Kumar Mangalam Birla-led Aditya Birla Group could be one of the few Indian companies to benefit significantly from US president-elect Donald Trump’s "America First" policies, analysts have said. Expected tax cuts and import tariffs could create favourable conditions for Birla’s US-based aluminium business, Novelis, which has extensive investments in that country.
Following Trump's victory in the recently concluded US presidential election, Birla expressed optimism about expanding his conglomerate's footprint in the world’s biggest economy.
The group entered the American market through a $6 billion acquisition of Novelis Inc in 2007. It is now considering more investments, over and above a $ 4.1 billion new recycling and rolling plant planned in Alabama. The expansion underscores the group's confidence in the US market, even as concerns over potential trade barriers and tariffs remain.
The Aditya Birla Group is among a handful of Indian firms with a significant presence in the US. Novelis is a leading supplier of flat-rolled aluminium, with its products finding use across industries —from food and beverage cans to automotive parts and air conditioners. Novelis is the largest revenue contributor to the metals major Hindalco Industries, comprising approximately 61.8% of the company’s total revenue for the quarter ending September 30, 2024.
Talking to media after Q2 earnings, Hindalco managing director Satish Pai said on November 11, “The new administration is likely to be beneficial for Novelis, as the company produces aluminium in the US for the US market.”
Also Read: Hindalco Q2 Results: Net profit rises 78%, co plans capex of $4-5 billion for upstream expansion
Analysts say for Indian conglomerates a renewed focus on protectionism could offer distinct advantages, particularly with the Trump administration’s emphasis on boosting US manufacturing and reducing import dependence.
During his first term, Trump pivoted the US toward a self-reliant stance, surprising allies and rivals alike with tariffs, particularly against China. Analysts expect Trump to continue to focus on trade imbalances in his second term as well, potentially introducing higher tariffs on imports from major economies such as China, Europe, and South Korea.
"Trump's past record shows he has a positive outlook on India and he also shares a strong rapport with Prime Minister Narendra Modi," Birla said during the Aditya Birla Group's silver jubilee scholarship celebrations on November 10.
Potential Benefits of Tariffs for Local Operations
Trump's first term saw import duties imposed on aluminium to encourage local production, aligning with his "Buy American" agenda.
If tariffs are further extended, analysts expect it to be beneficial to local aluminium producers like Novelis, which holds a significant market share in the U.S. aluminum rolled products market, especially in sectors like automotive and beverage can manufacturing.
The US may also consider restricting aluminium scrap exports, a move that could be good for Novelis’ profit margins, as tighter scrap markets threatens to strain its profitability in the coming quarters. The U.S.-based aluminum company reported an 18% year-on-year drop in net profit to $128 million for the quarter ending September 2024 and announced the suspension of its near-term EBITDA per tonne guidance amid scrap availability concerns.
“It’s probably a little bit early, but this is a critical material, and protectionist measures to keep scrap within home countries could be considered around the world,” Novelis CEO Steve Fisher said recently.
As of 2023, the US exported about 200,000 metric tonnes of aluminium scrap to China. Any new restrictions could stabilise Novelis’ margins, as it relies heavily on scrap, which makes up 63.2 percent of its production mix.
At 2.03 pm, the Hindalco stock was trading at Rs 629.80, down 3.35 percent from the previous close.
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