This article first appeared on GuruFocus .
Release Date: August 03, 2026
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
Positive Points
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National Aluminium Co Ltd ( BOM:532234 ) reported a robust Q1 FY27 with total income growing 39% year-over-year to Rs 5,400 crore, and PBT and EBITDA surging 88% and 78%, respectively.
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The company achieved best-ever quarterly production in bauxite, hydrate, and wind power, and is targeting 5-10% above rated capacity utilization across all areas.
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Alumina realizations are expected to improve significantly in Q2 FY27, with spot prices rising to around $370-$380 per ton from $323 in Q1, driven by supply disruptions in Russia and China.
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Domestic aluminum premiums have increased to $110 per ton from $60, boosting realizations, and the company expects LME prices to remain supported by a projected 0.88 million ton global supply deficit.
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The company maintains a strong balance sheet with zero debt and a cash reserve of Rs 10,500 crore, which will be used to fund its expansion plans without external borrowing.
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Employee costs are declining due to a superannuation scheme for senior staff and lower provisions, with a trend of 170-200 employee reductions expected annually over the next few years.
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The new 1 million ton alumina refinery (5th stream) is progressing, with mechanical completion targeted by September and 200,000 tons of production expected this fiscal year, adding to sales volumes.
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Captive coal production is on track to increase to 4.8 million tons in FY27, offering significant cost savings compared to e-auction coal, which is about Rs 1,500 per ton more expensive.
Negative Points
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The commissioning of the new 1 million ton alumina refinery has been delayed by 2-3 months, with production now expected to start only from November-December 2026, pushing full capacity utilization to next fiscal year.
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Raw material costs are rising sharply, with caustic soda, CPC, and HFO prices increasing metal production costs by Rs 15,000-16,000 per ton, and Q2 costs are expected to rise further to around Rs 172,000 per ton.
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LME aluminum prices have cooled down to around $3,200 from Q1 averages of $3,600-$3,700, which could pressure margins despite higher alumina prices.
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Coal inventory at the refinery is critically low at only 2-3 days (versus the required 10-15 days) due to railway rake priority issues, posing a risk to production continuity.
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The Potangi bauxite mine development is facing delays due to local resistance and activist opposition, with production now expected to start only from October 2026, later than planned.
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The company has no plans to enter aluminum recycling, which could limit its ability to capture growth in that segment, though it maintains this is to preserve metal quality.
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The massive Rs 25,000 crore capex for the 0.5 million ton smelter and 1,000 MW power plant will begin next fiscal year, with peak spending in FY29-FY31, potentially straining cash flows despite current reserves.
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Alumina sales volumes are expected to increase only modestly to 1.6 million tons in FY27 from 1.4 million tons last year, as the full benefit of the new refinery will only be realized from FY28.
Q & A Highlights
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Q: Can you provide an update on the commissioning of the 1 million ton 5th stream alumina refinery and whether the 200,000 ton production target for FY27 is still achievable? A: CMD: We started commissioning activities in June. More than 50 packages are involved; some have achieved mechanical completion and are under trial. Our target is to complete mechanical completion of all packages by September end, followed by integrated water trials. Actual production will start from November or December, and it will take 3-4 months to stabilize at 60-70% capacity. We are confident of producing around 2 lakh tons of alumina from this refinery this fiscal year. There is a delay of 2-3 months from our original plan, which is not huge for a chemical process plant of this scale.
Q: What is the reason for the decline in employee costs, and should we expect this trend to continue for the full year? A: Director of Finance: The reduction is due to the superannuation of high-paid employees and induction of new employees at entry-level salaries. Our average CTC has dropped from Rs. 36 lakh to Rs. 33 lakh. Additionally, we made higher provisions for retirement benefits (leave, gratuity) and ERP last year, which are not required this year. We expect this trend to continue for the next two quarters. However, there may be a 15% impact in Q4 due to the pay revision due on January 1, 2027.
Q: What are your alumina sales volume guidance for FY27, and how will the new refinery impact this? A: CMD: Last year we sold around 14 lakh tons of alumina. This year, we are targeting 16 lakh tons. The additional 2 lakh tons of production from the new 5th stream will be added to our sales volume this year.
Q: With aluminum prices cooling down, will raw material cost pressures impact margins in Q2? A: CMD: Aluminum prices have come down from an average of $3,600-3,700 in Q1 to around $3,200 now. Raw material costs have increased significantly. Caustic soda prices rose from Rs. 42,000 last year to Rs. 45,000 in Q1 and will be around Rs. 49,000 in Q2. Calcined petroleum coke (CPC) prices have risen from Rs. 44,000 to Rs. 66,000-70,000. HFO prices have increased from Rs. 46,000 to Rs. 75,000. These three areas have increased our cost of production by around Rs. 15,000-16,000 per ton of metal. However, alumina prices have also risen to around $370 per ton, which will offset some of the raw material cost increases.
Q: What is the current alumina realization, and what was it in Q1? Will Q2 alumina costs be higher? A: Director of Finance: Q1 alumina realization was around $323 per ton. We are now getting around $370 per ton, an incremental $50. Alumina cost of production is in the range of Rs. 21,000-22,000 per ton, and we expect it to remain in that range in Q2 despite input cost increases. The higher alumina prices will provide a better margin.
Q: How have domestic aluminum premiums moved, and do you expect them to increase further? A: CMD: Premiums have increased from around $60 to $110 per ton due to the Middle East war situation. We discovered this premium in our latest export tender. However, since the war situation is easing, we expect premiums to remain at this level or possibly decline in the coming months.
Q: Were any export shipments impacted by the Middle East war situation? A: CMD: One shipment that was ordered before the war at $390 was delayed but has now been realized. Other shipments are proceeding normally, and there are no pending shipments. The premium increase was a temporary effect of the war, and we expect normalization.
Q: Can you provide details on the 0.5 million ton smelter expansion project, including timeline, technology, and CapEx? A: CMD: We have finalized EGA as the technology supplier and will sign the technology license agreement this month. The DPR is under preparation and should be ready in 3-4 months, with board approval expected by October-November. We will order packages by August-September next year and start groundwork by October-November next year. The project, including a 1,000 MW power plant, will take 3-3.5 years to complete, with a target of December 2030. Total CapEx will be around Rs. 25,000 crore, with major spending in FY29-FY31. We have signed a JV agreement with NLC India for the power plant to reduce CapEx and ensure coal security.
Q: What is the status of captive coal production and the Potangi mine development? A: CMD: Captive coal production in Q1 was 1.04 million tons, slightly lower due to initial technical issues, but we are on track to achieve the 4.8 million ton target for FY27. The mining plan for expansion has been approved, and we expect environmental clearance (EC) in the next 2-3 months. For Potangi mine, we have appointed an MDO, but there is local resistance to road construction. We are working with district authorities and expect to start road construction this month, with production beginning around October.
Q: What is the CapEx outlook for FY27 and FY28? A: CMD: For FY27, CapEx will be around Rs. 1,500-1,800 crore, as most payments for the 5th stream refinery are done. From FY28, CapEx will increase to around Rs. 2,500 crore, rising to Rs. 4,000-5,000 crore and then Rs. 6,000-7,000 crore in subsequent years, primarily driven by the smelter expansion and Potangi mine development.
Q: How will the power plant CapEx be financed through the JV with NLC? A: Director of Finance: The 1,080 MW power plant will cost around Rs. 12,000 crore, with a 50:50 JV between NAL
For the complete transcript of the earnings call, please refer to the full earnings call transcript .
