Nalco to scale up downstream portfolio, plans ~5.5-bn project
National Aluminium Company (Nalco) is placing high stakes on the downstream business in the sector. After co-developing a downstream products park with Odisha Industrial Infrastructure Development Corporation (Idco) and planning joint ventures with foreign entities Almex and Rusal, the central government-owned company has pledged to invest ~5.52 billion on a major downstream complex, at Kamakhyanagar in Dhenkanal district.
Billed as the largest investment in Odisha on the metals downstream space, it will be funded wholly from Nalco’s internal accrual.
“Nalco’s focus is on constant value addition. There is huge demand for value-added aluminium products. Apart from catering to the demand, product diversification will also shore up our margins,” says T K Chand, chairman and managing director.
For the planned downstream complex, 188 acres has been identified. The allotment is subject to appraisal by the Industrial Promotion & Investment Corporation of Odisha (Ipicol). Nalco expects to complete the project within 48 months of taking possession of the land. The project has potential to generate employment for 1,761 people, direct and indirect, it says. The complex will house facilities for aluminium foil, rolled products and extrusion, with a combined yearly envisaged capacity of 170,000 tonnes. Aluminium alloy wheels, a key component for the automobile industry, will also be made.
Nalco’s enhanced focus on downstream applications could mark the beginning of a strategic shift in its strategy. Over the years, alumina sales have propelled the company’s profit, a key driver of its Ebitda (earnings before interest, taxes, depreciation and amortisation). The alumina vertical has 46 per cent share in the company’s gross turnover, and nearly 80 per cent of Ebitda. Nalco has gained massively from the rupee's slump and rally in global alumina prices. “Nalco is possibly looking for a safe bet in aluminium downstream products. Volatile prices and currency fluctuations are a worry for metalfocused companies, though Nalco offsets that risk with a huge cash surplus and robust export earnings,” an analyst said.
Nalco recently announced investment of ~1.31 billion on a wire rod manufacturing unit. The facility, envisaging yearly capacity of 40,000 tonnes of alloy grade material, is coming up at an aluminium park at Angul. The unit is designed to meet the growing demand for aluminium in the power sector, especially in transmission.
Within the downstream park, Nalco has readied a plan for a joint venture with Canadian firm Almex for production of automobile-grade aluminium. To cost ~2.5 bn, the project will source metal from Nalco’s smelting complex in the vicinity. The annual production capacity envisaged is 60,000 tonnes. Nalco has committed supply of 50,000 tonnes each year of molten aluminium to downstream companies which chose to install units at the park.
The navratna company has also offered to lend its brand name to products made within the park. To attract investors, Nalco has announced pricing discounts on sale of molten aluminium (of ~4,000 a tonne) and ingots (of ~5,000 a tonne) to downstream buyers.