NALCO finalises ₹30,000-crore expansion plans

State-owned alumina and aluminium-maker, NALCO (National Aluminium Company) has firmed up a ₹30,000-crore expansion plan by FY30 – its first major capex in recent times, that includes setting up a ₹17,000-crore aluminium smelter-capacity; apart from mine expansion projects and foray into downstream products. It has on-boarded Rio Tinto Canada as a tech partner. The CPSE has zero debt; but will need to leverage debt to fund such a large capex, with a projected debt-equity ratio of 70:30, sources said.

The remaining ₹13,000-crore capex will be spent towards a JV with NTPC for supply of 1,200 MW of captive power including supply of 25-30 per cent of ‘green power’ (from renewable sources).

Additional investments will be made towards value-added and downstream products, sources said; and earnings from these segments is expected to fund future capacity expansion programmes.

“Incremental earnings – revenue and EBITDA – that will accrue are being worked out. Currently, we have got approvals for the capex and EIL (Engineers India Ltd) has prepared the plans,” Brijendra Pratap Singh, Chairman and Managing Director, NALCO, said during a recent investor call.

Smelter expansion

The company’s new expansion plans include setting up an aluminium smelter capacity (of 0.5 mtpa), with capital outlay of ₹17,000 crore and expected commissioning in FY30. The management expects initial spending to start from FY27, with full-scale capex during FY28-30. Operations are likely over a four-five year period, at least.

For incremental production, there is need for captive power for which the JV with NTPC is being explored. Some investments in the ₹13,000-crore power plant outlay would be from the power producer. “Discussions are under-way and there could be some revision in numbers,” company top brass indicated.

Till the time the expansion happens, NALCO is exploring the possibility of using additional casting facilities for making of aluminium.

In mining, an alumina refinery processes bauxite into alumina; while an aluminium smelter processes alumina into aluminium.

FY25 capex

NALCO’s FY25 capex guidance was pegged at ₹2,000 crore, of which ₹1,700 crore is to be used towards 1 mtpa fifth-stream alumina refinery expansion, and the other ₹300 crore used for maintenance, coal block ramp-up and auxiliary projects.

Around 70 per cent of the physical progress (on alumina refinery) has been completed, with commissioning expected by December this year. Expected output is to the tune of 700-800 kt in FY27.

According to consultancy firm Motilal Oswal, in the long run, NALCO’s “aggressive expansion plans could significantly enhance production capacity. However, the completion timeline by FY30, execution risks and cost escalations remain key concerns,” it mentioned in a report.

The firm added that despite a robust demand outlook for aluminium in India, “the near-term upside is capped by potential price corrections (in alumina), limited production headroom…and regulatory risks.”