00:00 into this earnings conversation with Mr Satish Pai of Hindalco. The numbers obviously, or as is the
00:05 case with most Ferris and non-Ferris companies have not looked that great, but relative to what
00:10 Primva estimates were on almost all line items, including EBITDA, Hindalco's numbers are much
00:16 better. Let's get Mr Pai to talk about what went right or what went wrong in the quarter and what
00:21 is the expect happens in the quarters ahead. Mr Pai, great having you. Thanks so much for joining
00:25 in. But before I talk about the quarter really and the numbers, I'm intrigued by this question,
00:31 which I want to understand from you. There's this vision outlined in the investor presentation about
00:35 shifting from being a metal manufacturer to a solution provider. You've spoken about this to me
00:41 once very briefly in the past. Can we start off with this because there is a bit of a detail this
00:46 time around? So, you know, the best way to describe that would to give you a practical example that we
00:53 have put in our press release this time. So, if you take the Tata Ace where we are building the
01:00 aluminium box on the last mile vehicle. So, what that means is that in the past, maybe we would
01:06 have just sold aluminium sheet. Whereas this time we are now doing and taking the aluminium sheet
01:12 and exclusions, actually doing the machining, welding, making a box. So, that's what we mean
01:18 a solution provider. So, we are not just providing exclusions and roll sheet anymore, whether it's
01:25 buses, whether it is trains, we are actually moving closer by doing more machining, more welding and
01:32 getting closer to the end product. So, that's why besides providing the aluminium, we are also
01:38 becoming solution providers. You reckon this can make a quote unquote a metals company look
01:47 materially different than what a metals company currently looks like say five years out?
01:51 I think our intention is that to differentiate us from let's say a typical upstream metals company
02:00 to a metals company that got a large value added business and hence has got access to a much better
02:08 value chain from a results point of view. So, yes, we are trying to make ourselves look different
02:15 from a very traditional metals and mining company. And this is a creative values, not just from a
02:21 perception and evaluation perspective, but also from a numbers perspective, you reckon?
02:26 Ultimately, that's the only thing that matters. So, yes, it has to be a creative from a numbers
02:31 point of view. And the only thing is that it will not be volatile with the LME prices going up and
02:37 down because these margins here tend to be a lot more steady going forward. So, that's what we are
02:44 really trying to do, get the company re-rated basically. Okay, well, wish you all the best for
02:51 that. I'm sure we'll have subsequent conversations on this. Let me now shift focus a bit on the
02:55 numbers. So, from an estimate perspective, yes, you've done way better than what the Bloomberg
03:02 estimates were, but obviously, as was anticipated, there have been issues on having in a sense,
03:07 the reportage has been lower on EBITDA, on net profit, etc. Do things look like in some fashion,
03:15 hopeful, considering the fact that there is a lot of chatter around China, eventually having to give
03:21 a stimulus at some point of time? And is that a trigger or would things turn around even otherwise?
03:26 So, look, a large part of our business, which is the Nobelist downstream business, the India
03:33 downstream business, the copper business, all these I am very, very confident that going forward,
03:39 they're going to continue to do well. The aluminum upstream business in India, which is the one that
03:45 is the commodity business and is based on the commodity price of aluminum is the one that is
03:51 susceptible to what will happen to the Chinese economy or the overall macroeconomic because
03:57 commodity prices go up and down based on sentiment of how the economies are doing. So, if I take
04:03 the overall business, 60% of our EBITDA comes from Novelis and I'm very confident Novelis had
04:10 a great quarter and every quarter now is going to be better than the previous quarter. So, in general,
04:16 the overall business of Pindalco is going to be good going forward. The one that is the most
04:23 worrying or is exposed to the Chinese economy is the upstream aluminum part.
04:29 But even in that, the good news is that our costs are coming down,
04:32 gold prices are coming down, availability is going up. So, our costs were down 2% in Q1 versus Q4
04:40 and we are guiding that in Q2 it will be down a further 3%. So, we'll be quite resilient in that
04:45 upstream business. Okay, so there's shipment growth, but the business still hurt. I'm talking
04:50 about a follow up to this answer on two counts. One is the upstream business shipment growth,
04:54 still the business hurt a little bit. Is that trend you are saying will look, I know sequentially is
05:01 the wrong way to compare, but net-net it will look better sequentially than what is looking
05:05 quarter one you're saying? At the worst case, if the LME goes down, we are hoping that it will look
05:11 flat. Okay, fair call. Novelis, and just again, you know, a question, there was this much of
05:22 candy stocking happening in quarter four, expectations that volumes will pick up in
05:26 quarter one. And yet, I mean, volumes are down 6%, 879 kilotons, EBITDA $479 per ton.
05:33 Do we see pickup in quarter two, starting quarter two or is this deferred to the latter half of the
05:39 year? No, no, the Novelis management has been very emphatic that, you know, we've already finished
05:45 the month of July of that quarter. So they're already seeing the volumes of can coming back.
05:50 They're quite confident that from a volume point of view, Q1 was the bottom. But then, you know,
05:57 the cost started to come in line and you see the EBITDA per ton reached $479 a ton. So we are quite
06:04 confident that, you know, in Q2 as the volumes come back, you're even going to start to touch
06:09 the $500 per ton EBITDA much quicker than what we had originally thought of. Okay, well, that's good
06:16 news. The other aspect is on the global side. I mean, by virtue of and I'm trying to think if you
06:21 can give me an economic answer as well, but by virtue of all that's happening on the interest
06:25 rates, housing demand and how does that shape up for your business and two, the two spaces which
06:30 seem to be doing really well, aerospace, auto, how's the demand been, how do you expect it to be?
06:35 So for auto, for Novelis, it was an all-time record quarter with 200 kg of shipments.
06:43 Majority of our contracts are now towards electric vehicles and in every part of the world,
06:51 electric vehicle demand seems extremely strong. So we see that, you know, auto sheep demand driven
06:59 by electric vehicles is going to continue to be good going forward. Aerospace, as you said, has
07:04 come back with a roll, everybody's flying again and both all our customers are, you know, busy
07:12 churning out planes. So aerospace as well, we see going forward very strong demand. So
07:19 now comes the interesting one, which is building and construction. It's very interesting,
07:24 the single user housing starts in the US have been up for four months in a row,
07:31 very counterintuitive in a rising interest rate environment, but for four months in a row,
07:38 the housing stocks have been going up, refurbishment of old houses is going up.
07:44 So we are starting to see the building and construction market starting to come back in
07:48 the US. So there could be a feeling that interest rates have peaked, maybe everyone says there could
07:54 be one more increase of 25 weeks, who knows. But people are starting to think that the interest
08:00 rate increase is probably reaching some sort of a plateau. And people are now looking beyond that.
08:07 Okay. Mr. Pai, one last question, as you sit at the end of quarter one and look into FY24,
08:15 what is that one factor that you reckon would have the most lasting impact for consolidated? I mean,
08:20 there are a lot of moving parts in your business, and therefore a lot of things that might impact.
08:23 If I'm still asking, who has a guess on what is that one key factor? What would you say?
08:28 I think that generally the world economic environment is the single biggest factor
08:35 that affects us all. So if the world is economically growing, because this year,
08:40 the growth is a little bit anemic. The world economic growth is not that great. It's 2.3%
08:46 the IMF said. So if next year that, you know, the economic growth picks up the Chinese economy is
08:52 doing well, that's one, because then all those things will raise the votes in a rising time.
08:58 So economic growth of the, you know, in the general world environment is what we need.
09:03 Okay, Mr. Pai, lovely talking to you. And I'm sure we get more chances to talk about the vision
09:09 because that's an interesting one. We'd love to talk more about that at some point of time. But
09:12 thanks for joining in today and giving us your thoughts. Thank you. And viewers, thanks for
09:16 tuning in.
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