11

Hindalco Industries LimitedHindalco Industries Limited

Performance Review Performance Review Q3 FY09Q3 FY09

Investor PresentationInvestor Presentation3030thth January 2009January 2009

2

Backdrop: Financial Crisis & Global MeltdownAs the Financial crisis spread through the Globe….

The financial system witnessed severe liquidity crunch

Banks lost trust in the peers

Stock markets collapsed as funds felt redemption pressure

Suddenly Fear & uncertainty engulfed till then vibrant Global financial markets

This led to ….

Sudden brakes on all booming commodity intensive sectors such asinfrastructure, automobile and Real estate

Slowdown in emerging economies, notably BRIC economies; the global demand drivers in the recent times

The recession that had started in the US expanded to the Globe

3

1,485

3,341

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3/Apr/06 22/Aug/06 29/Jan/07 9/Jul/07 12/Nov/07 23/Apr/08 30/Sep/08800

1,300

1,800

2,300

2,800

3,300

3,800

LME CSP-$/Mt

Exchange Stock= Comex+LME+Shanghai

-56%

Slowing Global demand… ….Resulted in stock buildup & price collapse

• Aluminium price down by 56% within 6 months

• Overall Inventories at 4.5 Mn Tonnes- highest levels since 1994Source: CRU Jan’09

Demand slow down led to a crash in commodities …… Aluminium

30

35

40

2006 2007 2008

34.4

10%

37.8 38.10.8%

Mn Tonnes

Source: Reuters

Tonnes $/Tonne

4

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

03-A

pr-0

6

25-S

ep-0

6

15-M

ar-0

7

06-S

ep-0

7

27-F

eb-0

8

15-A

ug-0

8

010002000300040005000

6000700080009000

10000

Demand slow down led to a crash in commodities …… Copper

-55%

Slowing Global demand… ….Resulted in stock buildup & price collapse

Copper prices down by 55% within 3 months Source: Brok Hunt Dec’08

17150172001725017300173501740017450175001755017600176501770017750178001785017900179501800018050

2006 2007 2008

17.5

17.9

18.0

2.7%

0.6%Mn Tonnes

Source: Reuters

Tonnes $/Tonne

5

Key Industry Drivers

Driver Q3 FY08 Q3 FY09Change

%Impact

Aluminium LMEAverage($/ton)

2,443 1,821

3,940

48.8

97,142

Copper LMEAverage ($/ton)

7,239

(25%)

(46%)

24%

(6%)

ExchangeRate(Rs/$)

39.5

Domestic AlIngot Realisation

(Rs/ton)1,03,137

6

Financials:

Rs Crores Q3 FY08 Q3 FY09 Change (%)

Net Sales 4,539 4117 -9%

-3%

-4%

0%

-16%

14,191 14,448 2%

EBIDTA 801 779 2,604 2,722 5%

PAT 543 545 1,784 1,962 10%

675

3.37

706

4.01

9M FY08 9M FY09 Change(%)

2,335

14.1

8%

-4%

PBT 2,532

EPS 13.61

Number of shares: 170.05 Cr in Q3 FY09122.57 Cr in Q2 FY08

7

Hindalco Highlights…Hindalco’s robust business model kept it in relatively good stead

Copper business acted as a natural hedge against the vagaries ofcommodity cycle

Underlines the importance of conversion business model

The role Novelis is expected to play in the long term

Copper business performance depicted a sharp improvement even inthese troubled times

Copper EBIT increased by over 23%

Low cost operations in aluminium helped Hindalco in partially offsetting the sharp fall in prices and decline in offtake

Brownfield expansions yieding higher volumes

8

Aluminium BusinessPerformance

9

Backdrop: All-round drop in Aluminiumdemand

De-growth in Sheet & Plate consumption

in USA and Canada

Source: CRU Jan’09

1131 1140 1130

959 957

850

900

950

1000

1050

1100

1150

1200

Q1 2008 Q2 2008 Q3 2008 Q4 2008 Q1 09 F

(Kt)

7.1

8.67

1212.5

18.70%

22.10%

4.10%

38.40%

0

2

4

6

8

10

12

14

2005 2006 2007 20080%

5%

10%

15%

20%

25%

30%

35%

40%

45%Consumption (Mn T)Growth%

Source: Antaike-Jan’09

Chinese demand -Plummeted

10

Supply: At Current Prices, > 90% of the Smelters are unviable

Production cuts Announcement By Month

Production cuts By Region

800

1442

679

920

840

1139

0

1000

2000

3000

4000

5000

6000

Sept'08& before

Oct'08 Nov'08 Dec'08 Jan'09 Total

Kt

5020

Completed

CountryAug'08 Prodn-

annualisedAnnounced Curtailment %Curtailed

China 14.0 3.0 21%North America 5.7 0.8 15%Eastern Europe/Russia 4.7 0.6 12%Western Europe 4.6 0.2 5%Asia/Middle East 4.0 0.1 2%Latin America 2.7 0.1 3%Oceania 2.3 0.1 4%Africa 1.7 0.1 6%Total 39.6 5.0 13%

Announced curtailment of 5 Mn Tonnesamounts to ~13% of Global output

Source: Alcoa Jan’09

(Kt)

(Mn Tonnes)

11

Aluminium: Performance at a glance

Rs Crores Q3 FY08 Q3 FY09 Change(%)

1736

578

14%

-8%

Net Sales & Operating Revenue 1980

EBIT 530

12

Higher Sales of Specialty Alumina

95099 85802

102050 108185

0

50000

100000

150000

200000

250000

9M FY08 9M FY09

Standard Specials

-10%

+6%

197149 193987*

(Mt)

* Overall sales declined due to higher captive consumption

13

Increase in Production volumes

Alumina (Hydrate) Aluminium

305123

319074

290000

300000

310000

320000

330000

Q3 FY08 Q3 FY09

122026

135096

110000

120000

130000

140000

Q3 FY08 Q3 FY09

TonnesTonnes

4.6%

10.7%

14

Peer Comparison: Hindalco - Creditable performance

-175

-150

-125

-100

-75

-50

-25

0

25

50

75

100

125

GlobalPeer 1

GlobalPeer2

GlobalPeer3

GlobalPeer4

Hindalco

Q3FY08 Q3FY09-12

-7

-2

3

8

13

18

23

28

GlobalPeer 1

GlobalPeer2

GlobalPeer3

GlobalPeer4

Hindalco

Q3FY09

EBIT - Indexed: Q3FY08=100 %

How the players performed vis viscorresponding quarter last year

EBIT Margins for the current quarter

15

Copper Business Performance

16

Challenging Times

TC/RC down by 33% vis-a- vis Q3FY08

Sharp decline in demand of refined copper globally

Sharp fall in By-product prices

17

Declining Demand

(Mn T)

17.94

18.16

18.03

0.60%-0.50% 1.30%

17.8

17.85

17.9

17.95

18

18.05

18.1

18.15

18.2

2008 2009 2010-10%

0%

10%Consumption (Mn T)Growth%

Global demand – Moderate Decline

Source: Brook Hunt Dec’08

Global demand for refined copper set to

decline in 2009 due to apparent Global

recession

Global slowdown in Copper intensive

sectors such as housing, infrastructure &

consumer durables

18

High Cost Smelters Cutting down production as by-product credit dries up

Production cut Announcement

4970

356358

78

213

0

50

100

150

200

250

FMI

PT S

mel

ting

Sum

itom

o

PPC

/Nip

pon

PPC

/Hib

i kyo

do

MI ,

Nao

shi,a

MI ,

Ona

ham

a

Kt

Announced curtailment of around 566 ktamounts to ~ 3% of Global output

Source: Fertilizer Week 16.01.09

(Kt)

Particular

Total Estimated

production in 2009 (kt)

Production Cut (%)

Production Cut (kt)

US 640 -25.0% 213Indonesia 700 -10.0% 78Japan 3591 -6.3% 226China 445 -10.0% 49Total 5376 -10.5% 566

19

Impressive Performance in challenging times

Production performance vis a vis Q3 FY 08……

Improved efficiency & lower conversion cost

On the back of bi-annual shutdown in smelter III,

Output declined by 12%

Highest ever smelter output in Dec’08

Cathode production declined by 7%

However, Value added Rod production increased by 15%

Higher contribution from Fertilisers stream

20

Copper: Performance at a glance

Rs Crores Q3 FY08 Q3 FY09 Change(%)

2,806

94

(24%)

23%

Net Sales & Operating Revenue 2,139

EBIT 116

21

Projects

2222

HAALProject commissioned during Q3 FY09

Value accretive project with enormous potential

Commercial production started in December

1060 MM Dia billet cast on 6th of Dec 2008

(Largest Aluminium alloy billet ever produced in

India)

First shipment dispatched to local forging units.

Exports commenced during Jan’09.

2323

Muri Alumina Expansion

Statutory Clearances – Obtained

Project – Commissioned; under stabilization

Commissioning:

Bauxite Handling & Bauxite Grinding- - commissioned.

HT Digestion and Precipitators commissioned.

Railway network operational.

Overall plant commissioned & stabilization under progress.

The entire steam and power requirement is being met by the

new captive power plant.

Muri plant has reached a capacity of 210 KT from 100 KT.

2424

Muri Project Site

Bauxite Handling HT digesters

New tracks & BTAP wagonsNew 10,000 T Alumina silo

2525

Hirakud Smelter and Power Plant ExpansionPhase II of the expansion of the smelting capacity from 100,000 TPA to 143,000 TPA was completed in Aug – 08 , as per schedule

Further work on expansion to 155 KTA is in progress and is expected to be completed by Aug- 09. First group of pots mechanically completed in Jan-09.

The power generation capacity has been raised from 267.5 Mw to 367.5 Mw.

2626

Greenfield Projects Greenfield Projects –– Mahan Mahan AluminiumAluminiumLand: Section 9(1) letter issued to 1 of 4 villages by Dist authorities. Balance villages in process.Coal: Coal block allotted. Production of Coal likely to start in FY 10Environmental, Rail & Water clearances have been obtained. Land for compensatory afforestation identified. Basic Engineering packages from AP received on schedule.Detailed Engineering work by EIL is in progress and enquiries/orders for major packages already placed/being placed.DCPL : consultant for power plant and detailed engineering. BTG order finalization by Feb -09. Final negotiations are in progress. Milestones :

First Metal by July 2011First TG unit by Mar-2011Coal by Jan 2011

2727

Greenfield Project – Utkal Alumina

Detail engineering for the main plant area is substantially completed.

All necessary statutory approvals are in place for construction of Project

Team is in place for the execution of project

About Rs. 750 crores have already been spent, Commitment made for about

Rs.3000 Crore

Most of Major Orders (long delivery) placed

L & T has been finalized for the civil, structural and tankages. This is expected to

expedite the project.

Environment Clearance – MoEF Clearance received for 3 million TPA.

Bauxite mining activities to start by mid 2010.

Mechanical Completion Date – Jan’ 2011

2828

Utkal Alumina

Township: Civil foundations work under progress (M/s Gulf Oil)

CPP area: Piling work commenced in boiler and coal bunker area (M/s Rammana Rao & associates

CPP area: Civil foundations work under progress in power plant area (M/s GDCL)

2929

Greenfield Projects Greenfield Projects –– AdityaAditya Smelter & CPPSmelter & CPPTechnology agreement with AP signed for Smelter. SIA clearance received.Basic Engineering is 70% complete, received on time.Detailed engineering consultant EIL- for smelter & DCPL for CPP. Work is in progressMajor proprietary equipments for smelter ordered.Plans to finalize orders in Feb-09 – Boilers, turbines, conversion substation. Total order value : Rs. 3000 Cr.Commitment made till Dec-08: Rs. 1264 Cr.Land acquisition is at an advance stage. 1357 acres registered in the name of the company. Water : Agreement signed for drawl of water. Coal Block: JV Company MNH Shakti Ltd. Registered office opened at Burla, first Board meet done.Expected date of Smelter Project completion( first metal ) : Oct -2011

3030

Greenfield Projects Greenfield Projects –– AdityaAditya Refinery & mines.Refinery & mines.

Alumina Technology tie up with ALCAN signed. SIA clearance for Alumina

Technology received.

Land acquisition is at an advance stage.

EPCM for Co-Gen plant awarded to M/s M N Dastur & Co.

Construction & Operation power : Work is going on as per plan.

Railways: Rail layout plan approved by East Coast Railways.

Expected date of Refinery Project completion( delayed ) : June – 2013.

3131

JharkhandJharkhand AluminiumAluminium

Land Acquisition: 7000 acres of land earmarked till date and Topographic

and Demographic survey completed. Socio-economic survey is started now.

CSR activities are ramped up. Visit of Sonahatu people to Renukoot

complex was done. This was extremely fruitful and positive.

Tubed Coal Mine Allotted- Joint venture formed between Tata power and

Hindalco.

Water Allocation – Clearance received from GoJ for 55 MCM water from

Subernrekha basin. Feasibility studies for establishing water sources

completed, reports being evaluated

Expected Commissioning date: June 2012.

32

To Sum Up……. ‘ Difficult times’

Financial Market turmoil has reversed the commodity bull run

Demand destruction, pricing pressures poses a serious & continuous challenge

Hindalco’s robust integrated model has helped in partially offsetting the impact of

sharp fall in the commodity prices

Copper business performance improved in these challenging times; underlying the

importance of conversion business model in the falling commodity price cycle

These are challenging times for the business, however with a ‘focused approach’

the management would face these challenges to overcome them

33

Financials

34

Results

34

Rs Crores Q3 FY08 Q3 FY09 Change (%)

Net Sales 4,539 4,117 -9%

Expenditure 3,738 3,338 -11% 11,586 11,726 1%

Other Income 114 150 32% 349 542 55%

Interest 62 93 50% 182 255 40%

PBDIT 915 930 2% 2,953 3,264 11%

Depreciation 147 161 10% 436 477 9%

PBIT 768 769 0% 2,517 2,786 11%

-4%

-20%

0%

14,191 14,448 2%

Tax 163 131 551 572 4%

675

545

706

543

9M FY08 9M FY09 Change(%)

2,335

1,784

8%

10%

PBT 2,532

PAT 1,962

35

Segment Results

35

82% 18%

48% 52%

58% 42%

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1Aluminium Copper

CE

Net Sales

EBIT

Rs Crores Aluminium Change (%)

Q3 FY08 Q3 FY09 Q3 FY08 Q3 FY09

14%

-8%

11%

Net Sales 1,736 1,980 2,806 2,139 -24%

EBIT 578 530 94 116 23%

Capital Employed 7,814 8,666 5,756 6,224 8%

33% 27%

30% 25%

Copper Change(%)

3%

7%

EBIT Margins 5%

ROCE 8%

36

Aluminium Production

Production Unit Q3 FY08 Q3 FY09 % Chg 9M FY08 9M FY09 % Chg

Alumina MT 304,059 319,074 5% 888,781 918,959 3%

Metal MT 121,971 135,073 11% 356,397 390,274 10%

37

Production Unit Q3 FY08 Q3 FY09 % chg 9M FY08 9M FY09 % chg

Copper Cathodes MT 78,334 72,877 -7% 236,748 210,851 -11%

CC Rods MT 34,471 39,737 15% 103,901 104,195 0%

Copper Production

38

Product Q3 FY08 Q3 FY09 % Chg 9M FY08 9M FY09 % Chg

Chemicals 131 138 5% 441 494 12%

Primaries 612 1,025 67% 1,834 2,646 44%

Aluminium Sales Revenue (Rs Crs)

39

Product Q3 FY08 Q3 FY09 % chg 9M FY08 9M FY09 % chg

Copper Cathodes 1,402 717 -49% 4,462 3,530 -21%

CC Rods 1,072 1,019 -5% 3,453 3,366 -3%

Copper Sales Revenue (Rs Crs)