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Hindalco profit rises 43% as India steps up infrastructure spending

Company says challenges emerging from higher input costs, rising commodity imports

Hindalco’s U.S.-based unit Novelis, the world’s largest recycler of aluminum, reported a 36% jump in net profit to $137 million.   © Corbis/Getty Images

MUMBAI (NewsRise) -- Hindalco Industries posted a 43% increase in first-quarter net income as India's largest aluminum producer cashed in on the increased government focus on infrastructure building.

The company, controlled by billionaire Kumar Mangalam Birla, said net profit in the April-June quarter stood at 4.14 billion rupees ($60 million). Analysts were expecting the company to report a net profit of 4.21 billion rupees, according to a Reuters poll. Revenue from operations grew 1.7% to 105.93 billion rupees.

The growth was aided by supporting macroeconomic environment, better realizations, and stable operations, Hindalco said in a statement. However, the company faces challenges arising from higher input costs and increased imports of aluminum and copper, it added.

Industrial commodity producers such as Hindalco and Vedanta Resources are benefitting as Prime Minister Narendra Modi's government is stepping up investments in construction of roads, ports and railways with an increased focus on rural India. India's federal budget, announced in February, increased the spending allocation toward infrastructure in this fiscal year to $88 billion from $73 billion in the previous year.

On Tuesday, Hindalco's U.S.-based unit Novelis, the world's largest recycler of aluminum, reported a 36% jump in net profit to $137 million.

"Our recent investment announcements in North America and Asia, along with the pending acquisition of Aleris, will diversify our product portfolio and increase our participation in high-demand, high-value markets to meet growing customer demand," Steve Fisher, president and chief executive of Novelis, said in a statement on Tuesday.

Last month, Hindalco said Novelis agreed to buy aluminum processor Aleris for $2.6 billion in a move that will give the company a strong foothold in the aerospace industry and other value-added businesses.

"We remain positive on Hindalco given the steady domestic operations for both aluminum and copper verticals and a healthy performance expectation from Novelis," ICICI Direct Research said in a report on Friday.

Operating earnings at Hindalco's aluminum unit jumped 35%, while that at the copper business rose 4%. Prices of copper increased in India after rival Vedanta was forced to shut down a plant in the southern Indian state of Tamil Nadu following protests from environmental activists.

Globally, base metal prices have taken a beating in recent weeks amid trade tensions between the U.S. and China.

Shares of Hindalco lost 2.2% in Mumbai trading on Friday, while the benchmark S&P BSE Sensex closed down 0.4%.

--Dhanya Ann Thoppil

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