Hindalco plummets 7% amid concerns over weak demand for arm Novelis after Constellium's warning

Novelis drives 20 percent share of Hindalco's total volumes and a higher proportion of the company's EBITDA.

Shares of Hindalco dropped nearly 7 percent following a sharp 28 percent decline in Constellium SE's stock after its quarterly results were reported. Constellium reported lower third-quarter profit and revenue due to weakening demand across multiple end markets and disruptions caused by flooding at its Swiss facilities.

Constellium SE, a Paris-based global manufacturer, specialises in aluminium rolled products, extruded products, and structural parts made from advanced alloys. Its shipments fell in the third quarter on account of poor performance in the automotive and aerospace sector. The company also said that demand remains weak in these two segments.

Following the poor show, concerns have risen for Hindalco's arm Novelis, as Constellium SE—operating in the same segment—reports soft demand in the automotive sector, raising fears of similar challenges ahead for the former.

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Automotives is the most profitable segment for Novelis, thereby driving a 20 percent share of Hindalco's total volumes and a higher proportion of the company's EBITDA.

Bogged down by these concerns, shares of Hindalco tanked, emerging as the top loser on the Nifty 50. At 10.24 am, shares of Hindalco were trading at Rs 686.95 on the NSE, though still deep in the red, but off its day's low of Rs 666.75.

Trading volumes in the counter were also sharply higher. As much as 87 lakh shares changed hands so far, significantly higher than the one-month daily traded average of 64 lakh shares.

Meanwhile, the dollar index also strengthened to a three-month high, crossing 104 level. A stronger dollar index is also bad news for metal manufacturers and thereby further dented dragged sentiment for the stock.