Detailed Narrative
Strong Q3 and 9M FY26 Performance Driven by Volumes and Efficiency
NALCO achieved its best-ever physical and financial performance for Q3 and 9 months ended December 2025. For 9M FY26, income grew by 13% while expenditure increased by only 6%, leading to a 20% rise in EBITDA margin and 25% in PBT. Alumina production increased by 20% and metal production by 3.5%. Alumina sales surged by 45% and metal sales by 5%. Q3 PAT increased slightly to Rs. 2,131 crores from Rs. 2,121 crores in the prior year, demonstrating robust operational execution.
Alumina Price Headwinds Offset by Metal Prices and Cost Savings
The company faced significant headwinds from falling alumina prices, which averaged $385 for 9M FY26, down from $562, resulting in a negative impact of Rs. 1,652 crores. Management expects Q4 alumina realizations to be around $310-$320 due to market oversupply. However, this was partially offset by a positive impact of Rs. 781 crores from higher metal prices, which averaged $2,867 for 9M FY26, up from $2,538. Additionally, efficiency gains, particularly in caustic soda consumption (reduced from 121 kg to 99 kg), generated Rs. 129 crores in savings, mitigating the Rs. 82 crore negative impact from caustic soda price increases.
Managing Rising Input Costs and Geopolitical Impacts
NALCO anticipates a slight increase in Q4 Aluminium Cost of Production due to rising prices of CP coke (expected to increase by Rs. 12,000 to Rs. 52,000) and CT pitch (expected to increase by Rs. 2,000 to Rs. 53,000), as well as caustic soda (expected to reach Rs. 55,000 from Rs. 42,000). Geopolitical tensions in the Middle East also affected January exports, potentially impacting Q4 alumina sales targets. The company aims to counter these challenges through continued focus on operational efficiencies and maximizing captive coal production, targeting 4 million tons for FY26.
Strategic Capex for Capacity Expansion and Future Growth
NALCO plans a capex of Rs. 1,700 crores for FY26, increasing to Rs. 1,800-2,000 crores for FY27, with Rs. 600-700 crores allocated for modification and replacement projects. The new alumina refinery, with a total capacity of 10 lakh tons, is expected to begin commissioning in June 2026, targeting 3 lakh tons of production in FY27. A significant long-term expansion to add 0.5 million tonne smelting capacity is planned by end of December 2030 or early H1 2031, with the Detailed Project Report (DPR) expected to be finalized this year.
Critical Minerals Exploration and Employee Cost Management
The company is actively pursuing critical mineral extraction from red mud and Bayer's liquid through MoUs with NML Jamshedpur and BARC, with pilot facilities expected to yield commercial scale results in 1-1.5 years. Employee costs saw a reduction of Rs. 118 crores for 9M FY26, primarily due to superannuation of approximately 300 employees and the withdrawal of an excess PRP provision of Rs. 50 crores. While a wage revision is due from January 1, 2027, management expects a further reduction of Rs. 70-100 crores in employee costs for FY27 due to ongoing superannuation and no immediate wage revision impact.