National Aluminium Company Limited

NALCO achieved its best-ever Q2 and H1 performance in FY26, both in terms of production and financial metrics. Q2 saw bauxite excavation increase by 13%, alumina production by 15%, and cast metal production by 3.48% YoY. Overall revenues from operations grew by 7.27% in Q2, while expenses reduced by 3.34%, leading to a 34% increase in PAT. For H1, revenues from operations increased by 18%, PBT by 47%, and PAT by 50.2% YoY, primarily driven by significant volume increases, including an 81% rise in alumina sales.

The company's refinery expansion project, which will add 1 million tons to its existing 2.1 million tons capacity, is approximately 80% physically complete. The commissioning target has been revised from September 2025 to June 2026 due to slight delays. Management expects to achieve about 5 lakh tons of production from the new refinery in FY27, representing 50% of its rated capacity, with full ramp-up by FY28. The total capex for this refinery expansion is around INR5,000 crores, with INR4,500 crores already spent.

NALCO plans a significant smelter expansion, aiming for an additional 5 lakh tons capacity within the next three to four years, targeting completion by 2030. The estimated capex for this smelter expansion is between INR17,000-20,000 crores, with an additional INR10,000-11,000 crores for an associated power plant, bringing the total to approximately INR30,000 crores. The Detailed Project Report (DPR) for the smelter is expected to be ready by June/July 2026, with capex spending commencing from FY27 onwards. The company believes its strong cash balance, projected to exceed INR20,000 crores, will largely fund this expansion without external support if a 50% JV power model is adopted.

NALCO is focused on securing raw material supply and managing costs. The Pottangi bauxite mine is targeted to start by June next year, with the MDO tender process initiated this month. An alternate bauxite sourcing conveyor with a capacity of 30 lakh tons per year is expected to be commissioned by April-May next year, ensuring no bauxite shortage for the expanded refinery. The company's captive coal production target for FY26 is 4 million tons, with approximately 2 million tons produced in H1. The landed cost of captive coal is INR1,600-1,700 per ton. Cost reductions have been achieved through improved efficiency, particularly in caustic soda consumption, which is now around 96 kg per ton of alumina production, and a decline in caustic soda prices from INR44,000 to INR41,000.

The KABIL joint venture is actively pursuing lithium exploration in Argentina. Non-invasive exploration has been completed across five mines with positive results. The next phase involves invasive exploration (drilling), for which a consultant has been appointed, and an exploration agent is expected to be on board within one to two months. The results of the invasive exploration are anticipated within six months, followed by the setup of a pilot plant. The commercial mining potential is expected to be determined within the next 8-9 months, or 1-1.5 years.

Alumina prices have been under pressure due to increased global availability from new refineries in Indonesia and capacity restrictions in China. The Q2 average alumina price was $380, but H2 is expected to be lower, in the range of $320-$340. For aluminum, the Q2 LME was around $2597, with current LME at $2850, and H2 expected to be $2800-$2900. Domestic aluminum realization in Q2 was around INR2,57,000 per ton, reflecting a domestic premium of about 10% over LME due to import custom duties and inland transportation costs. Metal sales in Q2 were lower than expected due to reduced market demand, particularly for wire rods and flat products.