Hindalco shares drop 7% over likely $650-mn impact of Novelis plant fire on cash flow, capex concerns

Its adjusted EBITDA however dropped 9 percent YoY to $422 million, while adjusted EBITDA per tonne shipped fell 8% YoY to $448. The company said that it rolled product shipments of 941 kilotonnes, which was in line with the prior year period.

Impact of fire at US plant:

Speaking about the fire incident which began on September 16 at its plant in New York’s Oswego, Novelis said that no injuries were fortunately reported. The damage from the fire was mostly localized to the hot mill area, and the teams York.

"Teams have been working around-the-clock to restore operations at Oswego quickly and safely, while leveraging alternative resources to minimize customer disruption," it added.

Hindalco said that approximately 70-80 percent of the damages are estimated to be recoverable through insurance. In Q2 FY26, the firm recognized $21 million in related charges. It now estimates FY26 negative free cash flow impact of around $550-650 million, including adjusted EBITDA impact of ~$100-150 million.

The company added that extensive restoration efforts have been taken to return to normalcy. The Hot Mill is expected to restart by end-December 2025, followed by a 4-6 week of production ramp-up.

"We are grateful for the swift response and dedication of our teams, as well as the collaboration of our customers, industry peers, and equipment suppliers,” said Fisher. “Despite this unexpected challenge, we remain confident in the strength of our business, the resilience of our team, and our ability to adapt and recover," said Novelis President and CEO Steve Fisher.

Bay Minette Project Update:

Novelis said that construction is progressing at greenfield rolling & recycling facility in Bay Minette, Alabama, in the US. The firm expects full project commissioning to begin in the second half of 2026.

It now estimates total capital cost in the order of $5 billion, from the earlier $4.1 billion estimate, for laying a strong foundation for future expansion. Out of this, $2.2 billion capital expenditures were spent through the end of Q2 FY26.

JM Financial on Hindalco Industries:

JM Financial kept a 'Buy' rating on the stock, which saying that Novelis' Rs 422 million Q2 EBITDA was in-line with its estimate. “As a result of loss in volumes from Oswego plant, company believes there could a reduction in overall volumes in FY26. However, the hot mill is expected to restart operations in Dec’25. We await Hindalco consolidated numbers to revisit our earnings and fair value – to be published shortly,” it said.

It further noted that Novelis witnessed a net negative tariff impact to the tune of approximately $54 million in Q2 FY26. The company expects this to go down going ahead driven by the ongoing mitigation efforts.

Axis Capital downgrades Hindalco shares to 'Reduce':

Axis Capital downgraded the shares of Hindalco Industries to 'Reduce', from its earlier 'Buy' rating, and marginally reduced its target price to Rs 770 apiece from Rs 880 apiece. This implies a downside potential of more than 7 percent from the stock's previous closing price.

 Nuvama downgrades Hindalco shares to 'Hold':

Nuvama downgraded the stock to 'Hold' from its earlier 'Buy' rating, but raised its target price to Rs 838 apiece from Rs 757 apiece.

Equirus has also downgraded Hindalco to 'Reduce' from its earlier rating of 'Add'. It said that the risk-reward for the stock is turning unfavourable at 6.6 times one-year forward EV/EBITDA, CNBC-TV18 reported.

Jefferies noted that Novelis' net debt stood at a 21-quarter high. It is set to rise further with higher capex amid rising aluminium prices and fire impact, it said.

"The capex for the Bay Minette project has increased to $5 billion (from $4.1 billion earlier), with the IRR (internal rate of return) now expected to be in the high single digits (compared to the earlier double-digit estimate)...as a result, lower operating performance and higher capex intensity are likely to keep its leverage ratio elevated," ICICI Direct Research said, as quoted by Informist.

"We therefore expect the underperformance at Novelis operations to continue, with the recovery to $500/tonne EBITDA taking longer than expected...on that note, we remain cautiously optimistic on Hindalco, considering that Novelis accounts for ~60% of consolidated revenue and ~56% of EBITDA," ICICI Direct said.

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(With inputs from agencies)

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