDA of $ 1.053 billion, down 2% YoY.

Record Free Cash Flow before Capex of $ 614 million.

Solid Liquidity of $ 1.021 billion.

Five Forces – Non-ferrous metal industry

Supplier’s bargaining power –Short term: Low / Long term: Moderate

• Captive bauxite mine for AL

• Captive power plant for AL manuf.

• Partial CU ore supply from mines in Au

• More supplies will be required to meet future capacity expansion

Buyer’s bargaining power -Short term: moderate / Long term: Moderate

• Commodity items & competition based on price

• Local presence required

• Rare product based differentiation

Threat of substitute -Short term: low / Long term: Moderate

• Increasing usage of non-metallic material

• Increasing volume of recycled AL

Threat of New Entrants - Short term: low / Long term: low

• High capital intensive

• Value chain integration is critical for survival

• High geographical spread required

Industry Rivalry: low

Strategy

Factors for getting competitive advantage:

• Volume growth by geographical spread to take advantage of economies of scale

• Value chain integration for reduction in cost & dependence of supplier

• Usage of updated technology for reduction in cost & increase in the efficiency

Demand Scenario

Demand growth to decrease from China as slowing down of the

construction industry

EU to have constant or declining demand due to EU debt crisis

Demand recovery in the US & Japan after fiscal stimulus driven by

automobile & construction sector.

Demand in India to grow in the medium to long term

Demand to grow @ 6 to 7% per annum for next five years

Source: Crisil

Supply scenario

Supply to get increased as a result of massive capacity addition in India

Capacity addition in Middle east to further increase the supply

Relatively low growth in demand to decrease capacity utilization in medium

future

Price pressure to rise on the producers in the developed economy because

of lowest cost in India & low power cost in the middle-east

Trade flow is likely to change because of the capacity addition in the

middle-east

Source: Crisil

Domestic Competition

Major domestic players apart from Hindalco,

Nalco

Balco

VAL

Raw material & fuel is the key elements for getting competitive advantage

Cost of competitors with external coal supply (ie supply from CIL) to increase significantly as CIL proposes to increase coal prices by 20%. Hindalco to benefit due to its own coal blocks.

Competitors dependent on external supply for raw material (like VAL for Aluminia) will have increase in cost due to imported aluminia

High rate of capacity addition in India to bring down utilization if global demand does not increase

Hindalco to have competitive advantage due to its captive power generation

for plants and captive mining for raw material & fuel (coal) for power plants

Global Competition

Major global players are,

Alcoa: US-based world's third-largest producer of aluminium, the largest bauxite producer & aluminia refiner with focus on US & European market

Rio Tinto Alcan: the world's largest aluminium producer & one of the world's largest producers of bauxite, aluminia with production capacity all around the globe

Hydro Al: A fully integrated Norwegian company is the fifth largest aluminium company in the world with strong presence in aluminia and power with focus on European market

Chalco: The largest producer of aluminia and primary aluminium in China & the second largest producer of aluminium in the world catering mainly to the Chinese market

UC RUSAL: World's second largest aluminium producer catering mainly to CIS & European markets

Way ahead for Hindalco…

To become self sustainable for the raw material (Bauxite & aluminia) &

power (coal) to achieve cost as a competitive advantage in the domestic &

global market

To set-up the plants in the middle-east to get cost advantage due to low

power cost & diversify risk from having all the production capacity in India

Increase focus on Japan & China. Demand from Japan to increase & China

is geographically suitable for exports from India (as logistic cost will be low)

To invest in African bauxite mines (Guinea, Mozambique and Ghana) as a

strategy for long term raw material security & to diversify risk of high

dependency on the India bauxite reserves

Thank You