National Aluminium Company Ltd Q1 FY27 Earnings Call Summary

Event Participants

Executives

5 Abhay Kumar Behuria (Director of Finance), Bharat Sahu (Company Secretary), Brijendra Pratap Singh (Chairman & Managing Director), Pankaj Kumar Sharma (Director of Production), Tapas Kumar Pattanayak (Director HR)

Analysts

11 Aditya Welekar (Axis Capital), Akhilesh Kumar (MK), Amit Lahoti (Aditya Birla Capital), Amit Murarka (Axis Capital), Digant Haria (GreenEdge Wealth), Manav Gogia (YES Securities), Pathanjali Srinivasan (Sundaram Mutual), Pinakin Parekh (HSBC), Rajesh Majumdar (360 ONE Capital), Sumangal Nevatia (Kotak Securities), Vikash Singh (ICICI Securities)

Financials & KPIs

Geographic & Segment Commentary

Alumina (Refinery & Bauxite): Best-ever bauxite and hydrate production in Q1; refinery cost landed at ₹22,766/ton with Q2 expected in the ₹21,000-22,000 range. FY27 alumina sales targeted at 16 lakh tonnes (vs. 14 lakh tonnes in FY26), with ~2 lakh tonnes incremental from the fifth stream. Realizations are rising from $323/ton (Q1) to ~$370/ton as RUSAL/China curtailments tighten global supply. Exports remain heavily weighted to the Middle East (60-70% of alumina offtake).

Aluminum (Smelter): Best-ever metal production; operating at ~958-959 pots vs. rated capacity of 960 pots, targeting 4.76-4.77 lakh tonnes for FY27 (above 4.6 lakh rated capacity). LME averaged $3,500-3,700 in Q1 but has cooled to ~$3,200, partially offset by a domestic premium increase from $60 to $110/ton (war-driven, likely to moderate). Cost curve is under pressure—raw material basket (caustic soda, CP Coke, HFO) added ₹15,000-16,000/ton of metal vs. last year, with Q2 costs marginally higher.

Coal & Power: Captive coal production at 11.04 lakh tonnes in Q1, roughly in line with 4.8 MTPA run-rate (despite a 5-day technical shutdown at the start of the quarter); captive coal landed cost ~₹1,600/ton vs. ₹3,500-3,600/ton for e-auction coal, creating a significant cost advantage. Smelter power plants are secured with 60-70% captive coal; refinery coal inventory is low (2-3 days vs. required 10-15 days) due to railway rake prioritization, though improving with summer peak passing.

Company-Specific & Strategic Commentary

Fifth Stream Refinery Expansion: ₹5,600 crores fully funded through internal accruals; mechanical completion target moved to September-end (2-3 month delay from June-July plan) with integrated water-run trials and production start by November-December. FY27 contribution guided at ~2 lakh tonnes, ramping to full 1 MTPA in FY28, lifting total capacity to 3.1-3.2 MTPA; new pressurized digestion technology expected to cut caustic soda consumption from 103-105 kg/ton to 85-90 kg/ton (₹1,000-1,500/ton savings).

0.5 MTPA Smelter + 1,080 MW Power Plant: Technology supplier EGA finalized, with technology license signing expected by mid-August. DPR under preparation with board approval targeted October-November; package ordering by August-September FY28, commissioning by December 2030. Total CapEx ₹25,000 crores. Power plant is a 50:50 JV with Neyveli Lignite (₹12,000 crores total cost) at Talcher, leveraging NLC coal mine proximity; 70:30 debt-equity funded, with NALCO equity contribution ~₹1,766 crores. Smelter to be funded entirely from internal accruals.

Coal Mine & Bauxite Expansion: North Block at Panchpatmali nearing exhaustion; new phases and South Block 2 ramp-up improving bauxite quality and lowering specific consumption (3.2 tonnes bauxite/tonne alumina in Q1 vs. 3.5 tonnes historically). Pottangi bauxite mine (110-120 MT reserves, MDO appointed) is delayed by local resistance to an 8-km access road; production now targeted October onwards. Captive coal expansion to 4.8 MTPA awaiting EC within 2-3 months, with production already at run-rate.

Guidance & Outlook

Risks & Constraints

Q&A Highlights

Fifth Stream Refinery Commissioning

• Question: Why has commissioning moved from June to November-December, and can we still produce 300,000 tonnes this year? (Amit Lahoti, Aditya Birla Capital)
• Answer: Mechanical completion, originally expected by June-July, is now targeted for September-end—a delay of 2-3 months typical for a large chemical process plant. Integrated water-run trials will follow before production starts in November-December. FY27 production of about 2 lakh tonnes from the fifth stream still stands, well below the 300,000-tonne figure. (Brijendra Pratap Singh, CMD)

Employee Cost Reduction Drivers

• Question: Is the lower employee cost from the superannuation scheme guided in Q3 FY26 (200-250 senior employees, ₹70-80 crore saving)? (Amit Lahoti)
• Answer: Yes—average CTC has dropped from ₹36 lakhs to ₹33 lakhs on superannuation of high-paid employees and induction of entry-level staff. Additionally, last year's higher provisions for retirement benefits (leave, gratuity valuation) and ERP provisions were not needed this year. Q2-Q3 costs should stay at this run-rate; Q4 will see +15% impact from pay revision due January 2027. (Abhay Kumar Behuria, Director of Finance)

Alumina Sales & Production Guidance

• Question: What is the FY27 alumina sales volume guidance? (Aditya Welekar, Axis Capital)
• Answer: Sales target is 16 lakh tonnes vs. 14 lakh tonnes last year. The 2 lakh tonnes increment comes entirely from the fifth stream's first-year contribution. (Brijendra Pratap Singh, CMD)

Input Cost Inflation & Margin Impact

• Question: With LME cooling from Q1 levels, how much cost pressure persists? (Aditya Welekar, Axis Capital)
• Answer: Caustic soda moved from ₹42,000 last year to ₹45,000 in Q1 and ~₹49,000 in Q2; CP Coke from ₹44,000 to ₹66,000-70,000; HFO from ₹46,000 to ₹75,000. Combined, these three inputs have raised metal production cost by ₹15,000-16,000/ton (Q1 metal cost ~₹1,70,000). Alumina prices, however, are running at ~$370 vs. an earlier assumption of $320, offsetting much of the input cost burden. (Brijendra Pratap Singh, CMD)

Alumina Realizations & Cost Trend

• Question: What was Q1 alumina realization, and will Q2 cost of production rise? (Pinakin Parekh, HSBC)
• Answer: Q1 average alumina realization was $323/ton. Q2 is expected to deliver +$50/ton (~$370) with the same input cost pattern. Alumina cost remains within ₹21,000-22,000/ton, given most raw-material escalation was absorbed in Q1. FX and input mix could move it marginally. (Abhay Kumar Behuria, Director of Finance)

Domestic Aluminum Premium Mechanics

• Question: How is the domestic premium determined, and can it rise further? (Pinakin Parekh, HSBC; Amit Murarka, Axis Capital)
• Answer: Premium is discovered through export spot tenders and loaded onto domestic pricing for 3-4 months until the next tender. Q1's tender closed at $110/ton vs. ~$60 five-six months ago, driven by Middle-East war disruptions. With the conflict easing, the premium is likely to hold or decline rather than increase. (Brijendra Pratap Singh, CMD)

0.5 MTPA Smelter CapEx & Timeline

• Question: What stage is the 0.5 MT smelter at, and when does CapEx ramp up? (Vikash Singh, ICICI Securities)
• Answer: EGA is finalized as technology supplier with license signing this month; DPR is under preparation with consultant. Board approval targeted for October-November; package ordering by August-September FY28; construction 3-3.5 years, commissioning by December 2030. Total project CapEx ~₹25,000 crores, with peak outflows in FY29-FY31; FY27 spend limited to ~₹300-400 crores of technology license fees. (Brijendra Pratap Singh, CMD)

Power Plant JV Financing

• Question: How will the 1,080 MW power plant CapEx be funded given the JV structure? (Sumangal Nevatia, Kotak Securities)
• Answer: Total power plant cost is ~₹12,000 crores (₹10-11 crores/MW), with a 50:50 NALCO-NLC JV. A 70:30 debt-equity mix means NALCO's equity contribution is ~₹1,766 crores; the rest is bank-funded with NALCO and NLC as guarantors. Smelter expansion is fully equity-funded from internal accruals—current cash of ₹10,500+ crores plus ₹3,500+ crores annual PAT accretion post-dividend comfortably covers the outflows without external borrowing. (Abhay Kumar Behuria, Director of Finance)

Coal Inventory & Captive Mine Ramps

• Question: Any monsoon-season coal disruption, and how is the 4.8 MTPA captive coal plan progressing? (Vikash Singh, ICICI Securities; Manav Gogia, YES Securities)
• Answer: Smelter power plants are unaffected as 60-70% of coal comes from captive mines. Refinery coal inventory is tight at 2-3 days vs. 10-15 days desired due to government rake prioritization for power plants; the issue is being escalated with Indian Railways. Captive coal Q1 output was 11.04 lakh tonnes, slightly below run-rate due to a 5-day restart; EC for expansion expected within 2-3 months. (Brijendra Pratap Singh, CMD; Abhay Kumar Behuria, Director of Finance)

Aluminum Price Outlook & Recycling

• Question: What happens to metal prices when the Middle-East smelters restart, and is NALCO considering recycling? (Digant Haria, GreenEdge Wealth)
• Answer: CRU and Platts forecasts peg LME at ~$3,100-3,200 for the rest of FY27; Middle-East smelter restarts are expected in Q4 FY27, with a global deficit of ~0.88 MT this year keeping prices supported at $3,000-3,200. NALCO has no recycling plans—recycling is for secondary producers, and quality/purity concerns make it unsuitable for a primary producer. (Brijendra Pratap Singh, CMD)

Bauxite-Alumina Efficiency & New Technology

• Question: Why has bauxite-to-alumina consumption improved to 3.2x, and can we sustain it? (Akhilesh Kumar, MK)
• Answer: The improvement is driven by new mine phases producing higher-grade bauxite; North Block is nearly exhausted, and South Block 2 will bring better ore quality. Specific consumption should remain favorable, supported by the new fifth-stream pressurized technology which lowers caustic consumption from 103-105 kg/ton to 85-90 kg/ton, reducing alumina cost by ~₹1,000-1,500/ton. New refinery overall cost is expected to be similar to existing (₹22,000-23,000/ton), with savings offset by depreciation. (Brijendra Pratap Singh, CMD; Pankaj Kumar Sharma, Director of Production)

Cash Balance & Funding of Expansion

• Question: What is net cash as on Q1, and will cash grow to ~₹15,000 crores by year-end? (Rajesh Majumdar, 360 ONE Capital)
• Answer: Net cash stands at ~₹10,500 crores as of 30th June 2026. Annual PAT of ₹6,000+ crores minus dividends and ₹1,500-1,800 crores of regular CapEx plus non-cash add-backs yields ~₹3,500 crores of incremental cash annually. This is sufficient to fund the smelter expansion entirely from internal accruals (the power plant is debt-funded in the JV). (Abhay Kumar Behuria, Director of Finance)

Coal Mix & Cost Advantage

• Question: What is the cost advantage of captive coal over linkage and e-auction coal? (Sumangal Nevatia, Kotak Securities)
• Answer: Captive coal landed cost is ₹1,600/ton; FSA linkage coal is nearly the same (₹1,600-1,700), but e-auction coal costs ₹3,500-3,600/ton. For the refinery last year, ~40% of coal was procured via e-auction and ~60% through linkage; increasing captive production (4.0 → 4.8 MTPA) replaces higher-cost coal and provides a meaningful input cost advantage. (Abhay Kumar Behuria, Director of Finance; Pankaj Kumar Sharma, Director of Production)

Key Takeaway

NALCO delivered a record Q1 FY27 with total income up 39% YoY to ₹5,400 crores, PBT up ~88%, and EBITDA up ~78%, supported by best-ever bauxite, hydrate, and power generation volumes—all segments operating above 5-10% of rated capacity. The quarter also saw alumina realizations at $323/ton (up to ~$370 in Q2) and domestic aluminum premiums doubling to $110/ton, though input cost inflation (caustic soda, CP Coke, HFO) has added ₹15,000-16,000/ton to metal costs. Strategically, management is advancing the fifth stream refinery (mechanical completion by September, ~2 lakh tonnes of FY27 alumina) and the 0.5 MTPA smelter plus 1,080 MW power JV with Neyveli Lignite, totaling ~₹25,000 crores CapEx by 2030-31, funded entirely through zero-debt internal accruals (₹10,500+ crores net cash). FY27 guidance remains firm: ~25 lakh tonnes alumina production, 16 lakh tonnes sales, 4.8 MTPA captive coal, and employee costs near ₹1,600 crores. Near-term watchpoints include LME softness to $3,000-3,200, refinery coal stockpile tightness from rake prioritization, Pottangi mine access delays, and Q4 FY27 pay-revision impact on employee costs.