Detailed Rationale

Crisil Ratings has reaffirmed its ‘Crisil A1+’ rating on the commercial paper of Hindalco Industries Ltd (Hindalco).

 

The rating continues to factor in the strong business risk profile of Hindalco, driven by established position in the Indian aluminium industry, cost-efficient domestic operations, diversified product mix and robust profitability at Hindalco’s wholly owned subsidiary, Novelis Inc (Novelis, ‘BB/Negative’ by S&P Global Ratings) which is mainly a conversion business.

 

The rating factors in continued strong operating performance reflected during the first nine months of fiscal 2026, wherein the company reported consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda) of around Rs 26,400 crore as against ~Rs 25,400 crore during the corresponding period last fiscal, despite the fire incident at Oswego Plant in New York, constituting ~10% of volume of Novelis. The operating margin was supported by improvement in London metal sexchange (LME) aluminium realisation, healthy product mix, increased savings from cost control programmes and healthy domestic demand. Margins had improved to ~$495/t during the period (was $480/t during fiscal 2025), excluding the impact of tariff and fire accident.  Additionally, the company’s financial risk profile had marginally moderated with consolidated net debt (including supplier’s credit and unfunded pension obligation) to Ebitda ratio* of around 2.2 times as on December 31, 2025 (1.7 times as on December 31, 2024). The same is expected to improve to ~2 times for the complete fiscal 2026.

 

With expected average LME aluminium prices of ~$2,800 per tonne during the fiscal (averaged
$2,700- per tonne in the first nine months of fiscal 2026 and ~$2,600 per tonne in fiscal 2025) on the back for healthy metal demand and potential deficit in global aluminium demand-supply, Crisil Ratings expects consolidated Ebitda to be at Rs 33,000-35,000 crore in fiscal 2026 (~Rs 33,300 crore in fiscal 2025).

 

Crisil Ratings has taken note of the fire incident at Oswego Plant, New York. The two fire incidents, one in September 2025 and another in November 2025, have led to negative impact on total cash outflow of $1.3-1.6 billion, including $180-200 million of repairs for the machinery and cost of service to the existing customer. Of the total impact, 70-80% are covered under insurance. The company is expected to utilise its credit lines to fund the cash mismatch till the time insurance proceeds are received over a period of 18-24 months. The plant is expected to commission its operations back at the end of this quarter fiscal 2027.

 

Further, Crisil Ratings also takes note of further increase in the cost of Bay Minette project by ~23% to $5 billion. The said increase in cost is supported by equity infusion done by AV Minerals of $950 Million in Novelis. AV minerals had raised 5-year, $1000 million loan to support the equity infusion in Novelis.

 

Due to above reasons, the consolidated capital expenditure (capex) has increased and is expected at Rs 70,000 crore over the medium term. This includes the increased cost of Bay Minettee project, organic expansion in downstream capacities in Novelis and downstream as well as upstream capacities in India businesses. Of the total planned capex, ~Rs 20,000 crore has already been incurred up to December 31, 2025, while ~Rs 25,000 crore is likely to be incurred in fiscal 2026, and the balance will be incurred thereafter. As per the capital allocation approach, capex plans are to be primarily funded through consolidated annual cash accrual, which continues to be healthy. However, for fiscals 2026 and 2027, due to increase in debt to support increased  cost of Bay Minette project and high utilisation of credit lines for bridging the cash flow gap till receipt of insurance proceeds for Oswego plant, net leverage ratios will moderate compared to fiscal 2025 (~1.2 times), but are expected to remain at 2.0 times on sustainable basis. The same will remain monitorable.

 

Crisil Rating also takes note of increase in input prices of few raw material due to ongoing disruptions in West Asia, offset by increased LME aluminum prices, globally. Further, due to supply disruption from West Asia, demand of Indian Aluminium is expected to increase. Also, the company is not expected to face any major supply risk in near to medium term. However, the impact is monitorable if the disruption continues. 

 

The rating continues to factor in strong liquidity of Hindalco and Novelis, and the proven fund-raising ability of Novelis to meet any cash flow shortfall for the project in a timely manner. Further, the company had outstanding consolidated cash & cash equivalents of around Rs 26,200 crore as on December 31, 2025.

 

These strengths are partially offset by susceptibility to volatility in metal and input commodity prices, mainly in domestic aluminum business. Any significant decline in global demand or supply chain disruptions, impacting sales volume of the company, and sharp fall in aluminium prices will be monitorable.

 

*Considering Net debt as on 31st December and 9 months EBIDTA

Analytical Approach

Crisil Ratings has combined the business and financial risk profiles of Hindalco and its subsidiaries, including Novelis and Utkal Alumina International Ltd, as these entities have strong business and financial linkages.

 

Profit after tax (PAT) and networth of Hindalco have been adjusted for amortisation of goodwill arising from acquisitions. Also, consolidated adjusted debt includes net deficit related to the unfunded portion of the post-retirement benefit obligation for Novelis and supplier’s credit at consolidated level.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths

Established position in the domestic non-ferrous industry

Hindalco is one of the leading players in the domestic non-ferrous industry, with more than 40% share in the flat-rolled products market. It is also a leading copper producer in India, with its integrated smelting complex in Gujarat being one of the largest single-location custom copper smelters in the world. Thus, it has strong economies of scale to compete globally, and thereby diversify its revenue mix. In fiscal 2025, Hindalco generated around 34% of its revenue from exports. Geographical diversity in revenue should sustain over the medium term.

 

Continued healthy operating efficiency of domestic aluminium operations

Hindalco benefits from its low cost of production for aluminium, with its smelters occupying the first or second quartile position in global cost curves. The company also benefits from full alumina integration with captive bauxite mines and stable coal cost with around 90% coal security through a combination of linkages from Coal India Ltd and operational captive coal blocks. Coal security for the domestic business is further supported by the Chakala mine (reserves of around 50 MT, acquired in fiscal 2021) Bandha (reserves of around 5 MTPA, acquired in fiscal 2026) and Meenakshi mine (reserves of 286 MT, acquired in fiscal 2022). Chakla mine would operationalize by June 2026 while Meenakshi mine would operationalize by December 2026, and thus, enable the company to meet more than 90% of its coal requirement internally. The operating margin has been healthy, supported by an increase in aluminum prices and robust input cost and integrated operations, supported by steady demand. The margin is expected to remain range bound at 12-14% with a reduction in prices and material cost. Focus on increasing the share of value-added products shall also support profitability over the medium term.

 

Product and geographical diversity of Novelis, with healthy and stable conversion margin

Novelis is the world’s leading producer of auto and beverage can sheets. As it primarily converts aluminium into value-added products, it is less susceptible to volatility in aluminium LME prices. Investment towards enhancing product mix in the high-margin auto segment and the stable can-body-stock segment have supported growth in operating margin. Its position as the world’s largest aluminium recycler (more than ~60% of its aluminium consumption in fiscal 2025) also supports cost structure. Acquisition of Aleris in 2020 has further strengthened the product and geographical diversities of Novelis with addition of the high-margin aerospace and speciality segments, and better access to the Asia-Pacific region. Adjusted Ebitda per tonne witnessed moderation majorly impacted by high aluminium scrap prices and was $495 per tonne in the first nine months of fiscal 2026 (ended December 31, 2025) from $480 per tonne in fiscal 2025; excluding tariff and fire accident impact. 

Contribution of Indian business to consolidated profitability had increased from ~45% in fiscal 2024 to 55-60% in fiscal 2025 and the nine months fiscal 2026 due to increase in LME aluminum prices. The company’s strategy to expand downstream aluminium, along with increased share of high-margin product segments, should further support profitability over the medium term.

 

Strong financial risk profile

High profitability led to net cash accrual of more than Rs 23,000 crore in fiscal 2025. The consolidated net debt (including unfunded pension obligation) was stable at Rs 41,000 crore as on March 31, 2025, however increased to Rs 57,000 crore as of December 2025 due to increase in Bay minette project cost and high utilisation of credit lines till receipt of insurance proceeds for Oswego fire accident. Net leverage (including unfunded pension obligation) had reduced to ~1.2 times in fiscal 2025 from around 1.6 times in fiscal 2024 and interest coverage ratio had improved to ~18 times from 6.7 times in fiscal 2024. However, due to increased capex in the nine months of fiscal 2026 of ~Rs 20,000 crore from Rs 12,000 crore in fiscal 2025, net leverage at consolidated levels for fiscal 2026 is expected to be ~2 times.

 

With an expected increase in capex (to be funded through internal accrual), net debt may remain stable. However, with an expected rise in Ebitda, net leverage may decrease from current levels, yet sustain comfortably at 2.0-2.5 times over the medium term. Financial flexibility will remain strong, supported by healthy cash surplus and strong refinancing ability.

Key Rating Drivers - Weaknesses

Susceptibility of the domestic aluminium business to volatility in metal and input commodity prices

The domestic aluminium business remains exposed to sharp fluctuation in aluminium prices, as witnessed in fiscal 2016 and the first-half of fiscals 2021, 2023 and 2024. The operating margin is susceptible to increase in prices of raw material (coal, coke, and pitch), which the company may not be able to completely pass on to customers. While coal linkage security has increased and stands at 40%, and may improve further over the medium term, it remains susceptible to a hike in prices by Coal India Ltd, and non-fulfilment of linkage. However, this is mitigated by the conversion nature of Novelis and the copper business, which cumulatively contribute 45%-50% to the consolidated Ebitda.

Liquidity Strong

Consolidated annual cash accrual (post-dividend) of Rs 23,000-25,000 crore is expected during fiscals 2026 and 2027, against planned capex of ~Rs 25,000 crore annually, respectively, and minimal scheduled term debt. Furthermore, consolidated liquid investments were around Rs 26,000 crore as on December 31, 2025 (including untitilised limits of Novelis). Consolidated liquidity is also supported by unutilised fund-based limit in Hindalco.

ESG Profile of Hindalco

• Hindalco aims to achieve Net Zero Emissions by 2050, with a short-term target to reduce GHG intensity by 25% by FY 2026-27 against the base year FY 2011-12. As of FY 2025, it has achieved a 19.50% reduction in specific greenhouse emissions. Novelis, targets carbon neutrality by 2050 and had a short-term goal to reduce absolute carbon emissions by 30% by FY 2026 from the base year FY 2015-16, which was achieved in FY 2025 with a 32% reduction.
• To accelerate its push to Net Zero, Hindalco has installed 190 MW of renewable energy capacity, targeting 300 MW by FY 2025-26.
• Hindalco also aims to achieve Zero Liquid Discharge (ZLD) at all locations by 2030, with 16 out of 19 factories already achieving ZLD status. Novelis targets a 10% reduction in water intensity by 2026, achieving 7.63% reduction as of FY 2025 against the base year 2020
• Hindalco targets water positivity across all operations by 2050, with 5 mines certified as water positive and 1 unit certified as water neutral. Additionally, it has also certified 5 factories in aspiring category as per NITI AAYOG guidelines
• Hindalco also aims for Zero Waste to Landfill (ZWTL) by 2050, with 8 factories certified as ZWTL. Additionally, 21 operating locations are certified as Single Use Plastic-free, with ~85% recycling of hazardous and non-hazardous waste.
• Hindalco is also one of the few Indian companies to publish a report on Task Force on Nature Related Financial Disclosures (TNFD) highlighting Nature related dependency, impact, risk and opportunity. 
• Hindalco and Novelis reported a gender diversity of 13.64%, surpassing its sector peers. The company has set a short-term goal of achieving zero fatalities and a Lost Time Injury Frequency Rate (LTIFR) of less than 0.25. However, in FY 2025, it reported 3 fatalities, an increase from FY 2024, and an LTIFR of 0.48 among employees and 0.25 among contractual workers.
• Hindalco's governance structure is robust, with approximately 50% independent directors and 33% women directors. Additionally, it has a dedicated ESG committee and provides comprehensive financial and non-financial disclosures.

Rating sensitivity factors

Downward factors

• Sustained weakening of profitability, resulting in lower-than-expected cash accrual with net cash accrual to annual debt repayment ratio reducing to less than 1.0 time
• Steady increase in net debt to Ebitda ratio to 2.5-2.7 times
• Significantly higher-than-expected debt funded capex, resulting in material dilution in capital structure and weakening in liquidity profile

About the Group

Hindalco, the flagship company of the Aditya Birla group, commenced operations in 1962, with an aluminium unit in Renukoot, Uttar Pradesh. The company is the second-largest aluminium manufacturer in India, with capacity of 1,340 kilo tonne per annum (KTPA) of aluminium and 3,740 KTPA of alumina. It has a custom smelter with copper cathode capacity (including recycling) of 421 KTPA in Dahej, Gujarat.

 

Novelis, a 100% step-down subsidiary of Hindalco, was acquired in May 2007, for $6 billion. It supplies aluminium sheets and foils to the auto and transportation, beverage and food packaging, construction and industrial, and printing industries.

 

Aleris, a wholly owned subsidiary of Novelis, was acquired on April 14, 2020, for $2.8 billion. It manufactures aluminium-rolled products and has 13 plants across North America, Europe and Asia, serving diverse industries, including aerospace, auto, building and construction, commercial transportation and industrial manufacturing.

Key Financial Indicators - Consolidated; Crisil Ratings-adjusted numbers

As on / for the period ended March 31	Unit	2025	2024
Operating income	Rs crore	238,763	215,962
PAT*	Rs crore	16,002	10,155
PAT margin*	%	6.7	4.7
Adjusted debt / adjusted networth*	Times	0.70	0.80
Interest coverage	Times	9.71	6.67

* Adjusted for the treatment of goodwill, mining rights and other intangible assets

Any other information: Not applicable