National Aluminium Company Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Best-ever H1, driven by volume and efficiency: Alumina sales surged 81% YoY in H1, while cost reductions and captive power savings added material profit, even as alumina prices weakened.
• Refinery expansion delayed to June 2026: The 1 MTPA fifth stream is now 77-78% complete, with critical packages pending; the delay pushes the volume ramp into FY28, though management still targets 5 lakh tons in FY27.
• Alumina price weakness is the near-term headwind: New Indonesian supply and Chinese capacity restrictions have pushed spot prices down, but management expects a seasonal recovery to \$350 in H2, supported by a shift toward term contracts.
• Captive coal and power savings are a structural margin lever: Grid power purchases collapsed from 38.1 crore units to 77 lakh units in H1, saving ₹136 crores, while captive coal production is ramping toward 0.4 crore tons for the full year.
• What to watch next quarter: Whether alumina prices recover to the \$350 target, the pace of refinery construction through the March-April structural deadline, and any clarity on the smelter DPR and Pottangi mine timelines.

Alumina: Volume Surge, Price Headwind

• H1 sales jump: Calcined alumina production rose 31% YoY to 11.61 lakh tons, enabling an 81% YoY increase in H1 alumina sales with no significant inventory liquidation; March 2025 stocks were already at minimum levels.
• Price weakness from new supply: Two to three new refineries started in Indonesia, smelting capacity reductions in some regions, and Chinese capacity restrictions have increased alumina availability, pressuring spot prices.
• H2 price recovery bet: Management expects alumina prices to recover to around \$350 in Q3 and Q4, citing historical seasonal patterns of higher production and price recovery.
• Contract mix shifting toward term: The company is targeting at least 50% term contracts, currently running two term contracts (3-month and 6-month), and pursuing one more if better prices are available; the logic is that when LME is high, term contracts linked to LME are preferable to low spot prices.
• Inventory forces sales: Alumina cannot be stockpiled in large quantities due to limited storage capacity (75 lakh tons in Vizag silos, 36,000 tons in Damanjodi), so production must be sold; the company plans 4-5 export shipments per month plus 10,000-12,000 tons of domestic sales.

Brijendra Pratap Singh: "Historically, we see in the Q3 and Q4, we get better prices. So we are expecting to go somewhere around 350, it should go."

Refinery Expansion: Delayed but Margin-Positive

• Timeline revised to June 2026: The fifth stream alumina refinery expansion, previously scheduled for September 2025, is now at 77-78% physical completion; critical packages including precipitation tank, hydrate filtration, calcination, evaporation, and electrification are pending.
• Structural deadline: Structural work on critical packages is to be complete by March-April, followed by three months for electrical layout and testing, setting up a June 2026 commissioning start.
• Ramp-up profile: Management expects 2-3 months to reach 60-70% capacity after commissioning, and 3-4 months to reach 70-80%; FY27 production is targeted at approximately 5 lakh tons, representing about 50% of the 1 MTPA capacity with six months of production after September.
• New refinery economics: Cost per ton will be ₹1,000-2,000 higher than the existing refinery due to depreciation, but this is partially offset by lower manpower requirements, better efficiency, lower caustic soda consumption, and volume benefits from single-stream operation; existing margins of ₹12,000-14,000 per ton are expected to compress to ₹10,000-11,000 per ton for the new refinery.
• Project closure: Refinery project closure is expected by FY27, with the balance 5-10% payment released in that year.

Brijendra Pratap Singh: "Minimum we will be getting a 10,000 plus of margin to that of in our export market or in the domestic market. So we will be having a positive margin in alumina."

Power & Coal: Captive Shift Delivers Structural Savings

• Grid power purchases collapsed: Grid power purchases fell from 38.1 crore units in H1 last year to just 77 lakh units in H1 this year, reducing cost from ₹186 crores to ₹50 crores and saving ₹136 crores in H1; this was achieved by producing more power from the internal captive power plant.
• Captive coal ramp-up on track: Captive coal production is increasing from 0.27 crore tons last year to a target of 0.4 crore tons this year; H1 production reached approximately 0.2 crore tons, on pace for the annual target.
• CESS removal equalizes coal costs: With the removal of CESS on coal (₹400 per ton advantage), captive coal and FSA coal from MCL will have almost equal delivered costs; the difference was ₹300-400 per ton before CESS removal, and the CESS removal benefit is estimated at approximately ₹67 crores in H2 on MCL coal procurement.
• Grid power now a backup only: Going forward, grid power will only be used during annual overhauling of one unit or during breakdowns; otherwise, total captive power is available.
• Power cost outlook: Management expects further reduction in power cost in H2 with CESS removal, and overall H1 power and fuel costs decreased by ₹53 crores YoY, driven by favorable coal prices (₹36 crores) and efficiency gains (₹135 crores), partially offset by volume increase (₹245 crores adverse).

Brijendra Pratap Singh: "It is a good thing to notice that this year we have reduced purchase power to minimum."

Aluminum: Pricing Lifts EBIT, Demand Temporarily Soft

• EBIT jump driven by pricing: Aluminum segment EBIT rose sharply QoQ primarily due to a ₹18,000 per ton increase in average realization from Q1 to Q2; volume also increased slightly by approximately 3-3.4%, but pricing was the dominant factor.
• Q2 metal sales dip: Metal sales were lower in Q2 due to reduced market demand from excessive rains, especially for wire rods and flat products; stocks are being carried forward for clearance as demand is projected to improve with the monsoon's retreat.
• Full-year volume target: Management is planning 470,000 tons of aluminum for the full year, above the rated capacity of 450,000 tons, and the present production rate supports this target.
• Domestic premium: The company currently enjoys an approximately 10% premium above LME for domestic sales due to import custom duty and inland transportation costs; pricing policy will be reviewed based on market conditions.
• H2 LME expectation: Management expects LME to be in the range of ₹2,800 to ₹2,900 in H2.

Cost Structure: Caustic Soda Efficiency and Employee Tailwind

• Caustic soda consumption reduced: Alumina cost of production fell from Q1 to Q2 due to excellent technical work reducing caustic soda consumption to 96 kg per ton; caustic soda prices also declined from ₹44,000 to ₹41,000, and management stated these consumption savings are sustainable.
• Input cost inflation present: CP coke costs rose from ₹30,600 to ₹42,000 and caustic soda from ₹30,000 to ₹40,000 in H1; management expects these levels to be maintained or to decline slightly.
• Employee cost to decline structurally: Around 200 senior-level employees are retiring, and new recruits are brought in at minimum scale, which will lower the average salary; employee cost as a percentage of total cost may reduce to 15-16%.
• Overall cost reduction: Total expenses reduced by approximately 3.34% in Q2 YoY.

Brijendra Pratap Singh: "The declining trend, of course, will be there because whatever our employees are retiring and here on the highest slab of the basics... and whatever we are recruiting they are on the minimum scale. So the average salary will go down."

Growth Projects: Smelter, Mines, and Lithium Exploration

• Smelter expansion consultant appointed: A consultant for the captive power plant has been appointed, and the consultant for the smelter detailed project report is in process and will be appointed this month (November 2025).
• Smelter timeline: The DPR will be ready by June/July 2026, followed by board approval, tendering, and ordering completion by March 2027; actual groundwork starts after March 2027, with commissioning expected around December 2030, representing a three to three-and-a-half-year construction period.
• Capex funding flexibility: Two models are under consideration: a smelter EPC with power at JV requiring a peak fund of ₹5,000-6,000 crores in FY27-28 or FY28-29, or an EPC on smelter with 50% JV power that may not require any external financing.
• Pottangi mines MDO tender: The company is ordering the MDO tender this month (November 2025), with a target to start the mines by June 2026.
• Alternate bauxite conveyor: A parallel conveyor downhill from the existing Panchpatmali mines with capacity of approximately 30 lakh tons per year is being built, with commissioning expected in April-May next year, serving as backup for the expanded refinery.
• KABIL lithium exploration: Non-invasive exploration of all five mines in Argentina is complete with good results; a consultant has been appointed for invasive exploration, and an exploration agent will be appointed in the next one to two months; depth of lithium will be known in the next six months, pilot plant results on grade and commercial mining viability in eight to nine months, and commercial mining feasibility in one to one and a half years.

Brijendra Pratap Singh: "If you go to the second model, EPC on smelter and JV, 50% JV power, then we may not require any outsource support to finance our project. This is out of the projection which we have made."

Guidance & Commitments

Key Metrics