National Aluminium Company Limited (NALCO)

Nature of the Disclosure

This document is a transcript of the Q2 FY27 Earnings Conference Call hosted by Systematix Group, submitted to the stock exchanges pursuant to Regulation 30 of SEBI (LODR) Regulations, 2015. The call discussed the company's unaudited financial results for the quarter and half-year ended September 30, 2026, and its business outlook. The management confirmed no Unpublished Price Sensitive Information (UPSI) was shared.

Key Quantitative Figures & Financial Performance

H1 FY27 (Apr-Sep 2026) Financials (All-time highs):

  • Revenue: ₹11,143 Crores
  • EBITDA: ₹5,539 Crores
  • Profit Before Tax (PBT): ₹5,160 Crores
  • Profit After Tax (PAT): ₹3,837 Crores (up 54% YoY)

Q2 FY27 (Jul-Sep 2026) Financials:

  • Net Profit: ₹1,835 Crores (up 28% YoY)

Cash Position:

  • Cash and bank balance increased to approximately ₹12,000 Crores as of H1 FY27.
  • Capex for FY27 is planned at ~₹1,800 Crores, with ~₹800 Crores spent in H1.

Operational Highlights & Production Guidance

Alumina:

  • H1 FY27 average alumina realization was ~$324/ton in Q1 and improved to ~$370-$375/ton in Q2.
  • Full-year alumina production guidance is maintained at 2.45 million tonnes.
  • The new 5th Stream Refinery is ~92% physically complete. Integrated trials and production start are targeted for the last week of December 2026 or early January 2027.
  • The ramp-up is expected to take 3-5 months, contributing ~0.8 million tonnes in FY28.

Aluminium:

  • Pricing is fully linked to LME benchmarks for domestic customers (95% of sales).
  • The company does not hedge its aluminium production.

Captive Coal (Utkal Block):

  • H1 FY27 production: ~2.1 million tonnes.
  • Full-year FY27 production target: 4.8 million tonnes (up from 4.0 million tonnes in FY26).
  • Environmental clearance for the 4.8 MTPA expansion is under process and expected in 2-3 months.

Project Updates & Capex

5th Stream Alumina Refinery:

  • Mechanical completion is advanced; 34-35 of 50 packages are complete.
  • Capital outlay for FY27 includes payments to technology licensor EGA.

Pottangi Bauxite Mines:

  • Facing delays due to local resistance concerning tree felling and land acquisition for a conveyor belt.
  • MDO (Dilip Buildcon) is engaged. Resolution is expected in 2-3 months.
  • Initial ore transport will be by road (adding ~₹490/ton cost) until an 18 km conveyor is built (~2-2.5 year timeline).
  • Once operational, the higher-quality ore is expected to improve refinery efficiency.

Brownfield Smelter & Power Plant Expansion (Angul):

  • Project Cost: ~₹17,000-18,000 Crores for smelter; Total ~₹25,000 Crores including power plant.
  • Technology License Agreement with EGA (Dubai) is signed.
  • Detailed Project Report (DPR) expected by Jan-Feb 2027, with board approval targeted for Feb 2027.
  • Package ordering is planned over 6-8 months post-approval, with major groundwork starting Jan-Feb 2028.
  • Commissioning is targeted for Q1 FY31.
  • A 50:50 JV with Neyveli Lignite Corporation (NLC) for the captive power plant is approved. DPR for the power plant is ready for board approval.

Cost Structure & Drivers

Raw Material Cost Inflation (H1 FY27 vs. FY26 Avg):

  • Caustic Soda: Increased from ~₹42,000/ton to ₹46,900/ton (H1) and projected at ₹49,000/ton for Q3.
  • CP Coke: Increased from ₹44,600/ton to ₹63,700/ton (H1) and projected at ₹70,600/ton for Q3.
  • HFO/LDO: Prices increased significantly (e.g., LDO from ~₹60,000-₹84,800 to ~₹115,000-₹120,000).

Power & Fuel Cost:

  • Increased by ₹317 Crores YoY in H1. Key reasons:
  • ₹256 Cr increase due to higher HFO consumption in the alumina refinery caused by coal shortages and rainy season moisture issues.
  • ₹73 Cr increase in grid power purchase due to CPP breakdowns and coal issues.
  • Coal stock at the refinery fell to 1-2 days (vs. a norm of 15 days) but has improved to 4-5 days.
  • Cost is expected to reduce in H2 with improved coal availability and techno-economics.

Techno-Economic Improvements Expected in H2:

  • Target reduction in caustic soda consumption by 6-7 kg/ton.
  • Overall initiatives expected to reduce alumina production cost by ₹500-₹1,000/ton.

Outlook & Guidance

Alumina Prices:

  • Management expects H2 average realizations of ~₹35,000/ton (~$370-$380/ton) vs. ₹33,200/ton in H1.
  • Prices are supported by demand from new smelters in the Middle East and Indonesia, though geopolitical issues (Strait of Hormuz) are impacting freight and insurance costs.
  • Long-term alumina surplus of ~1.6 million tons is projected for CY27, capping significant upside.

Margins:

  • H2 FY27 margins are expected to remain stable with Q2, supported by:
  • Additional contribution from the new refinery (~₹150 Cr PBT).
  • Improved techno-economics (~₹100 Cr benefit).
  • Non-recurrence of a one-off royalty impact taken in H1 (~₹50 Cr benefit).

Other Income:

  • Increased by 43% QoQ in Q2 due to higher interest income on growing cash deposits (~₹8,500 Cr to ₹12,000 Cr) and better rates from empaneled banks.

Other Key Details

Mine Lease Renewals:

  • The lease for Panchpatmali mines (Central & North blocks) expires in 2029. The renewal process for government companies is automatic, and NALCO has initiated the process with consultants. No bidding is required. Some increase in royalty is expected as per rules.

Red Mud Management:

  • A new filtration unit (capex ₹400-500 Cr) is planned, which will add a minor cost (~₹20-100/ton) upon completion.

Employee Cost:

  • Pay commission revision is expected to be implemented for Jan-Mar 2027 (3 months), with an estimated ~15% increase. Overall employee cost for FY27 is expected to be lower than FY26 due to the retirement of high-salary employees and the induction of fresh hires at lower scales.

Domestic Alumina Sales:

  • Domestic pricing is pegged to the average realized price from export spot tenders, ensuring parity.

Coal Procurement:

  • The company is largely covered by FSAs (6 MTPA). E-auction coal purchase has been reduced significantly from 5.16 lakh tons in FY26 to 1.96 lakh tons in H1 FY27, aided by higher output from the Utkal captive mine.