Hindalco delivers record profit, but coal costs are rising

HINDALCO Hindalco Industries Limited (HINDALCO) reported its highest ever quarterly consolidated net profit of ₹7,533 crore in Q2 FY27, an increase of 59% year on year. Revenue increased 39% to ₹91,708 crore, while EBITDA grew 42% to ₹13,757 crore. The headline numbers are excellent. But I think the more important story is what is driving them and whether those drivers can continue. 1. Aluminium and copper prices are doing a lot of the work Aluminium upstream EBITDA increased 55% to ₹7,009 crore. Copper EBITDA surged 164% to ₹1,673 crore, supported by higher metal prices, better by product realisations and operating performance. However, higher commodity prices do not automatically mean permanently higher profitability. 2. Novelis is recovering, but shipments declined Novelis reported adjusted EBITDA of $508 million, up 20% year on year. EBITDA per tonne improved 23% to $553. But shipments fell from 941,000 tonnes to 919,000 tonnes. This distinction matters. Better profitability per tonne is encouraging, but I would also want to see volume growth. 3. Rising costs are the immediate concern Raw material costs increased 38.5% and fuel costs rose 14.5%. Management indicated that coal costs could increase another 5% in Q3 FY27. If commodity prices soften while energy costs remain elevated, margins could come under pressure. 4. Debt needs monitoring Consolidated net debt to EBITDA increased to 1.80 times from 1.23 times a year ago. The ratio is still manageable, but the direction deserves attention, particularly as Hindalco continues investing in projects such as its Bay Minette facility in the US. My view: Hindalco's operating performance is strong, and its diversified business model is showing its value. But investors should not assume that a 59% profit increase will automatically translate into similar growth in future quarters.