Billionaire Birla's Hindalco Doubling Down on Modi's Build Plan

(Bloomberg) -- Hindalco Industries Ltd., India's biggest producer of aluminum, is planning to invest 50 billion rupees ($773 million) in the next five years to boost its capacity to make processed products such as panels as the country accelerates investments in building infrastructure.

The company is looking for any distressed rolling mills or extrusion presses for sale in India to help meet its target to expand annual production of value-added products about 66 percent to 800,000 metric tons, Satish Pai, managing director of the flagship of billionaire Kumar Mangalam Birla's Aditya Birla Group, said Tuesday in an interview. 

Prime Minister Narendra Modi's promise to boost investment in developing Asia's third-largest economy's power, housing and transportation sectors has led to a record metal production in the country. Because of overcapacity in domestic primary aluminum markets, Hindalco will focus more on the downstream products and the automotive sector, Pai said.

Housing Panels

“If we want to take advantage of the Modi plan, we need to have downstream products,” Pai said in Mumbai.  This means “more cables, conductors, housing panels, and foils,” he said.

Earlier this week, Hindalco reported its fifth straight quarterly profit in the three months to March 31 boosted by record volumes and higher prices on the London Metal Exchange.

India consumes about 3 million tons of aluminum and domestic production is pegged at 4 million tons, out of which Hindalco churned out a record 1.3 million tons of primary metal and 481,000 tons of value-added products last year. Local demand is expected to grow at 9 percent to 10 percent in the next five years pushing up usage to 6 million tons, Pai said.

Along with expanding in India, the company's Atlanta-based unit Novelis Inc., which is the world's largest producer of rolled aluminum products, is also planning a big push in the automotive sector, said Pai, who took over the top position in the company last August.

“Novelis is a big part of the growth story -- we will be putting in more investments to expand into the auto sector,” he said without giving details. “We have a deleveraged balance sheet and the company is healthy enough to take advantage of any growth opportunities that present themselves,” he said, when asked about acquisition plans by Novelis.

Prices will continue to remain high in the range of $1,700-to-$2,000 a ton over the next year supported by strong demand globally, Pai said. If China's pledge to cut capacity materializes, then prices could even rise to $2,200 a ton, he said. The metal in London was little changed at $1,929.50 a ton at 9.19am in Mumbai. It's gained 14 percent this year.

To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net.

To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Keith Gosman, Jake Lloyd-Smith