Archive · 6 Nov 2025
Hindalco Shares Slide as Nuvama Downgrades to Hold Amidst Cost Pressures
Imagine Hindalco is a big company that owns another company called Novelis, which makes aluminum products.
Recently, Novelis shared its latest financial results.
While some parts of their business are doing okay, like making money each day, there are a few big problems.
First, a fire happened at one of their factories, which will cost them a lot of money and might make them unable to produce as much aluminum for a while.
Second, the cost to build a new factory is going up much more than they originally planned.
Because of these money worries, a company that gives advice on stocks, called Nuvama, decided to tell people to 'Hold' Hindalco's stock instead of 'Buy' it.
They also lowered the price they think the stock will be worth.
Even though things look a bit tough now, Nuvama believes that once the damaged factory is fixed and the new one is closer to being built, Hindalco's business could start getting better in the future.
Hindalco Industries shares dropped nearly 7% following its subsidiary Novelis' quarterly results and impact assessments of recent incidents.
Brokerage firm Nuvama downgraded Hindalco to a 'Hold' rating with a revised target price of Rs 838, citing margin pressure and rising capital expenditure.
A fire at Novelis' Oswego plant is expected to negatively impact free cash flow by $550–650 million, with an estimated EBITDA effect of $100–150 million in H2FY26.
The capital expenditure for Novelis' Bay Minette project has been revised upwards by 22% to $5 billion.
Despite challenges, Novelis reported stable Q2 adjusted EBITDA of $422 million and increased EBITDA per tonne, with plans to enhance cost-efficiency measures.
- Who
- Hindalco Industries and its US-based subsidiary Novelis, and brokerage firm Nuvama
- What
- Hindalco shares fell nearly 7% after Novelis reported quarterly results and announced impacts from a fire incident, leading Nuvama to downgrade Hindalco's stock rating to 'Hold' with a revised target price.
- When
- Today's trading session and Q2FY26 results, with outlook for H2FY26 and FY27.
- Where
- Novelis' operations in the US (Oswego plant, Bay Minette project).
- Why
- Downgrade driven by margin pressure, rising capital expenditure for the Bay Minette project, and the financial impact of a fire at the Oswego plant, despite stable operational performance and cost-efficiency measures.
Concerns Highlighted by Nuvama
Positive Aspects or Mitigation
Novelis Capex and Cash Flow Impact
Concerns Highlighted by Nuvama
Nuvama cites rising capital expenditure for the Bay Minette project, which has increased by 22% to $5 billion, potentially straining the balance sheet. Additionally, a fire incident at the Oswego plant is expected to negatively impact free cash flow by $550–650 million in the current financial year.
Positive Aspects or Mitigation
Despite the concerns, Hindalco's net debt-to-EBITDA ratio is projected to remain comfortable at around 1.2x by the end of FY26. Furthermore, 70-80% of the cash flow impact from the Oswego fire is expected to be recoverable through insurance.
Margin Pressure and Operational Outlook
Concerns Highlighted by Nuvama
Nuvama points to margin pressure and rising capital expenditure as reasons for the downgrade. The fire at the Oswego plant is estimated to affect EBITDA by $100–150 million in H2FY26. The coming quarters are expected to be challenging due to the fire's impact and higher capex.
Positive Aspects or Mitigation
Novelis' adjusted EBITDA for Q2FY26 was $422 million, slightly above Nuvama's estimate, and EBITDA per tonne increased by 4% QoQ to $448. The company has revised its cost take-outs run-rate upwards to $125 million by end-FY26 and $300 million by FY28 to offset higher tariffs and costs.
- Company
- Hindalco Industries (Novelis subsidiary)
- Hindalco Share Price (Current)
- Down nearly 7%
- Novelis Q2 Net Sales
- $4.7 billion (up 10% YoY)
- Novelis Q2 Total Shipments
- 941 kilo tonnes
- Novelis Q2 Adjusted EBITDA
- $422 million (up 1.4% QoQ)
- Novelis Q2 EBITDA per tonne
- $448 (up 4% QoQ)
- Oswego Plant Fire Impact (Cash Flow)
- $550–650 million (negatively impacted)
- Bay Minette Project Capex Revision
- $5 billion (up 22%)
- Hindalco Net Debt-to-EBITDA Ratio (FY26 est.)
- 1.2x
- Novelis Cost Take-outs Run-rate (End-FY26)
- $125 million (revised upwards)
Sources
Hindalco sees up to $650 million impact from fire at US unit
Hindalco estimates $550–650 million impact on free cash flow from Novelis plant fire – All eyes on December restart
Hindalco faces ₹5,700-crore hit as Novelis US plant fire halts output
Hindalco shares in focus after Novelis results lead to multiple downgrades, target cuts
Hindalco shares plunge 6% as Novelis capex surge raises investor concerns
