I heard from someone who is associated with Nalco that they have one of the best mines in the world with very good alumina percentage…which has significant cost advantage in the production of aluminium.
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This is indeed true. The quality of bauxite is such that to make alumina the temperature required is far lesser than what one needs with bauxite from Australia (major global source). This gives Nalco an advantage of almost US$100/t in alumina cost and around US$200/t in aluminum cost.
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Thanks! Since the 10 Yr CAGR Profit growth is higher for Hindalco, it seems something has positively impacted Nalco in just the last 10 years. Maybe some new mines won in the last 10 years with higher Alumina percentage as @N29 mentioned and as you also mentioned about energy savings which should be a big factor too.
Hindalco with Novelis and thus International Sales scores over in total sales but Nalco has the profitability edge till it has these mines running…
Btw the link has good information on mines auction in the current FY. So far 6 mines were auctioned for Bauxite and neither Nalco nor Hindalco was the winning party.
https://mines.gov.in/webportal/content/archived/details-of-successful-auction-during-the-year-4134
Interesting article on India’s push for critical minerals. The govt.arm for this seems to be “KABIL - Khanij bidesh India , this being a 40/30/30 JV between Nalco, hcl and mining exploration consultancy.
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Found this article to be very insightful
30,000cr Capex Plans - 17,0000cr of Aluminium + 13,000cr for Power (JV with NTPC)
This is excluding the ongoing Alumina and Bauxite Capex.
Massive Debt is likely to be taken
Any Example of PSU managing to do such capex efficiently, without delays or cost overruns?
NALCO | Management Interview
- Expect some pressure on aluminium prices after US tariffs kick in.
- Aluminium prices may drop to $2,570 & Alumina prices to be around $500’
- Fallout of US tariffs as well as the co’s Q3 performance.
- New Alumina refinery to begin operations in Sep 2025.
- Margin will sustain at 25-30%
- Reserve Cash: INR 4000 cr
Watch here
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A US or global slowdown can lead to aluminium prices falling down to $2,300 per tonne, Emkay said
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Nalco has mixed performance in the execution front.
It entered into a JV with GACL and began a caustic soda plant whose output has successfully eliminated the need for imports and shielded it from raw material price fluctuations.
The alumina plant future expansion along with enhanced bauxite production from Pottangi mine is an 8000 crore project funded through reserves with zero debt. The alumina plant that is currently being expanded will go live on September 2025 is costing 5677 crores funded through internal accruals. Pottangi mines expansion is again through internal accrual costing 1961 crores.
It is now planning a JV with NTPC to get 100% power production done in-house and reduce dependence on grid electricity which is very expensive. This could be a game changer in making Nalco a very low cost producer. The bill for this capex is estimated at 13000 crores, and the coal requirements would be 7 million tonnes per annum out of which 4 million will be obtained from Nalco’s own Utkal D and E coal blocks.
Their JV with BARC for extraction of lucrative germanium and gallium from “red mud” waste generated after aluminum production is still in planning phase since 2014.
Their JV KABIL with other PSU companies to source critical minerals is yet to see any results.
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Although Nalco has been a very good foreign exchange earner for the government, India also imports 56000 crores worth of aluminum which the govt will be keen to replace with domestic production.
Aluminum can be a replacement for copper in electrical grids and is already finding increasing use in automobiles due to its lightweight advantages in EV and petrol vehicles.
Domestic demand, led by auto sector and including power and infra sectors, is projected to hit 10 million tonnes from the current 4.5 million tonnes.
Due to these factors, Nalco has visible growth drivers providing good earnings visibility down the road although short term pain could be felt in the next few quarters
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Any idea why it’s trading at such low PE?
Lower than normal PE could be due to lower price (numerator) or even higher than normal earnings (denominator).
NALCO is in a commodity industry so PB is probably a better metric to judge over / under valued status.
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It has a p/b of approx 2.5- would that be fairly valued for commoditiy business? I looked at hindalco - and it’s trading at approx 1.5 p/b. but Nalco has better ebitda margins, so is the higher p/b justified?
Great work, but I think if company is going good bcoz it’s psu ,than what is the issue govt selling their share?
p/b is 3.5 times now. Stock started crazy upward journey.
Disc - not invested
Extract of Q4,FY26:
Q : Pallav Agarwal: Sure, sir. Sir, just lastly, coming back to the alumina pricing scenario. So I think you had earlier mentioned that Indonesia, the smelters were delayed, but the alumina refineries had come on stream. So, there was a pressure on pricing. So by when do you expect this to probably normalize and the smelting capacity to start operation in Indonesia?
A : Brijendra Pratap Singh: Indonesia smelting capacity is going to start this financial year end, some of the smelting capacities. But in spite of that, their refineries capacities are on the higher side. There will be an excess of alumina in the market every time this year or maybe next year. And with this, some of the smelters in the Middle East is going down and their revival itself will take around seven to eights months or maybe one year. So, this year, this financial year, there will be an excess of alumina in the market and the pressure on the pricing will be there.
Page 11 of 27 : Q: So regarding there was a lot of news of us about exploring the rare earth and critical mineral assets as well. Apart from the KABIL Argentina mine, have we scouted or zeroed down on anything else?
A : In rare earth and critical mineral, we have a huge amount of red mud lying with us and there are some projects we have taken it up. And in coming times, there are some visibility that we will be getting some valuable items from this. But presently, these all are at pilot scale level. It will take another two, three years to firmly decide upon the value which we will get out of this. But in some of the projects like gallium extraction project, we are at advanced stage of putting up a pilot plant, and we’ll get the first right of extracting and putting up a gallium plant down the line after two, three years.
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Wondering if NALCO is already running at near 100% smelting capacity (converting Alumina to Aluminium), if not then this war in Middle East and their smelters impacted, shows that there maybe a market for finished Aluminium in their market over the next 1 year till their smelters come online to full capacity..
NALCO -
Q4 and FY 26 highlights -
Q4 outcomes -
Revenues - 4981 cr, down 5 pc
EBITDA - 2547 cr, down 12 pc
PAT - 1718 cr, down 17 pc
Q4 physical performance -
Alumina exports - 3 lakh MT
Alumina domestic sales - 38k MT
Aluminium exports - 6.11k MT
Aluminium domestic - 1.16 lakh MT
FY 26 outcomes -
Revenues - 17729 cr, up 6 pc
EBITDA - 8613 cr, up 8 pc
PAT - 5813 cr, up 9 pc
Alumina sales ( exports + domestic ) - 14.46 lakh MT
Aluminium exports - 13k MT
Aluminium sales - 4.61 lakh MT
FY 26 physical performance -
LME prices for aluminium averaged around $ 3150 / ton in FY 26. Today’s prices are @ 3550 / ton
NALCO is an integrated Bauxite - Alumina - Aluminium -Coal - Power company. It is the global leader in producing bauxite and alumina at the lowest cost
Top 6 user Industries of aluminium -
Electrical
Transportation and Automobiles
Building and construction
Consumer durables
Machinery and Equipment
Packaging
Company expects the demand for aluminium in India to keep growing @ 6-7 pc CAGR for next 5 yrs
Existing facilities and Ongoing expansion projects -
Bauxite - 7.5 million MTPA ( located @ Panchpatmali, Odhisa ) - total reported resources @ 310 million MT
Expansion underway @ Pottangi Bauxite mines ( located @ a distance of 25 km from Panchpatmali ). It ll have a capacity of 3.5 MTPA with reserves of 110 million Tons. Expected to be commissioned in May 26
Alumina Refinery - 2.1 million MTPA ( producing alumina hydrate, special hydrates, Calcinated alumina ) - located @ Damajodi ( Odisha ) - aprox 14 km away from Panchpatmali. The mined-out bauxite is transported from captive mine to refinery by a 14.6 KM long single-light multi-curve 1800 tonnes per hour (TPH) capacity cable belt conveyor
Expansion is currently underway at the Alumina refinery. Capacity is expected to go up by 1 MTPA. Expected to be commissioned in Jun 26
Aluminium Smelter - 0.46 million MTPA ( producing Aluminium metal - Ingots, Billets, Wire Rods, Rolled products ) - located @ Angul ( Odisha ). The alumina produced is transported to aluminium smelter at Angul (Odisha) and to Vizag ( for exports ) port by rail
Smelter expansion shall double the company’s refined aluminium’s capacities. Likely to be commissioned in Dec 30
Captive coal mines - 4 million MTPA ( @ At Utkal coal mines in Angul district )
Company can increase its Coal block’s production by 20 pc above 4 million MTA without environmental clearances
Captive thermal power capacities @ 1200 MW ( 10 X 120 MW ) located @ Angul
Additional captive power plant with capacity of 1080 MW - expected to go live in FY 31
Wind power capacities @ 198 MW
Capex for company’s Aluminium Smelter shall begin in FY 28. For Smelter, the capex should be around 17000 cr. For 1080 MW power plant, capex requirement should be around 13000 cr
Notes from previous concalls -
KABIL JV ( between Nalco : Hind Copper : Mineral exploration and consultancy limited in the ratio 40 : 30 : 30 ) has 5 mines in Argentina ( Lithium mines ). Non invasive exploration is complete. Results were encouraging. Commercial mining may take > 2 yrs to begin ( once they ascertain commercial viability for which they ll take another 6 months )
Capex for Alumina refinery expansion has been around 4000 cr. Should spend another 1300 cr before the refinery goes live. Should be able to make Rs 10000 / MT ( aprox $ 109 / ton ) kind of margins ( post depreciation ) from this new refinery ( even at depressed alumina price levels )
Should be able to produce additional 2 lakh MT of Alumina in FY 27 and 10 lakh tons ( full ramp up ) by FY 28 - from the new refinery. This should add another 200 cr / 1000 cr to company’s EBITDA over FY 27 / FY 28
2-3 new Alumina refineries have come up in Indonesia + 1-2 smelters have been shut in China and elsewhere. That’s why Alumina prices r weak but aluminium prices continue to rise
2-3 new Alumina refineries have come up in Indonesia + 1-2 smelters have been shut in China and elsewhere. That’s why Alumina prices r weak but aluminium prices continue to rise
In talks with two companies to form JVs for extraction of rare earth minerals from Alumina Red Mud. Aprox 1-1.5 tons of Red mud is generated / 1 ton Alumina production
Also forming a JV with another company for extraction of Gallium from Liquid Residual of Alumina production
Aluminium cost of production in Q4 is running @ aprox $ 1750 / ton
1.93 tons of Alumina are required to produce 1 ton of Aluminium
In Q3 - Company’s avg selling premium in domestic mkt ( over LME prices ) was aprox $ 28
CP Coke ( calcinated petroleum coke ) is used as Anode in Aluminium Smelters
Notes from Q4 concall -
Alumina realisations @ $ 370 vs $ 580 / ton in FY 26 vs FY 25 - steep fall in realisations
Aluminium realisations @ $ 2700 vs $ 2550 / ton in FY 26 vs FY 25 - descent gain in avg realisations wrt metal. Current metal price is very healthy @ > $ 3550 / Ton
Alumina production target for next FY @ 2.5 million MT, Aluminium @ 0.47 lakh MT
Alumina exports directed to ME was aprox 40 pc of company’s Toal exports pre - Iran war. Since those supplies are now under pressure, spot Alumina prices have now fallen further to $ 310 / Ton. Aiming to make up for the lost Alumina sales from sales to other geographies + domestic sales. A key advantage that NALCO enjoys is that the quality of its Bauxite mines is rich. Because of which, they enjoy a benefit of $ 100 / Ton in Alumina and $ 200 / Aluminium production
Alumina realisations in Q4 were @ $ 348 / Ton. As of end Apr, they r selling Alumina @ $ 310 / Ton
Capex tgts for FY 27, 28, 29 - should be around 1.8k, 4k and 8k cr
Company’s avg cost of production for Alumina is around $ 230 / Ton
Assuming avg Aluminium and Alumina prices @ $ 3350 and $ 320 + Avg Aluminium and Alumina sales @ 4.7 lakh and 15 lakh tons - Revenue from Aluminium and Alumina sales for FY 27 should be around 14.9 k cr + 4.5k cr = 19.5 k cr. These figures for FY 26 were @ 12k cr + 5k cr = 17 k cr - these r optimistic assumptions 
Next yr, their employee costs should be lower - as fresh hirings are < superannuations + the Superannuating employees draw greater salaries
Capex incurred in FY 26 was @ 2000 cr
Alumina surplus should continue in FY 27 as well. So the prices should naturally remain under pressure
Company’s annual requirement vs captive production of coal in FY 26 stood @ 7.2 million tons vs 4.2 million tons. They aim to ramp up captive production to 4.8 million tons in FY 27
Company has a JV with GACL to produce caustic soda. half of their caustic soda requirements are met by the production from that JV. Aprox 200 kg of caustic soda is required for 1 MT production of aluminium
Caustic soda prices are up 7-8 pc in last 4-6 months
Cash on books @ aprox 8.5k cr
Management believes, $ 300-310 / Ton should be the floor for Alumina prices
Will be adding brownfield capacity to their flat rolled + wire rod products ( subsumed in their capex guidance ). Its a profitable business area for them
Employee costs should see an avg hike of 12-14 pc in FY 28 - on account of implementation of new pay commission
In talks with Neyveli Lignite to form a 50:50 JV - to share the capex for the proposed power plant to be built along with the new Aluminium smelter. Talks are in advanced stages. Should be a sweet deal for Neyveli as they have Lignite mines in nearby areas
The royalty that the company pays on Bauxite mining depends on the LME prices. Hence continues to vary all the time
For FY 26, ratio of revenues from Aluminium : Alumina was @ 73 : 27. Fall in Alumina prices is being more than offset by gains in Aluminium prices
Their JV with GACL produced a negative EBITDA of 30 cr. This FY, it should make a positive EBITDA
Disc: hold a small trading position, not SEBI registered, posted only for educational purposes, biased
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