National Aluminium Company Ltd Q4 FY2025 Concall Summary

Key Takeaways

• Record year, cautious outlook: FY25 delivered highest-ever revenue, PAT, margins and dividend, but the alumina price that drove aluminium segment growth has already corrected from ~\$500 to ~\$400, and management expects it to stay in that range.
• Refinery delay is the critical path item: The 1 MTPA 5th stream refinery expansion has slipped from September 2025 to May-June 2026 for commercial production, pushing the volume and cost benefits that underpin the medium-term story further out.
• Cost levers are real but timing-dependent: Employee costs fell ~₹200 crores in FY25 on net headcount reduction, and the refinery expansion promises 20-25% lower caustic soda consumption, but the payoff component of employee cost is tied to volatile alumina prices and the refinery isn't online until mid-2026.
• The smelter project is a FY30 story: Board approved ₹17,000 crores, but the DPR is still being prepared, tendering will take 1.5 years, and commissioning takes 3-4 years after that, so material capex only begins flowing in FY27-28.
• What to watch next quarter: Whether the refinery timeline holds at May-June 2026 or slips again, the trajectory of alumina prices through the \$400 floor, and any clarity on the Midhani JV alloy plant that management now sounds unsure about proceeding with.

Alumina: The Price Reset and Volume Bridge

• Price correction mechanics: Alumina fell from an expected \$500 to around \$400 because new Indonesian refineries and Vedanta's domestic capacity addition created excess supply while smelter capacity in China and elsewhere did not pick up. Management expects stabilisation around \$400, with a possible move up to \$400-\$450.
• Geopolitical fragility in bauxite: Guinea supplies 60-70% of global bauxite and recently announced it will not supply EGA. Any further policy changes in Guinea may affect bauxite supply to alumina refineries worldwide, a risk management flagged explicitly.
• The volume bridge to FY27: The 5th stream refinery expansion targets more than 5-6 lakh tonnes of incremental alumina production in FY27. Planned alumina production for FY26 is ~22.5 lakh tonnes, with sales of ~12.75 lakh tonnes, an increment of ~2 lakh tonnes over last year.
• Domestic sales pivot: Management increased the domestic alumina sales target to 50,000-80,000 tonnes this year, up from very low levels last year, while exports are planned at ~12.3 lakh tonnes with month-wise shipment schedules already locked for the full year.
• Inventory build as deliberate buffer: Alumina inventory at the smelter rose from ~10,000-12,000 tons to ~60,000-65,000 tons, a conscious decision to add safety stock given frequent logistics issues and total dependence on railways.

Singh: "We are expecting the same will continue, maybe it will go up to maybe in between \$400 to \$450."

Refinery Expansion: The Slipped Timeline

• What slipped and why: Mechanical completion moved from September 2025 to January-February 2026, with commercial production now expected May-June 2026. Delays in 2-3 packages stem from local issues in the tribal Koraput area (labour supply, local resistance) and rock cutting challenges. Blasting permission has now been obtained and resource allocation increased.
• Budget held despite delay: The project budget has not increased even though the timeline has extended, per the Director (P&T).
• Monitoring escalation: Weekly monitoring is now in place, and management expressed confidence in the May-June 2026 start date, though it did not directly address the possibility of further delay when asked.
• Cost structure payoff: Once operational, the expanded refinery promises a 20-25% reduction in caustic soda consumption via new technology (HRD, DCW), plus lower landed bauxite cost from the Pottangi mines conveyor belt and manpower savings. Management says these operating expenditure reductions will more than compensate for the substantial depreciation increase when the expanded capacity is capitalised in FY27.
• Alumina cost outlook: Management expects costs to remain at the current ~₹22,000 level, with a possible ₹1,000-2,000 reduction through efficiency improvements in caustic soda consumption and internal coal usage.

Singh: "We are confident enough that next May-June, we will be able to start the production from there."

Aluminium: Muted Prices, Long-Dated Growth

• Price headwind: Aluminium LME prices declined during Q4 to ~\$2,350 (now ~\$2,450) due to trade war and duty restrictions, so aluminium realisation was lower. Management's projections indicate improvement to \$2,500-\$2,550.
• Market in slight deficit: The aluminium market is likely to stay in a slight deficit of 0.07 crore tonnes in FY26, with global production projected at ~7.3 crore tonnes. European smelters are returning but Chinese smelters are stopping or modernising for carbon emission reduction, so the net increase is limited.
• India demand story intact: Domestic aluminium demand is rising at 9-10%, with a 6.5-7% CAGR expected through 2030, taking consumption to 7.5-0.8 crore tonnes per annum.
• Smelter expansion is a FY30 event: The board-approved ₹17,000 crore brownfield smelter and captive power plant project is still at the DPR stage. Tendering will take 1-1.5 years, commissioning 3-4 years after that, and material capex only begins flowing in FY27-28. The RTAL technology originally planned is not available, so a team is going to Dubai and EIL has been given the DPR target.
• IRR undisclosed: Management declined to share the IRR and return on capital being assessed, saying a fresh DPR is being prepared and only after that will they come out with figures.

Singh: "Our target is the next one, one and a half years to finish off the tendering activity. And if it completes by the end of last year, then, actual commissioning and all that will take 3 to 4 years."

Costs: The Employee and Raw Material Equation

• Employee cost tailwind, with a catch: Employee cost fell ~₹200 crores in FY25 as ~430 retirements/separations outpaced ~200 new inductions. Management plans to continue reducing headcount by ~250 per year with minimal recruitment. However, the payoff component linked to financial performance was substantially high in FY25 and is not likely to be sustained in FY26 due to declining alumina prices.
• Raw material cost drivers in FY25: CP coke cost reduction contributed ~₹400-500 crores, caustic soda reduction ~₹150 crores, captive power plant ~₹70-80 crores, and efficiency improvements (lower caustic soda and CP coke usage) ~₹100 crores.
• Raw material reversal risk: Management acknowledged a slight reversal in CP coke and caustic soda prices already, but said it is "very difficult to predict" the trajectory.
• Depreciation reversal in Q4: A ₹76 crore reversal came from three one-off items: change in estimate for capitalisation threshold of major spares, re-assessment of the lean slurry project, and fair evaluation of wind power assets leading to impairment provision reversal.
• Finance cost is non-cash: The ₹59 crore finance cost for the year is an accounting entry only with no cash outflow, relating to the CCD issuance treated as a guarantee under accounting standards.

Panda: "it will be very premature to talk of figures now. But on the employee cost for our fixed and other salary component will come down. Then again, it depends on the financial performance and the payoff."

Captive Resources: Coal, Bauxite and Power

• Utkal D&E coal mines: License received for 0.4 crore tonnes rated capacity, with production targeted at that level in FY26. A decision on increasing to 0.6 crore tonnes will be taken after 6 months, based on performance of mixing 50% captive coal with MCL linkage coal.
• Pottangi Bauxite Mines: Lease deed signed for 0.35 crore tonnes per annum capacity with 11.1 crore tonnes reserve. All statutory clearances obtained, work is on to start it, and it is planned to begin by June 2026. The smelter delay means the requirement is not there earlier.
• Renewable energy build-out: A 15 MW wind power plant is being set up in Tamil Nadu, with 7 MW of solar power planned in coming years.
• Coal sourcing mix: 0.2 crore tonnes from captive sources, with the rest from linkage.

Subsidiaries, JVs and Exploration

• GNAL turnaround progressing: The caustic soda JV had cumulative net worth erosion from commissioning delays and depressed realisation. A CCD was taken to provide working capital. With improved chlorine offtake, GNAL has operated at 90%+ capacity for 4-5 months and is now entering operating profit territory. The CCD has a 5-year tenure with 40:60 promoter ratio, accelerated buy-out option, and put option exercisable by both promoters.
• Midhani JV in doubt: The alloy plant JV with Midhani, earlier estimated at ~₹4,000-5,000 crores investment, is "under discussion at the ministry stage" and management said "we are not sure whether we will go ahead," with commercial viability not established.
• KABIL exploration timeline: Non-invasive exploration in Argentina is complete, consultant appointment is almost final, and invasive exploration will start after that. All exploration is expected to finish by end of FY28, with a decision on commercial mining viability around the same time.

Guidance & Commitments

Key Metrics