Hindalco Industries Ltd stock is down 7% since the company announced its December-quarter (Q3FY26) results. The oft-cited reason for this is the two fires at subsidiary Novelis’s Oswego plant in September and November 2025, which disrupted operations. But that explanation, on its own, is incomplete.
Incred Research Services recently downgraded Hindalco and National Aluminium Co. Ltd (Nalco), citing concerns that aluminium prices, and by extension their profit margins, may have peaked. When several metal stocks that rode the same rally start to wobble together, it is usually not because of a company-specific issue. The writing is on the wall that the commodity up-cycle appears to be losing momentum.
Hindalco’s consolidated Q3 numbers looked steady on the surface. Revenue grew in the mid-teens year-on-year, supported by strong domestic aluminium performance, a richer product-mix, and reasonably resilient pricing on robust domestic demand.
But profit after tax fell 45% year-on-year, largely due to exceptional charges of ₹2,610 crore linked to the Oswego fires. However, the fires have done more than just dent one quarter’s earnings. They warrant higher costs for repair, have disrupted shipments, increased external sourcing, and forced supply-chain reorientation, pushing management to extend the operational normalization timeline out to the June quarter. Potential insurance recoveries will offset a part of the financial damage, but not the near-term uncertainty.
Diversification see-saw
Copper was another soft spot. Higher revenues masked flattish volumes as demand took a step back amid heightened channel inventories and elevated copper prices. Profitability also came under pressure owing to weaker treatment and refining charges. It is a reminder that Hindalco’s diversified portfolio cuts both ways—strength in aluminium can be offset by softness in copper. Nalco’s downgrade provides important context on where the aluminium cycle stands, possibly making matters worse.
Analysts are increasingly wary that aluminium prices may have already factored in the best-case scenario. With fading support from a weak US dollar and expected improvement in scrap supply, InCred expects aluminium to tank by 20% over the next year. The early signs are evident. Even excluding the impact of the fires, shipments at Novelis fell 3% year-on-year during Q3FY26 owing to muted demand. Consolidated profit before tax, excluding exceptional items, declined sequentially from ₹6,720 crore to ₹5,440 crore. Commodity hedging at 64% for Q4 and 21% for FY27 could blunt the blow.
Debt wish spooks market
Sure, Hindalco is not just a commodity proxy. Its downstream push, scale advantages, and long-gestation projects such as Bay Minette provide long-term optionality. Equity infusion from the parent amounts to about $1 billion (including $250-million potential infusion announced last week), and should soften the immediate financial hit at Novelis. Meanwhile, the ₹10,000-12,000 crore of capital expenditure planned for smelter expansion in FY27, along with its captive coal-mines, recycling facilities, and flat-rolled products and battery-grade foil facilities, are part of Hindalco’s plan for vertical integration.
But markets were spooked by the outlook on debt, particularly with cost overruns in Bay Minette, in the context that financial leverage is already stretched. Net debt expanded to ₹59,500 crore as of December, taking net debt/Ebitda from 1.06 in March to 1.73, uncomfortably close to management’s threshold of 2. Moreover, despite Hindalco stock falling off its 52-week high of ₹1,029.8 on 29 January, it still trades at a rich EV-to-Ebitda of 6.65 based on Bloomberg FY27 consensus estimates. Any slipups will hit the stock harder now than they would have a year ago.
